Did Goldman Sachs Overstep in Criminally Charging Its Ex-Programmer?

theodp writes "Programmer Sergey Aleynikov holds the dubious distinction of being the only Goldman Sachs employee since the 2008 financial meltdown to have actually served time in prison. After leaving Goldman, Sergey was accused of stealing computer code from his former employer and sentenced to eight years in federal prison. Exactly what he'd done neither the FBI nor the jury seemed to understand, so Moneyball author and financial journalist Michael Lewis decided to give Sergey a second trial, assembling a jury made up of programmers and people familiar with high-frequency trading, and asking them to level a judgment. Their verdict? Not guilty. 'I think it's quite possible that Goldman itself didn't know what he had taken, the value of it, the purpose of it, or anything else,' Lewis concludes. 'There was such turnover at Goldman, and the system was such a hairball, that I think people knew pieces but they didn't know the whole. Serge might have been as close as there was to an expert on the how the whole system worked. I think the valuable thing that Serge took when he walked out the door was himself.' Aleynikov was released on appeal in 2011, but subsequently re-arrested on state charges the following year, so he's still not out of the woods yet."

Comments

Lemme get this straight

[Opportunist]

Of all the people who wasted and squandered the money of thousands, if not millions, nobody did time in prison, the only person who did was actually not stealing from decent people but from the thieves, and for THAT he goes to jail?

Re:Lemme get this straight

[fustakrakich]

The people who do the actual stealing are holding presidential cabinet positions. Can't touch this... If there were such a thing as justice, Goldman Sachs' charter would have been revoked a long time ago.

Re:Lemme get this straight

[fustakrakich]

That's vengeance, not justice... Asset forfeiture is sufficient.

Re:Lemme get this straight

[Rockoon]

Of all the people who wasted and squandered the money of thousands, if not millions

The closest thing to a currency loss and "squandering" was when the FED started rapidly printing money well beyond what the GDP growth indicated was needed.

Re:Lemme get this straight

[gmuslera]

If you count the hundreds to millons that lost job, houses, fell into poverty, prostitution, or died at consequences of them getting richer, in all the world, i think that rope and pitchforks below what justice should do. But if you want to point exactly who died, i'd say justice. What happened with them (and the rest of that mafia) is just the death note for anything that resembles justice in US.

Re:Lemme get this straight

[pla]

That's vengeance, not justice...

Sometimes justice means both.


Asset forfeiture is sufficient.

Tell that to all the people who died of starvation because Goldman saw profits in artificially inflating the hard red spring wheat futures market.

No, sometimes "justice" does mean torches and pitchforks. Real monsters just don't take the hint otherwise.

Re:Lemme get this straight

[Seumas]

Exactly what I clicked on the story to say. Of all the people at Goldman Sachs (and facilitating shadiness on the government-end of the symbiosis), this is the guy they go after?

How about Henry Paulson

Re:Lemme get this straight

[fustakrakich]

Real monsters have learned that society rewards their behavior. Taking away those rewards will go a very long way to correct the problem.

Re:Lemme get this straight

[noh8rz10]

i htink this is a chance for rehabilitation rather than incarceration, you know? the us justice system is too punitive in my book. why not have all these poeple contribute to society by doing programs for inner city youth or something?

Re:Lemme get this straight

[mwvdlee]

Asset forfeiture is not sufficient; it does nothing to compensate for consumed assets like holidays, rentals and such.
Nor does it prevent repeat offending.
Nor does it compensate victims.

As a result, any sufficiently large financial crime can never be fully repaid by it's offender.

Re:Lemme get this straight

[Rockoon]

This is in sharp contrast to the "new" (really asset swapped) money from QE, which is "real" government money which can't simply disappear the way private credit can.

Tell this to the people with savings. Tell them how the FED creating $80+ billion per month doesnt make the value of their savings disappear.

Re: Lemme get this straight

[OECD]

You want to change the prison system? Introduce some rich people to it.

