Ex-Goldman Programmer Pleads Not Guilty to Code Theft

Former Goldman Sachs Group Inc. (GS) programmer Sergey Aleynikov, who successfully challenged a federal conviction for stealing internal code from the bank, pleaded not guilty to similar state charges.

Aleynikov entered his plea today in New York state court in Manhattan before Justice Ronald Zweibel. He was indicted on two counts of unlawful use of scientific material and one of unlawful duplication of computer-related material, according to his lawyer, Kevin Marino.

Marino in court assailed New York District Attorney Cyrus Vance Jr.’s office for attempting to prosecute Aleynikov a second time, and said he will move to dismiss the case on double-jeopardy grounds. Marino said his client declined an offer to plead guilty to one felony count in exchange for time served.

“The message is, if you mess with Goldman Sachs, you better get ready for the fight of your life,” Marino said.

Zweibel allowed Aleynikov to remain free on $35,000 bail pending his next court appearance and gave him permission to travel to Russia to visit his mother, who is being treated for cancer, once his passport is returned by federal authorities. He is scheduled to return to court on Nov. 16.

Conviction Reversed

Aleynikov was freed from prison after serving about a year following his federal conviction on charges he stole the bank’s high-speed trading code. His 2010 conviction was reversed by the U.S. Court of Appeals in New York.

Federal prosecutors claimed that, on his last day of work at New York-based Goldman Sachs in June 2009, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s high-frequency trading system.

Aleynikov sued Goldman Sachs in federal court in Newark, New Jersey, earlier this week, seeking payment of more than $2.4 million in legal fees. He claimed he’s entitled to indemnification because of his previous employment as an officer of Goldman Sachs, according to the complaint.

Aleynikov, a vice president in the bank’s Global Equities Division until June 30, 2009, was part of a team responsible for developing and improving source code related to high-frequency trading, according to the complaint.

No Funds

A New York appeals court in February ordered Aleynikov freed from prison in Fort Dix, New Jersey, ruling that the two laws prosecutors used to charge him, the National Stolen Property Act and the Economic Espionage Act, didn’t apply to his case. Aleynikov was serving an eight-year prison term at the time the conviction was overturned.

New York prosecutors said that while the federal appellate judges court said Aleynikov’s conduct didn’t constitute a federal crime, they suggested it could be a violation of state law. The prosecutors also said Marino asserted in court documents that theft of trade secrets is a “quintessential state-law crime.”

“On our own initiative, we contacted federal prosecutors and asked for their cooperation in filing a state criminal case to make sure this defendant was held accountable for his criminal conduct,” Assistant District Attorney David Szuchman said in a statement. “Any suggestion that we filed these charges for any other reason is false.”

Aleynikov, who is unemployed, relies on the charity of friends for shelter and doesn’t have the funds to fight the state case or pay Marino’s law firm an initial retainer of $500,000, according to the New Jersey lawsuit. Marino said his client lost his house, his wife left him and he lost his job.

“He left Russia for freedom, justice and the American way,” Marino said in court. “And he got Franz Kafka and Goldman Sachs.”

The criminal case is New York v. Aleynikov, 04447-2012, New York State Supreme Court (Manhattan). The New Jersey case is Aleynikov v. Goldman Sachs Group Inc., 12-cv-05994, U.S. District Court, District of New Jersey (Newark).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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