People v. Aleynikov
| Decision Date | 07 July 2015 |
| Docket Number | 04447/12 |
| Citation | 2015 N.Y. Slip Op. 25229,49 Misc.3d 286,15 N.Y.S.3d 587 |
| Parties | The PEOPLE of the State of New York v. Sergey ALEYNIKOV, Defendant. |
| Court | New York Supreme Court |
New York County District Attorney Cyrus R. Vance Jr. (Daniel Holmes, Jeremy Glickman and Elizabeth Roper, of counsel) for the People.
Marino, Tortorella & Boyle (Kevin H. Marino, John D. Tortorella & John Boyle, of counsel) for the Defendant.
The Defendant was charged in this case with one count of Unlawful Use Of Secret Scientific Material in violation of Penal Law § 165.07 for conduct which occurred on June 1, 2009 (Count 1), one count alleging a violation of the same statute with respect to conduct which occurred on June 5, 2009 (Count 2) and one count of Unlawful Duplication of Computer Related in the First Degree in violation of Penal Law § 156.30(1) for conduct which occurred on June 5, 2009 (Count 3). After a jury trial presided over by this Court, the jury was unable to reach a unanimous verdict with respect to Count 1, returned a guilty verdict under Count 2 and a not-guilty verdict under Count 3.
At the close of the People's case, the Defendant moved for a trial order of dismissal with respect to all three counts pursuant to CPL 290.10. He periodically renewed that motion during the jury's extensive deliberations. For the reasons outlined infra, the Defendant's motion for a trial order of dismissal with respect to the two counts for which that motion is outstanding (Counts 1 & 2) is granted. The Court holds that, viewing the evidence in a light most favorable to the People, the prosecution did not prove the Defendant made a “tangible reproduction or representation” of secret scientific material as required by the statute. The Court also holds, again under the same evidentiary standard, that the People did not demonstrate Aleynikov had the “intent to appropriate ... the use of secret scientific material” as required by the law.
The vast majority of the evidence during the trial was uncontested. Those general facts are first outlined here. Following that, a more detailed recitation of the specific facts relevant to the two issues in this motion are recounted with respect to key witnesses.1
In 2009, Sergey Aleynikov was employed as a computer programmer in the New York City office of Goldman Sachs (“Goldman”), a global financial institution. Goldman had approximately 32,000 employees in 2009. Mr. Aleynikov was one of the computer programmers responsible for writing computer source code for Goldman's high-frequency trading (“HFT”) system. Computer source code is “[i]nstructions to the computer in a more human readable format so that you're instructing the computer on what you want done.” (404)2 . “High–Frequency Trading” is “a trading style practiced by many trading companies whereby you use computers to make very rapid decisions that allow you to generate trades or generate orders and create prices, [at] which we [a firm, in this case Goldman] would be willing to buy and sell securities.” (442). Goldman earned approximately $300 million from HFT trading during the 2009 calendar year.
Aleynikov resigned from Goldman at the end of April or early May to accept a job at a new high-frequency trading firm, Teza Technologies (“Teza”). His annual compensation from Goldman at the time was $400,000. He last worked the week ending June 5, 2009. His last date of employment at Goldman was around July 5, pursuant to a “garden period”3 where employees are paid after they cease work so they do not immediately begin work for a competitor.4 Mr. Aleynikov was not working on Goldman projects after June 5, however, was required to return Goldman property at that time and did not have permission to take or retain property or computer code from Goldman after June 5. Teza had agreed to pay Aleynikov an annual salary of $1.2 million to work as a computer programmer.
Aleynikov was permitted to access computer code from the Goldman computer code repository while he was a Goldman employee in order to work on the code. Goldman employees were also permitted to work on computer source code at home but only through a remote log-in to the Goldman computer system. On June 1 and June 5, 2009, Aleynikov uploaded approximately 32 megabytes of computer source code from the Goldman HFT system to a server in Germany.5 He then downloaded that source code from the German server to his home computer in New Jersey. When Aleynikov uploaded that computer source code he knowingly violated the Goldman confidentiality policy which he had agreed to as a condition of his employment. Goldman considered its computer source code to be intellectual property, proprietary and valuable and took significant steps to ensure that code was not transferred or used outside the firm. When he wrongfully uploaded the computer source code Aleynikov also deleted his “bash history” (the record of the commands he inputted into his computer) relevant to his unauthorized upload. This was done in a failed attempt to conceal his actions. Further, the data he uploaded was encrypted and some of the transfer dates for the scripts he uploaded were back dated.
