Court Overturns Conviction of Ex-Goldman Programmer(dealbook.nytimes.com)
dealbook.nytimes.com
Court Overturns Conviction of Ex-Goldman Programmer
http://dealbook.nytimes.com/2012/02/17/court-overturns-conviction-of-ex-goldman-programmer/
7 comments
I used to work at Goldman's and I can tell you that they will be absolutely furious about this. I have never worked at a company so paranoid about having work stolen. Once - a friend of mine sent me an email with a tag-line with a bit of code in it. When I replied the email filters picked it up and I had to explain to my boss why I was trying to "export" Goldman's code. They are nuts about it.
Goldman put a lot of time and energy into making an example out of this guy. He blatantly "did it" - they had recorded phone conversations of him talking to his new boss and uploading code immediately after. I know the details because we received almost weekly reports on the case via the corporate intranet (in the "news" section). Goldman wants their people scared so nobody else tries this.
I always found it a bit odd because the court sentenced this guy to 8 years. Ummm... ok. But why is Fabrice Tourre still walking around? Justice indeed.
Goldman put a lot of time and energy into making an example out of this guy. He blatantly "did it" - they had recorded phone conversations of him talking to his new boss and uploading code immediately after. I know the details because we received almost weekly reports on the case via the corporate intranet (in the "news" section). Goldman wants their people scared so nobody else tries this.
I always found it a bit odd because the court sentenced this guy to 8 years. Ummm... ok. But why is Fabrice Tourre still walking around? Justice indeed.
Forget Fabrice Tourre, how about John Corzine? The government isn't even going to use the law _that he created_ to go after him for stealing client money.
What bothers me more about this particular case is that Goldman's attorneys claimed that this code could be used to manipulate the market, and yet the SEC did nothing to investigate.
You have documented court testimony of a market participant (Goldman) claiming they have the ability to manipulate the market. This should be a slam dunk if we had regulators with anything remotely resembling balls.
You have documented court testimony of a market participant (Goldman) claiming they have the ability to manipulate the market. This should be a slam dunk if we had regulators with anything remotely resembling balls.
You misunderstand, knowing how someone else is going to trade allows you to do market manipulation, knowinf how you are going to trade yourself obviously doesn't help you do market manipulation
You can use a hammer to kill someone quite easily.
Let's imagine that I go to the police complaining that a bunch of my tools, including a hammer, was stolen from my truck. Should I be prosecuted for murder? Is this a "slam dunk", and should the police and prosecutors have their manhood questioned for not going after me for murder? Even though, to the best of everyone's knowledge, no murder has been committed by anyone, least of all me?
Pretty much anyone, including you, has the ability to manipulate the market. It's not hard; in fact it's so trivial that you can do it by accident. That doesn't mean we should throw you in jail just in case you decide to do it in the future.
Let's imagine that I go to the police complaining that a bunch of my tools, including a hammer, was stolen from my truck. Should I be prosecuted for murder? Is this a "slam dunk", and should the police and prosecutors have their manhood questioned for not going after me for murder? Even though, to the best of everyone's knowledge, no murder has been committed by anyone, least of all me?
Pretty much anyone, including you, has the ability to manipulate the market. It's not hard; in fact it's so trivial that you can do it by accident. That doesn't mean we should throw you in jail just in case you decide to do it in the future.
is the culture there as back-stabbing and ruthless as it seems like to outsiders? Or is it just an exaggeration and people are mostly nice and pleasant, albeit ambitious?
Probably both. I have a couple friends there and they're some of the smartest, most decent human beings I know. On the other hand you get stories like this, and the Fabrice Tourre's and whatnot. Grey, not black or white.
It's fair that they're upset, 8 years in prison seems overly harsh though. In fact, any time in prison seems a bit over the top for what is essentially a breach of contract and therefore a civil matter between Goldman and the ex-employee.