Re:Lemme get this straight

[girlintraining]

Of all the people who wasted and squandered the money of thousands, if not millions, nobody did time in prison, the only person who did was actually not stealing from decent people but from the thieves, and for THAT he goes to jail?

Actually, that's not even entirely accurate. First, he was borrowing open source software. Goldman Sachs liked this because it meant faster development times, which meant faster profits. They didn't re-release modified code, even if it was only a few lines, of course, violating the licensing terms. Parts of the code he was working on he uploaded to an external server, because his company didn't have a proper code versioning system -- there was no way to track changes being made, and so he utilized an open source repository to store changes to chunks of code he was working on. This wasn't publicly available, it was simply put "in the cloud".

Unfortunately for him, overzealous managers and clueless FBI agents didn't understand what any of this meant, and frequently, and horribly, misinterpreted or misunderstood, what their own experts were telling him. His own attempts to explain what he had done weren't any better understood and were perceived as a confession.

This is a story of how law enforcement was criminally stupid, and believed what a middle-manager with no expertise in the subject and about five layers removed from what he was panic-striken over... that some immigrant they hired was "up to no good", when in truth, it was business as usual. Naturally, the FBI swung into action, believing the worst possible thing -- he was a terrorist, he was trying to destroy america, he was some kind of muslim radical... because the software he used was called Subversion, and when you add in terms like delete, modify, copy, remove... suddenly it looks like a bona fide CSI episode full of shadowy men exchanging pen drives with knowing winks and nods and death to america would surely follow if their crack investigative team didn't interrogate the suspects while brainy people in the forensics lab tossed around complex terminology and zoomed in on single pixels before saying "AH HA! We've got you now! This single pixel here proves he was the murderer!"

Criminal. Stupidity. That was the only crime here. It was CSI: FBI Edition... only without the special effects and soundtrack, and by people with their sense of humor surgically removed, rather than having actual personality and interesting dialogue.

Re:Lemme get this straight

[Anonymous Coward]

They didn't re-release modified code, even if it was only a few lines, of course, violating the licensing terms.

Ok, I'll pull a "Citation required" card. Please show an OSS license that requires releasing code modifications if you have only just modified a private copy of the code and have not redistributed it. So far as I know, it's usually if you redistribute the software or made a copy publicly available are you to provide the changes.

I mean, is this whole thing a GPL-is-viral kind of blowup on Goldman's part? Does it boil down to Goldman fearing Serge Aleynikov violated GPL (or whatever license) by adding Goldman proprietary changes and pushing the changes to an SVN server outside of Goldman? And they feared it would've required redistribution of the entirety of their trading platform?

Goldman fearing GPL violation more than causing the global financial meltdown? Seriously?

Re: Lemme get this straight

[dragonsomnolent]

I wish I had mod points, but in lieu of that, I will say ABSOLUTELY! The criminal justice system in the country is completely messed up. The programs don't work (especially 3 strikes laws) and especially with the treatment of addicts (which is a medical condition) being locked up along with rapists and murderers. The fact that prison rape has become a punchline of jokes shows just how screwed up it all is. The entirety of the system needs an overhaul, from laws to prison conditions.

Re:Lemme get this straight

[reve_etrange]

Their savings are held as bank deposits at private banks. The "money" the Fed is creating is held by the banks as reserve balances at the Fed itself. In our financial system there is only one operational pathway for reserve balances to enter the economy separately from their role in settling interbank payments, which is as physical U.S. currency AKA Federal Reserve Notes. Physical currency represents only a very small fraction of total reserves. Thus, the total size of all reserve balances held at the Fed has no bearing on the traded value of bank deposits denominated in dollars but held in the private sector (that is, the value of your and my savings). Like I said, Canada's banks typically have overnight reserve balances of ZERO, but that doesn't mean Canadians have no deposits at their private banks or that those deposits have infinite value.