Although Aleynikov duplicated and transferred the computer source code, Goldman continued to possess the code and never lost a single line of it. Aleynikov was arrested on July 3, 2009. He thus possessed the code for 33 days prior to his arrest. Aleynikov earned no income (outside his legitimate employment with Goldman) attributable to this conduct. After Aleynikov's unauthorized upload, Goldman continued to trade using the code and never lost any income by virtue of Aleynikov's actions. (Goldman expended resources to investigate Aleynikov's activities but the value of that work was not quantified). There was no evidence Aleynikov ever sold or attempted to sell the source code he transferred to anyone. He did, however, download a portion of the code to a server at Teza. Defendant's counsel has acknowledged that Aleynikov “made copies of the sections of Goldman Sachs's source code he thought could be helpful to him in building Teza's high frequency trading platform.”6
Aleynikov's upload of the Goldman computer source code occurred after he accepted an employment offer from Teza. There was no evidence Teza was motivated to hire Aleynikov because of Aleynikov's unauthorized transfer of the code. Teza never earned any income from the source code Aleynikov obtained. It was Teza's policy that programmers who came to work for Teza were not permitted to bring proprietary source code from other firms they had worked for. Teza began high-frequency trading at the end of the third or beginning of the fourth quarter of 2010. On June 1 and June 5, 2009, Teza was in the process of developing its HFT system but was not engaged in high-frequency trading. At that time, Teza had not yet determined what kind of high-frequency trading it would conduct. After Aleynikov's arrest on July 2, 2009, his employment with Teza was terminated. There was no evidence Aleynikov ever duplicated the source code he downloaded to a piece of paper, any medium where it could be touched or any medium outside a computer or thumb drive.
Aleynikov was originally prosecuted and convicted in federal district court with respect to these actions for violating the National Stolen Property Act, 18 U.S.C. § 2314 (the “NSPA”) and the Economic Espionage Act of 1996, 18 U.S.C. § 1832 (the “EEA”). He was sentenced to a 97 month prison term for these convictions (8 years plus one month). His convictions were reversed by the Second Circuit in a written decision published on April 11, 2012. United States v. Aleynikov, 676 F.3d 71 (2d Cir.2012) (the “Second Circuit Decision”). At the time his convictions were reversed, Aleynikov had already served one year in prison for them. The Second Circuit found that Aleynikov's conduct did not violate either the NSPA or the EEA. With respect to the NSPA, the Court held that the source code Aleynikov uploaded did not constitute stolen “goods”, “wares” or “merchandise” as defined by the statute. With respect to the EEA the Court held the statute was not violated because Goldman's HFT system was neither “produced for” nor “placed in” interstate or foreign commerce as required by the Act.7
Following the reversal of Aleynikov's federal conviction he was charged in the instant case in New York State court on July 31, 2012. More than 2 ½ years of motion practice before Justice Zweibel of this Court then ensued. Mr. Aleynikov has been at liberty throughout his state prosecution. The state motion practice resulted in several extended, unpublished decisions by Justice Zweibel. In a Decision and Order on May 2, 2013, he upheld the legal sufficiency of the grand jury indictment and denied the Defendant's motion to dismiss that indictment on grounds of double jeopardy, collateral estoppel, vindictive prosecution and in the interest of justice. In a 71 page decision on June 20, 2014, he found Aleynikov was arrested without probable cause because the FBI made a mistake of law when they seized him for violating the NSPA and the EEA. A thumb drive and laptop computer recovered incident to that arrest were suppressed on that basis.
The Court found that a subsequent search of Aleynikov's home at which additional computers were found was lawful because Aleynikov's wife consented to the search. However, Justice Zweibel found that the U.S. Attorney's Office wrongfully transferred this lawfully seized property to the New York County District Attorney's office after Aleynikov's acquittal in the federal case. Judge Zweibel suppressed computers found at Aleynikov's home on that basis. The combined impact of these two rulings was that all of the physical evidence recovered from Aleynikov's person and home evidencing his unlawful downloads were suppressed. Justice Zweibel finally granted the Defendant's motion to suppress a...
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