A federal appeals court on Friday reversed the conviction of a former Goldman Sachs programmer on charges he stole computer code, ordering an acquittal in a case that tested the boundaries of what can be considered a crime as companies seek to protect their intellectual property from competitors.
The unusually speedy mandate from the 2nd US Circuit Court of Appeals in Manhattan will result in freedom for Sergey Aleynikov, of North Caldwell, NJ. He has been in prison since he was sentenced in March to more than eight years in prison. He was convicted in December 2010 of stealing trade secrets and transporting stolen property in interstate and foreign commerce.
A three-judge appeals panel heard arguments on Thursday, but the judges gave no indication that they would reverse the lower court hours later with a terse, one-paragraph order. The 2nd Circuit said it would issue a written ruling “in due course” to explain its decision.
Aleynikov’s attorney, Kevin Marino, said he spoke with his client Friday. He said Aleynikov reacted by concluding: “There is justice in the world.”
“I could not be happier,” Marino said. “It’s justice because Sergey Aleynikov did not commit either of the crimes with which he was charged. The government’s attempt to stretch this criminal federal statute beyond all recognition resulted in a grave injustice that put Sergey Aleynikov in prison for a year.”
In arguments before the 2nd Circuit on Thursday, Marino called it “ridiculous” and “preposterous” that his client was facing eight years in prison because he was found to have information that was not a product that Goldman Sachs sold in interstate and foreign commerce. A prosecutor had asked the court to uphold the conviction, saying protection of trade secrets was the only way companies could retain their technological advantages.
Prosecutors declined to comment Friday.
Aleynikov, a naturalized US citizen who emigrated from Russia in 1990, was first arrested in July 2009 as he returned from a trip to Chicago to the offices of his new employer, Teza Technologies LLC.
Prosecutors accused him of taking trade secrets from Goldman Sachs Group Inc. in 2008 to help his new company gain an advantage with high-speed trading. He made $400,000 as a vice president at Goldman Sachs. His move to Teza enabled him to be paid $300,000 annually, with a $700,000 bonus in his first year and a revenue-sharing plan that would have added $150,000 annually.
During a two-week trial, Marino told jurors that his client was merely trying to copy parts of the company’s software that were taken from public software codes. He acknowledged that Aleynikov had violated the company’s confidentiality agreements but said that was a civil matter.
The trial brought into focus sophisticated computer programs that use mathematical formulas to execute scores of trades in short periods of time after evaluating moment-to-moment developments in the markets.
The government said Goldman Sachs makes millions of dollars a year in profits from high-frequency trading and carries a competitive advantage over rivals because of the speed of its computer programs.
At sentencing, Aleynikov said he very much regretted “the foolish decision to download information before I left Goldman Sachs,” though he added that only some of the information he took was proprietary to the company.
He said he “never meant to cause Goldman any harm, and I haven’t acted with malice to anyone at the bank.”