Ex-Goldman Sachs Programmer Should Get Probation for Theft, Lawyer Says

Former Goldman Sachs Group Inc. (GS) computer programmer Sergey Aleynikov, convicted of stealing the firm’s trade secrets by appropriating its computer source code, should get probation and not prison, his lawyer said.

Aleynikov was convicted in December in federal court in New York on charges of violating the Economic Espionage Act and the Interstate Transportation of Stolen Property Act. He faces as long as 10 years in prison on the espionage charge and five years for the interstate transportation charge when he is sentenced by U.S. District Court judge Denise Cote on March 18.

Aleynikov doesn’t deserve a prison term “because there was no evidence of an actual or intended loss,” or financial harm to Goldman as a result of his actions, his attorney, Kevin Marino, said in court papers filed late yesterday. Prosecutors have argued Aleynikov deserves a prison term of eight to ten years, Marino said.

“While the crimes for which Aleynikov was convicted are undoubtedly serious, he was not found to have caused or intended pecuniary harm to Goldman,” Marino said. “As a result he does not deserve the harsh sentence the government requests -- 97 to 120 months in prison.”

Marino said his client’s alleged crimes merit a term of probation to six months. The lawyer argued, as he had during the trial, that Aleyninkov only took open-source code he had written at Goldman and nothing that was proprietary.

Trading Platform

“The evidence showed at most that Aleynikov intended to use the code he copied to make it easier for him to build a high-frequency trading platform” at his new employer’s firm, Marino said.

“The government now seeks to have Alyenikov punished as though he had not only stolen Goldman’s entire platform, as it originally claimed, but also had sold that platform to a Goldman competitor who used it to cause Goldman monetary damages of twenty million dollars,” Marino said.

On Feb. 24, Cote ordered Aleynikov, who had been free on bond, jailed before sentencing because she deemed him a flight risk. Aleynikov, who is a naturalized U.S. citizen, holds dual U.S.-Russian citizenship, Marino said.

Assistant Manhattan U.S. Attorney Rebecca Rohr told jurors during her closing statement that Aleynikov was a “thief.” On his last day of work at New York-based Goldman in June 2009, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s trading system, she said.

Encrypted Code

He circumvented Goldman’s security system, sent the code to an outside server in Germany, and later compressed and encrypted the code, Rohr said. Aleynikov took the code with him to a meeting with his new employers in Chicago in July 2009, she said.

After taking Goldman’s software, Aleynikov executed a program to cover his tracks, prosecutors said. If he thought the codes were open source and should be publicly available, “why did he then encrypt it?” Rohr asked jurors. “So that no one, like him, could access the code.”

The case is U.S. v. Aleynikov, 1:10-cr-00096, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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