Hearing an appeal by a former Goldman Sachs computer engineer convicted of stealing code from the bank, New York Court of Appeals judges Tuesday questioned defendant Sergey Aleynikov’s assertion that he did not make a tangible copy of the code because he had saved it on a hard drive.
The arguments before New York’s high court were the latest stage of Aleynikov’s nearly decadelong legal saga regarding his appropriation of the bank’s source code for high-frequency trades, which has highlighted the ongoing challenge of applying laws that have been on the books for decades to cases involving relatively new technologies.
Aleynikov is seeking to overturn a decision last year by a lower court reinstating his conviction of unlawful use of secret scientific material, a 50-year-old statute that he says was not intended to criminalize his actions, since it predates the technology he used to copy the code to a server in Germany.
Much of the Court of Appeals judges’ questions concerned whether Aleynikov made a “tangible” reproduction of the source code.
Aleynikov’s lawyer, Kevin Marino of Marino, Tortorella & Boyle, argued before the court that the code was made up of “bits and bytes,” not in a tangible form that could be perceived by the senses, and that Goldman Sachs was not deprived of the code.
“What Mr. Aleynikov did here is make a copy that in no way, shape or form deprives Goldman Sachs of anything,” Marino said.
But Judge Jenny Rivera launched a salvo of questions about Aleynikov’s argument on tangibility just after proceedings began before the court, saying the code would be tangible if it takes up physical space on a hard drive.
“If it’s taking up space, then something else can’t sit there,” Rivera said.
Other judges joined in with queries about Aleynikov’s tangibility argument. Judge Leslie Stein said the purpose of the code was to be able to use it and that the statute at issue in the case was intended to “fill a loophole” that New York’s larceny statute did not cover.
Assistant Manhattan District Attorney Elizabeth Roper, who appeared on behalf of the prosecution, argued that the value of the source code, which she said is worth “hundreds of millions,” is based on its exclusivity, and that Aleynikov deprived the bank of its exclusive use of the code.
“This is not an awkward or strained application of this statute at all,” Roper said.
Aleynikov’s legal odyssey began in June 2009, when he left Goldman to work for a startup company called Teza Technologies, which also dealt with high-frequency trades.
On his last day with Goldman, he uploaded thousands of proprietary files from Goldman’s source code repository into a server in Germany.
Roper told the Court of Appeals that when Aleynikov reproduced the code, he tried to cover his tracks by encrypting the files, backdating files and by clearing his computer’s use history.
The FBI arrested Aleynikov and he was convicted of violating the National Stolen Property Act in U.S. District Court for the Southern District of New York, but in 2012, the U.S. Court of Appeals for the Second Circuit threw out the conviction, finding that the data was intangible property and thus did not constitute stolen wares as defined by the statute.
After the Second Circuit’s ruling, the Manhattan District Attorney’s Office pursued Aleynikov on charges of unlawful use of secret scientific material. A jury found Aleynikov guilty on one of three counts, but Manhattan Supreme Court Justice Daniel Conviser overturned the conviction, saying there wasn’t enough evidence that Aleynikov made a tangible copy of the source code or that he intended to appropriate the source code.
Last year, the Appellate Division, First Department reinstated Aleynikov’s conviction, finding he made a tangible reproduction of the code when he uploaded it to a hard drive and that prosecutors were not required to prove that he intended to deprive Goldman of the code.
The First Department’s ruling came just after the Delaware Supreme Court denied Aleynikov’s bid to recover between $1.5 million and $2 million he says he is owed for fighting cases in state and federal court.
The Aleynikov matter has also spilled over to federal court in New Jersey, where the former programmer has sued Goldman Sachs, claiming the bank owes him more than $7 million to pay his attorneys; and two FBI agents, alleging malicious prosecution.
The malicious prosecution suit has been stayed until the Court of Appeals rules on Aleynikov’s appeal in his criminal case, and there is a pending motion for judgment on the pleadings in his suit against Goldman Sachs.