Yet, QE does negatively affect the future value of our savings, not by harming the traded value of the dollar, but by reducing our interest income. During QE, the Fed exchanges reserves (bearing an 0.25% interest rate since 2008), which it "prints" (into a database), for securities (bearing ~3% in the case of Treasuries). The net financial assets of the private sector is unchanged, but its average rate of interest is decreased, negatively impacting its future income. Basically, the Fed is helping the government refinance at a lower rate, which is like a wealth tax on the government's creditors (including us, pensions, foreigners, companies, etc.).

TL;DR: QE is a Bad Thing, but because it decreases the amount of money we have and not the opposite.

Re:Lemme get this straight

[UnknownSoldier]

You're surprised that banks almost get away with murder and have a fall guy take the blame? This stuff has been going on at _least_ since 2001.

- - -
http://en.wikipedia.org/wiki/Brad_Birkenfeld

In October 2001, Birkenfeld began working at UBS in Geneva, Switzerland, handling private banking, primarily for clients located in the United States. In 2005, he learned that UBS's secret dealings with American customers violated an agreement the bank had reached with the IRS.

He resigned from UBS in October 2005 and provided written whistleblower complaints to Peter Kurer, Head Counsel for UBS, and other UBS senior executives regarding the illegal practices of U.S. cross-border business.

He is the first person to expose what has become a multi-billion dollar international tax fraud scandal over Swiss private banking.[2] Despite his unprecedented, extensive and voluntary cooperation, and registering as an IRS whistleblower, Birkenfeld is the only U.S. citizen to be sentenced to jail as a result of the scandal.

- - -

The fundamental problem is that the majority of people just don't give a crap about Accountability and Transparency and would rather watch their (un)reality TV so they don't have to think or do about how the government -- which is an extension of themselves -- is screwing up one of the greatest nations.

Re:Lemme get this straight

[rtb61]

So formulating wars to inflate the profits of the military industrial complex would be a 'white collar crime' even when those wars kill millions. How about pharmaceutical corporations pushing toxic medicines that kill tens of thousands another 'white collar crime'.

So violent, hmm. Lets say I come to your home, grab you and your family toss you out on the street and then confiscate your belongings, if you protest, I assault you and any members of your family that join you and throw you in a confined space for an extended period. This pretty much destroys you life, destabilizes you whole family likely breaking it up and exposing your children to considerable risk. This is called the non-violent crime of bankrupting families to generate corporate banking profits, and not just one family but hundreds of thousands even millions globally. For this the corporation and it shareholders should get fined and I the criminal get to wander off with millions in bonuses, THIS IS FUCKING FAIR?!.

Re:Lemme get this straight

[serviscope_minor]

I'm not conviced your interpretation is correct.

Clearly private copies count as copies otherwise no company would pay for more than one copy of Office.

The GPL is also somewhat quiet on the matter of copies and focuses on distribution. It therefore appears you can copy as freely as you like, it's only distribution which is in any way restricted.

Certainly for private use, you can put in proprietary code, copy it as many times as you like and everything is fine. You just don't have permission to -redistribute- the GPL portion without releasing your changes too.

Setting the ground there, but I suspect we would agree on the above points.

What seems to be the case is that the company (i.e. agents of the company) has added proprietary code. Any entity which is not the company has no right to copy those parts. It seems that "internal" distribution is OK because you're not redistributing to people as private individuals, but to agents of the company acting as a single entity.

IOW the private individual still has no right to copy the code.

IANAL, but this seems to be how the interpretation of it goes. I can't cite any precedent or the applicable law, but no one has ever attempted to uphold the GPL as meaning that internal redistribution meaning that anyone who touches a copy has permission to release it (or that the company has no right to redistribute internally).

Would be great to hear a real lawyer chime in with a completely non-binding opinion.

Reminds me of the 'range check' patent war

[michael_rendier]

When a judge, who coded as a hobby, looked at the attorneys and said that any 9th grader could have written a 'range check'... Jury selection is never to get the most intelligent person in a seat...they want the ones who they can paint the picture for, and have them accept it...