The issue in this case wasnt over whether Aleynikov did something wrong (he even admitted as much). The issue is over how he should be punished. Goldman should be upset, but that doesnt necessarily mean he deserves the degree of punishment that the Economic Espionage Act entails.
"The issue is over how he should be punished."
Eh, no, that's not what the issue is about. The article states explicitly that no reason for the reversal was given (yet), but it seems to be about the extent of 'interstate commerce'. I.e., a purely technical legal point, having nothing to do with the material matters in the case.
Eh, no, that's not what the issue is about. The article states explicitly that no reason for the reversal was given (yet), but it seems to be about the extent of 'interstate commerce'. I.e., a purely technical legal point, having nothing to do with the material matters in the case.
But they are related. If the conviction was upheld, he could be punished criminally with jail time. With the conviction overturned, Goldman can still go after him civilly for breach of contract which is relatively similar to a fine.
"Relatively similar"? No it's not. Criminal conviction or not, GS could still sue, albeit that the proof would be easier. Either way, I don't understand the relationship between your post and mine, or the whole point that is being made here.
I wonder if Teza even used the code Aleynikov took with him. If they didn't, would he even face civil penalties?
Punitive damages maybe, plus maybe contractual obligations on damages in case of breach. If they didn't use it, and if a civil case was purely based on damage caused (two big ifs), I don't think there would be much of a (civil) case, no, because there needs to be causality between the breach and the damages, which then there wouldn't be.
Still he could be done on theft of trade secrets & breach of contract and Teza could see what GS had tried what wored what didnt which is worth a lot.
He didn't intentionally upload code to Germany. He uploaded to xp-dev.com, and the server happened to be in Germany.
It's not a technicality, they charged him under an inappropriate statute. If you punch someone and get charged with murder then you'll be acquitted since you did not commit the alleged crime of murder. It's not a technicality but incompetence on the part of the prosecutor.
There probably is a statute that is appropriate for this but didn't carry enough time to satisfy the prosecutor. Prosecutors often inflate charges so people will deal down to a lesser charge.
To me it sounds like he's admitted to a tort which GS could have resolved on its own with out using public resources.
There probably is a statute that is appropriate for this but didn't carry enough time to satisfy the prosecutor. Prosecutors often inflate charges so people will deal down to a lesser charge.
To me it sounds like he's admitted to a tort which GS could have resolved on its own with out using public resources.
I think this is a case where the right thing happened for the wrong reason. I don't doubt that the defendant wronged Goldman Sachs. But it's clearly absurd that he should have to spend 8 years in federal prison for it.
GOOD. Fuck Goldman for being able to sic the FBI on an ex-employee who went to a competitor. If he copied code that's obviously a civil matter. How many tech companies have had the same thing happened to them? How many did the FBI get involved in? Close to zero I'd guess over 40 years.
They get special treatment from law enforcement because they're rich, powerful, and connected. It was a total travesty that the FBI even became involved in the first place.
Not that I'm justifying his actions. He did wrong and there should be consequences -- but Goldman shouldn't get to use the FBI as their enforcers.
They get special treatment from law enforcement because they're rich, powerful, and connected. It was a total travesty that the FBI even became involved in the first place.
Not that I'm justifying his actions. He did wrong and there should be consequences -- but Goldman shouldn't get to use the FBI as their enforcers.
Even if he violated confidentiality agreements, wouldn't that be a civil violation instead of a criminal one? Why is the federal government prosecuting what should be a civil case?
GS wanted an example made, so they got the FBI to prosecute. 8 years inside makes for a really big stick to wave in front of the rest of their programmer base.
Unfortunately for them, the court has ruled that the statute in question didn't apply, so the ruling has been reversed. Assuming double jeopardy applies, he can't be prosecuted (by the government) again for the same acts. I think that GS could still sue for breach of contract, but their damages would presumably be limited to actual harm done wouldn't they?
