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 If there were such a thing as justice, Goldman Sachs' charter would have been revoked a long time ago.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

[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

[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

[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

[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

[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.

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.

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.