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Ex-Goldman Sachs Programmer Wants Bank to Pay Legal Fees

Former Goldman Sachs Group Inc. computer programmer Sergey Aleynikov, charged twice with stealing confidential trading code, sued the bank for payment of more than $2.4 million in legal fees.

Goldman Sachs should pay fees and expenses incurred during Aleynikov’s federal prosecution, which resulted in a conviction that was later overturned, his lawyers argued in court papers filed yesterday in federal court in Newark, New Jersey.

Aleynikov was freed from federal prison earlier this year after the U.S. Court of Appeals in New York reversed the 2010 conviction in federal court in Manhattan. He was subsequently charged by New York state prosecutors in Manhattan over the same matter.

“Aleynikov exhausted his financial resources prior to his trial on the federal charges,” his lawyers said in the complaint. “Unless the court orders Goldman Sachs to honor its legal obligation to advance his legal fees and expenses to defend the state charges, Aleynikov’s ability to defend those charges will be irreparably harmed.”

Aleynikov was arrested last month on state charges of unlawful use of scientific material and duplication of computer-related material, both felonies, according to Manhattan District Attorney Cyrus R. Vance Jr. He is free on $35,000 bail.

Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment on the filing.

Conviction Overturned

Aleynikov is 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.

Federal prosecutors claimed that, on his last day of work at Goldman Sachs, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s trading system. He allegedly sent the code to a server in Germany, compressed and encrypted it, and took it with him to a meeting with new employers in Chicago.

Aleynikov pleaded not guilty to the charges.

The 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.

Lacking Funds

The state charges involve the same conduct underlying the federal allegations, Kevin Marino, an attorney for Aleynikov, said last month. The new charges each carry a maximum sentence of four years in prison under the New York state penal code.

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, Marino said in the complaint.

The case is Aleynikov v. Goldman Sachs Group Inc., 12-cv-05994, U.S. District Court, District of New Jersey (Newark).

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