Unfortunately for them, the court has ruled that the statute in question didn't apply, so the ruling has been reversed. Assuming double jeopardy applies, he can't be prosecuted (by the government) again for the same acts. I think that GS could still sue for breach of contract, but their damages would presumably be limited to actual harm done wouldn't they?
They could be but they could seek punitive damages and/or treble damages. Honestly, in the case of getting sued by GS costs are probably the biggest factor.
How would you go about stealing code from Goldman without being detected?
If you can't think of some clever ways of doing this (and getting around machine restrictions) you probably shouldn't be employed at GS.
Label it as high risk loan certificates and smuggle it out in a briefcase.
I'm not sure why you would, without Goldman's entire infrastructure (SecDB, Slang, etc) it probably wouldn't be that useful. The only thing you could "steal" is what's between your ears anyway.
You'd probably have to write new code; but you could port the algorithms, which are the distillation of their trading expertise. That'd boost you several years ahead in domain knowledge—and, as GS pointed out, you'd also know how GS was going to trade, which would help you predict market movements.
I suspect the latter wouldn't actually be all that accurate, though, since all those split-second decisions are going to be highly dependent on how fast everything runs, which means your GS emulator can't make the same decisions unless you port everything exactly.
I suspect the latter wouldn't actually be all that accurate, though, since all those split-second decisions are going to be highly dependent on how fast everything runs, which means your GS emulator can't make the same decisions unless you port everything exactly.
You would also need to replicate the portfolio the algorithm was managing...
use steganography and smuggle it out inside pictures you upload to your facebook
You can't use Facebook at GS... E-mail should work but might get suspicious.
It seems like they can trivially retry him under criminal copyright infringement laws. Is there some technicality preventing the justice department from pursuing that course?
Does anyone know if Goldman is simultaneously pursuing civil resource for copyright violation?
Does anyone know if Goldman is simultaneously pursuing civil resource for copyright violation?
Double jeopardy applies here doesn't it? You don't get to keep prosecuting people for one act until one of the cases sticks: You have to pick one breach of the law, or bundle a bunch of them into a single prosecution, and go to court on that basis don't you?
IIRC, double jeopardy doesn't stop both criminal and civil charges from being filed for the same offense (it only applies to being criminally charged multiple times)?
You're right (I think), so GS could go after him for breach of contract and/or copyright infringement but not any of the criminal offences that were originally available to them (including the copyright related ones).
Given that their return might be limited to their provable losses & that they'd have to demonstrate those in court I suspect that they'll probably decide it's not worth the effort. The guy has already spent a year in prison after all & they've successfully demonstrated to all their other employees that GS will go for the maximum possible sentence if any of them transgress in the future, which was probably the main point of the whole exercise in the first place.
Given that their return might be limited to their provable losses & that they'd have to demonstrate those in court I suspect that they'll probably decide it's not worth the effort. The guy has already spent a year in prison after all & they've successfully demonstrated to all their other employees that GS will go for the maximum possible sentence if any of them transgress in the future, which was probably the main point of the whole exercise in the first place.
This true. OJ Simpson was found not-guilty on the criminal charges, but still lost the wrongful death civil suit.
Double jeopardy specifically only bars a person from being charged for the same (allegedly criminal) act multiple times in the same jurisdiction.
In other words, a person can be charged in federal and states courts separately for the exact same acts.
In other words, a person can be charged in federal and states courts separately for the exact same acts.
Double jeopardy only applies to being tried for the same crime twice. It doesn't prevent you from being tried for a different crime that you committed simultaneously with the one you were acquitted of.
You can be acquitted of murder and then tried for conspiracy to commit murder; you can be acquitted of "economic espionage" and then be tried for criminal copyright infringement because they're two separate crimes, though committed in the same act.
You can be acquitted of murder and then tried for conspiracy to commit murder; you can be acquitted of "economic espionage" and then be tried for criminal copyright infringement because they're two separate crimes, though committed in the same act.
