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Debated Word Frees Ex-Goldman Coder Twice

MANHATTAN (CN) - Until someone can put a finger on software code, federal and local prosecutors cannot touch ex-Goldman Sachs programmer Sergey Aleynikov under laws meant to punish the theft of "tangible" property, the New York Supreme Court ruled Monday.

Since his arrest in 2009, Aleynikov has been fighting charges that he stole high-frequency trading code from the megabank to land a seven-figure paycheck Teza Technologies.

Aleynikov's attorney, Kevin Marino, has long argued that federal and local prosecutors went after Aleynikov to do the bidding of a politically connected megabank. Aleynikov claims to have only downloaded software code that he believed to be on the public domain.

In 2012, the Second Circuit freed the Russian-born Aleynikov from an eight-year sentence because he had been charged under a statute criminalizing the theft of "goods," "wares," or "merchandise."

Chief Judge Dennis Jacobs, the lead author of the opinion, wrote at the time that only "tangible property" fell under those categories.

Believing New York law would be more effective, Manhattan prosecutors deployed three other charges against Aleynikov, but a jury only convicted him of one count under a 1967 statute criminalizing the stealing of "secret scientific material."

On Monday, Judge Daniel P. Conviser explained in a 78-page opinion why that law should not have reached Aleynikov.

"In the ensuing 48 years it has apparently been rarely used," Conviser wrote. "There are only three reported decisions in which the validity of a conviction under the statute has ever been considered and only one where the statute's provisions have been analyzed, that case being People v. Russo."

Wall Street had never heard of high-frequency trading (HFT) code at the time a Suffolk County court found that statute could cover the theft of a "computer program" in 1986, according to the opinion.

When the New York legislature criminalized creating "tangible reproduction" of "secret scientific material," the drafters of the statute never envisioned HFT code either, Conviser noted.

"If Aleynikov made a tangible electronic reproduction in this case, what would an intangible electronic reproduction have looked like?" Conviser wrote.

"More to the point, what would an intangible electronic reproduction have looked like when the statute was enacted in 1967?"

Prosecutors also failed to prove that Aleynikov had an "intent to appropriate" code that never fell out of Goldman's possession.

"There was also no evidence, in this court's view, from which it could be inferred that Aleynikov cared one wit about how profitable Goldman might be in the future," Conviser wrote. "His aim was to help himself - not hurt Goldman."

Aleynikov's attorney Marino said in a statement that his client has now been "acquitted of every single crime two sets of prosecutors could conjure in their zeal to do the bidding of Goldman Sachs."

"Now we know that in addition to being too big to fail and too amorphous to jail, Goldman Sachs is powerful enough to provoke two failed criminal prosecutions to settle a private score," Marino said in the statement.

While Marino called it "appalling" that Manhattan District Attorney Cyrus Vance took up the case, Conviser found prosecutors "acted in good faith in this case to prosecute what they believed were serious crimes."

Vance's spokeswoman Joan Vollero said prosecutors are "considering our appellate options."

"We think this defendant committed a crime," Vollero said. "So did the jury. If what Sergey Aleynikov did isn't a crime, then every company that values its intellectual property should be concerned."

While Conviser believed "what Aleynikov did was unquestionably wrong," the judge wrote that prosecutors cannot take shortcuts.

"Defendants cannot be convicted of crimes because we believe as a matter of policy that their conduct warrants prosecution," he concluded. "We cannot ignore key terms like 'tangible' and 'appropriate' because they make it impossible to convict someone we believe engaged in wrongdoing. The demands of the digital age will doubtless require further refinement of our criminal laws. But it is the job of the courts to apply the laws that exist."

Meanwhile, Aleynikov still has an active federal lawsuit against Goldman Sachs in New Jersey seeking attorneys fees.

Alluding to this case, Marino in his statement blasted the bank for having "spent millions in shareholder dollars to evade their obligation to pay Mr. Aleynikov's legal fees for winning two criminal cases while happily paying the fees of virtually every former Goldman employee to incur legal fees, including those convicted of federal crimes and found liable for wholesale violation of our nation's securities laws."

Goldman Sachs did not immediately respond to a request for comment.

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