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Ex-Goldman programmer's code theft conviction revived by New York court

By Jonathan Stempel

By Jonathan Stempel

NEW YORK (Reuters) - A New York state appeals court on Tuesday reinstated the criminal conviction of former Goldman Sachs Group Inc <GS.N> programmer Sergey Aleynikov for stealing computer code from the bank as he prepared to jump to a high-speed trading start-up.

The 5-0 decision by the Appellate Division in Manhattan reinstated a May 2015 jury verdict that had later been overturned by the trial judge.

It means Aleynikov, 46, who had won the overturning of two criminal convictions in a 7-1/2-year legal odyssey, will be resentenced unless he wins permission to ask the state's Court of Appeals in Albany for another reversal.

Kevin Marino, Aleynikov's lawyer, said he is "seeking immediate leave to appeal" the decision, "which contravenes settled law as to the meaning of the statutory requirements of a 'tangible' reproduction and the 'intent to appropriate.'"

Aleynikov is a dual U.S. and Russian citizen whose tale helped inspire Michael Lewis' bestselling book "Flash Boys" on the rise of high-frequency trading in the U.S. equity market.

Prosecutors accused the former Goldman vice president of illegally copying Goldman trading code in 2009 as he prepared to join Teza Technologies LLC in Chicago.

Aleynikov said he intended the code only for his own use.

Arrested in July 2009 on federal charges, Aleynikov was convicted and spent 11 months in prison before a U.S. appeals court voided that conviction in February 2012, saying his activity was not a crime under federal corporate espionage laws.

Vance charged Aleynikov under state law six months later.

In July 2015, Aleynikov's trial judge said the second conviction, for unlawful use of secret scientific material, must be voided because prosecutors did not prove that Aleynikov committed "this particular obscure crime."

But the appellate division said the judge appeared to have wrongly believed that stolen source code needed to be printed on paper for Aleynikov to be guilty.

"The fact that defendant made the reproduction onto a physical hard drive, rather than onto a piece of paper, is of no consequence," Justice Rosalyn Richter wrote.

Aleynikov faces up to four years in prison.

In a statement, Vance said theft of intellectual property "is indeed a crime" in New York, "regardless of the physical means used to spirit the data away from its source.

"No company wants to do business in a market where someone can steal its work product without consequences," he added.

Aleynikov has incurred more than $8 million in bills fighting the criminal charges, and is trying to force Goldman to cover some costs.

The case is New York v Aleynikov, New York State Supreme Court, Appellate Division, First Department, No. 4447/12.

(Reporting by Jonathan Stempel, Karen Freifeld and Brendan Pierson in New York; Editing by Cynthia Osterman and Alan Crosby)

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