In a somewhat bizarre case, a Goldman Sachs programmer has been convicted for the second time of stealing software that he developed for Goldman (see Wired article). The first conviction was overturned and the second may be nullified by the judge.
Sergey Aleynikov was convicted in 2011 on espionage and theft of trade secret charges. He was accused of stealing the source code for Goldman’s high speed trading platform he helped develop prior to leaving for another firm.
The following year the conviction was reversed because the code is not physical property, according to the appeals court and so the theft statute he was charged under did not apply.
After the reversal, Sergey was released from prison after serving 1 year out of his original 8 year sentence.
Goldman, not being happy that the conviction was overturned, worked with the NY District Attorney and he was charged him under state law (the initial conviction was under Federal law) with “unlawful use of secret scientific material” and “unlawful duplication of computer related material”. He was found guilty of the first charge and acquitted on the second. I am not sure how that might work, but that was what the jury decided.
Sergey was earning $400,000 a year at Goldman when he decided to take a new job with Teza Technologies which would have paid him $1.2 million.
A few days before he left Goldman, he downloaded and encrypted code he had worked on and transferred it to a website hosted in Germany. Then he erased the program he used to encrypt the files. He also attempted to delete the log files showing his activity. This does not seem to me like the activities of a person who thought what he was doing was legal.
His story was that he only intended to collect open source software. According to his attorney, only 32 megabytes of the 1,224 megabytes of code he took was proprietary. If true, that would tend to support his claim.
The appeals court said that because he did not assume physical control over anything when he took the source code, he did not deprive Goldman of its use, therefore he did not steal anything.
Apparently, the judge in the second case is skeptical of the conviction and may overturn it. If that doesn’t happen, I assume Sergey will appeal it.
So what does all this mean?
To an employer concerned about insider threats, it means that it is not limited to low-compensation employees and it is not limited to physical objects. It also means that it is very difficult to actually obtain a conviction (this happened in 2009).
To an employee, it means that your actions may be viewed very differently by an employer than by you and even if you think what you are doing is legal, your employer may not agree. And, if your employer disagrees with your interpretation, your life will be hell for a long, long time.
With Sergey earning almost half a million dollars a year and Goldman being pretty profitable, a LOT of money has been spent on this over the last 6 years. AND, it is not over yet.
Also, the police did not find any of Goldman’s code on Teza’s computers, so it was not a cut and dried case of someone stealing code to take to his new job.
The scary part is that this is an easy case – they have the proverbial smoking gun and six years later it is not settled. What about those cases where the employer never even found out about.
What this says is that the entire problem of insider theft is a pretty messy problem and it is not going to become any easier in your lifetime or mine.