Re:Reminds me of the 'range check' patent war

[bfandreas]

...a jury of people who aren't smart enough to get out of jury duty.

What baffles me is the stupidity involved. First the poor sap who got jailed. I NEVER take any code with me between two gigs. I NEVER even take my personal notes with me. I tell them to change my passwords the moment I'm through the door. And I do a clean sweep on all my private equipment. While I do have my own tool kit I do inform my employers that this is mine, it will stay mine and I will never charge them to use it in whatever way they please as long as I get to keep using it myself and I give no guarantees for it. It's mostly stuff to copy and paste and example code so there is very little value to it. It is ok to take ideas and concepts with you because it is very hard not to remember those. That's called work experience. But never ever take source with you. Even if you think that it is open source. What you could do is blow the whistle that they are in breach of the OSS license in question and that's it.

The other side of the stupidity is that cleaning your bash history now is considered incriminating. If you have typed your password on the CLI and you don't clear your history then I would consider this criminal negligence. I would very much be surprised if Goldman-Sachs doesn't have a policy for this. Also if their system is such a hairball then it is very unlikely that you can directly integrate any code into another system. You propably don't even want to do so. And he didn't take the predictive stuff. So what he took with him couldn't have been more than general code involving efficient comparison of values, net code, sorting code and so on. Most of which wouldn't even be original enough to be worthy of a software patent.

While he deserved a slap on the wrist for being awefully cavalier with stuff that GS considered their property(rightfully so or not) he certainly didn't deserve 8 years in prison. If a jury can't understand the case and simply goes with the guy with the biggest words and the most expensive suit then it needs to be dismissed.

There a couple of problems I see in the US justice system:
1) DAs get elected which subjects them to a popularity contest and is a high motivator to get your name into the papers. They need to make a lot of noise and they need to get high-profile convictions that impress those who are worthy of impressing. Easy tearjerk cases for the public, specialised cases for campaign contributors.
2) DAs too often have political ambitions beyond the justice branch. This aggravates the problem in 1)
3) The practice to throw as much at a defendant as you can possibly muster makes plea-bargains a very powerful tool. You get a worst case of 136 consecutive years in prison. You get an offer to sign here and only go to prison for 8 years. Given how often plea-bargains are taken this is plain wrong. And it needs to be abolished. If you throw the phone book at a person you should be willing and able to get a conviction for all and also be willing to see it through. Either a person is guilty and deserves 136 years of prison or he is not. Willingness to go for less only demonstrates eagerness to get something but not to the full extent of the law. This practice needs to be banned. Now.
4) He didn't get a jury of his peers. I would have found him guilty of breaching his NDA and nothing more. Those bozos were all high-school graduates who never had a chance to understand a word that was said and went with a presumably flamboyant and sensationalistic prosecutor.
5) He didn't get good counsel. How a jury of high-school graduates got past the selection process we will never know. Why no real expert with practical knowledge was heard we will never know. On the one hand you have the state throwing lots of resources at one guy and on the other hand we have a private person who has not even remotely the means to match that.

The whole thing was lopsided from the start and it will always be.

Dumbass Slashdot Editors

[Anonymous Coward]

"Did Goldman Sachs Overstep in Criminally Charging "

Goldman Sachs can bring criminal charges? Really?

Re:Dumbass Slashdot Editors

[gmuslera]

They have the DOJ and most of the government in their pocket, they can bring law to whoever they want for whatever reason they want. Now, justice, thats another topic, in which country you try to use that word?

Wrong reasoning

[KiloByte]

You're assume Goldman Sachs cares about "is this legal?" or "is this right?". What they care is: "will this improve our PR?", "will this scare people from going against us?", "will this scare people from working for us?".