Double jeopardy applies to the same act, not the same crime. You cannot be tried for the same act twice if the case is fully resolved (i.e., it ends with a plea or a verdict or an appeals court renders a decision that "prejudice" shall apply.)
This is why prosecutors always overcharge: if they undercharge, they are foreclosed from seeking a conviction on the more serious charges once the case is resolved (whether they win or lose).
This is why prosecutors always overcharge: if they undercharge, they are foreclosed from seeking a conviction on the more serious charges once the case is resolved (whether they win or lose).
Goldman is simultaneously pursuing civil resource for copyright violation?
They could be but really why? Its a single guy, with likely limited monetary resources, and unless they can prove large monetary or punitive damages they wouldn't win much. I guess they can go the "make his life a living hell, dissuade folks from doing this in the future" kind of attitude but its a costly way to go about it.
They could be but really why? Its a single guy, with likely limited monetary resources, and unless they can prove large monetary or punitive damages they wouldn't win much. I guess they can go the "make his life a living hell, dissuade folks from doing this in the future" kind of attitude but its a costly way to go about it.
"with likely limited monetary resources"
He was going to make about $1.2 million/year at the new job, and made $400k at Goldman. If he's still employable for HFT development, he's going to make a lot of money over the rest of his career.
He was going to make about $1.2 million/year at the new job, and made $400k at Goldman. If he's still employable for HFT development, he's going to make a lot of money over the rest of his career.
They should ruin him. And I'm sure Goldman has enough lawyers on staff/retainer that they can make his life a living hell for relatively little marginal cost.
That's an awfully arbitrary statement to be presented as factual. Clearly the programmer deserves to be punished, and I would argue that he already has been. His professional reputation has probably been permanently tarnished. But does he deserve to be ruined by the federal government? I certainly don't think so. Justice doesn't always have to happen in a courtroom.
Make that ruined by the federal government at the cost of US taxpayers and future taxpayers.
Well I can't see how any "resonable" operson would not say that a trading platform used in an international and across state boundarys is not a “product produced for interstate commerce”
This is one of those bonkers decisions by judges a bit like the famous Prince Philip Prestel Hack back in the 70's
Basicaly the judgement was that an electronic key is compeltly diferent to a physical one - WTF!
I used to work for the guy who had been in charge of that system
This is one of those bonkers decisions by judges a bit like the famous Prince Philip Prestel Hack back in the 70's
Basicaly the judgement was that an electronic key is compeltly diferent to a physical one - WTF!
I used to work for the guy who had been in charge of that system
The disagreement, from what I can tell in this brief summary with no opinion out yet, doesn't seem to be over the "interstate" part so much as the "product" part. The federal government's Constitutional commerce-clause power almost certainly includes the ability to regulate platforms like this Goldman platform, since it's heavily tied up in interstate (and international) commerce. But the wording of this particular criminal law, the Economic Espionage Act, arguably applies only to "products" sold in interstate commerce, not internal software that isn't for sale anywhere, even if used internally for purposes closely tied up with interstate commerce. At least, that's what his lawyers appear to have successfully argued.
I haven't read the court's decision to see exactly what part of the statute the guy was charged under and the court said did not apply, but the wording of the part that looks like it would be the right part says:
Whoever, with intent to convert a trade secret, that is related
to or included in a product that is produced for or placed in
interstate or foreign commerce
I read it as saying that the trade secret has to be "related to" a "product that is produced for or placed in interstate or foreign commerce". So if their trading platform isn't "a product", and isn't itself "produced for or placed in" interstate or foreign commerce (but only used internally), it may not apply. Depending on what exactly "placed in" means; it seems the court interpreted it to mean that the product had to actually be put into commercial channels for sale, not merely used internally for commercial purposes.
'Commerce' here means something sold in the open market, not something used privately as an aid to market trading. Goldman's trading software was not for sale to others, so it had not been placed into the stream of commerce.
So, it would seem that Goldman should rightly be rather upset about this, as much as I dislike Goldman, they seem to be in the right here?