Seryozha was at that point no longer working for Goldman Sachs, and he dared to do something hostile, so he was an enemy who needed to be punished. Extra bonus for telling the masses "another crooked banker in jail" which makes the uninformed feel as if there's a shred of justice left.

Re:Wrong reasoning

[Jane Q. Public]

You're assume Goldman Sachs cares about "is this legal?" or "is this right?". What they care is: "will this improve our PR?", "will this scare people from going against us?", "will this scare people from working for us?".

This is the whole reasons corporations worked to try to make "non-compete" agreements enforceable: to lock in their control of an employee.

And that is why non-compete clauses or agreements are no longer enforceable in California. California did a good thing for a change.

They need to get it through their heads that they do not control the contents of a mind. If they want somebody to "not compete", then the PROPER way to do it is to give them better pay and compensation than the other guy. That's called capitalism.

Pfffft

[jeff13]

Being called a crook by Goldman Sachs is like being called an anti-Semite by Hitler!

Time for Tech / IT unions

[Joe_Dragon]

Some places have gone way to far and works have no one to stand up for them and even quitting can be seen as planting an time bomb even if all it is stuff that you do day to day that after you quit does not happen and it's leads to an big fail.

Morale of the story

[Registered Coward v2]

Always get a lawyer before talking to the law.

Re:Morale of the story

[hawguy]

Always get a lawyer before talking to the law.

No, the moral of the story is: become well connected (too big to fail/jail) and don't get caught.

That's a bit like saying "Become rich", easier said than done. But the parent poster is correct when he says "Don't talk to the law". It can do nothing to help you, and as the police will tell you when they arrest you, anything you say can and will be used against you".

http://www.youtube.com/watch?v=6wXkI4t7nuc

Re:NO

[Black Parrot]

Goldman Sachs didn't charge him with anything the state charged him.

The state is merely an instrument of our financial-pharmaceutical-defense-burgerflippial complex.

Does Betteridge's law of headlines always apply?

[recrudescence]

No.
PS. Note how the title of this post is also a question.

Re:Wait, what?

[hawguy]

He pulled up his browser and typed into it the words: Free Subversion Repository. Up popped a list of places that stored code, for free, and in a convenient fashion. He clicked the first link on the list. The entire process took about eight seconds. And then he did what he had always done since he first started programming computers: he deleted his bash history. To access the computer he was required to type his password. If he didn't delete his bash history, his password would be there to see, for anyone who had access to the system.

What? It is possible to put your password on the command line with subversion, but why would you do that if you are going to delete your history? Why not just let subversion prompt for a password (or use a keyring to store it)?

I've deleted my bash history after inadvertently or purposely typing a password into a command line -- sometimes putting the password on the command line is the most expedient way to get work done, despite it being a bad idea from a security standpoint -- and sometimes I'll mistype a hostname on an ssh command, but have already typed my password or ssh key passphrase and it ends up being entered as a command (good thing I never user "rm -rf /" as a password). Well, rather than delete the whole history, I usually run "history -r" to replace my history with the last saved history.

Though if the company really wants to see what a user has done, looking at the bash history is a very weak way to do it since anyone can edit their own bash history - they should be running something like auditd that sends command execution logs to a separate server that the developer doesn't have access to.

Beyond simple theft

[Livius]

If a person is deprived of a very large amount of savings, say an amount that exceeds the lifetime productivity of an average wage-earner, that crime should be put on the level of some lesser version of manslaughter. It's gone beyond theft at that point.

Justice

[Pino Grigio]

How many Goldman executives are currently serving time in prison? If the answer is zero, then I'm pretty sure there's something wrong with the legal system.

The French Connection connection

[Squidlips]

Anyone remember the end of The French Connection. All the masterminds walked while the chemist served time....

Incompetence or something else

[internerdj]

The article pointed at it being fear mongering among managment but I wonder since the article mentioned he was one of the top programmers on Wall Street. I wonder if this was an attempt to make him unemployable since he was leaving to go work for a competitor.