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How Much Time Could Sergey Get?
Sergey Aleynikov could be looking at some shocking time. That is, depending on how compelling Goldman's arguments for the "loss" of the software are.
For the uninitiated, sentencing in the federal system is governed primarily by something called the Federal Sentencing Guidelines Manual, 583 pages (excluding supplements and appendices) of scintillating, punitive detail that manages to outline an offense hierarchy that could fairly be said to represent a cross-section of the nation's current (or 18 months dated) moral architecture.
Mr. Aleynikov is charged, for now, with violating 18 U.S.C. §§ 1832, 2314 and 2 (specifically, "theft of trade secrets," "transportation of stolen goods, securities, moneys, fraudulent State tax stamps, or articles used in counterfeiting," and the obligatory aiding and abetting throw-away of 18 U.S.C. § 2). A quick back of the napkin analysis might look like this:
Ignoring § 2 for a moment, §§ 1832 and 2314 are covered by §2b1.1 which smacks the defendant with a "Base Offense Level" of 6 for offenses that do not have a statutory maximum term of 20 years or more. Both sections have a statutory maximum of 10 years so we give him a 6.
Now comes the pincher. The "loss" provision assigns points for the dollar value of the "loss" involved in the offense. More than $1,000,000 slaps on 16 levels. More than $100,000,000 gifts him with 26. More than $400,000,000 and he's looking at 30 more levels.
There is also a bit of an unconventional definition of "loss" here. Specifically:
Loss Under Subsection (b)(1).—This application note applies to the determination of loss
under subsection (b)(1).(A) General Rule.—Subject to the exclusions in subdivision (D), loss is the greater of actual
loss or intended loss.(i) Actual Loss.—"Actual loss" means the reasonably foreseeable pecuniary harm
that resulted from the offense.(ii) Intended Loss.—"Intended loss" (I) means the pecuniary harm that was intended
to result from the offense; and (II) includes intended pecuniary harm that would
have been impossible or unlikely to occur (e.g., as in a government sting
operation, or an insurance fraud in which the claim exceeded the insured value).
In determining "the pecuniary harm that was intended to result from the offense," the prosecution will, no doubt, present the statements of Goldman Sachs and the NYSE on the critical value of the software to boost the sentencing. (Anyone think Goldman is likely to go lightly here? Me either).
Let's try $200,000,001 for size. 28 levels on top of the base level of 6.
Now we run through the various enhancements including things like:
If the offense involved misappropriation of a trade secret and the defendant knew or intended that the offense would benefit a foreign government, foreign instrumentality, or foreign agent, increase by 2 levels.
and-
If the offense involved theft of, damage to, or destruction of, property from a national cemetery or veterans’ memorial, increase by 2 levels.
Of the enhancements this one probably applies:
If (A) the defendant relocated, or participated in relocating, a fraudulent scheme to another jurisdiction to evade law enforcement or regulatory officials; (B) a substantial part of a fraudulent scheme was committed from outside the United States; or (C) the offense otherwise involved sophisticated means, increase by 2 levels. If the resulting offense level is less than level 12, increase to level 12.
I'm assuming no foreign power was involved, but who knows.
Assuming no criminal history, he's looking at 6 + 28 + 2 = 36 levels or 188-235 months for §§1832 and 2314. That's over the statutory minimum for both offenses so we end up with 10 years... the equivalent of level 31. For reference, an armed bank robbery with $100,000 in "loss" and no injuries would net you level 29.
Then there is the question of consecutive v. concurrent sentences. Either way, 10 or 20 years is a stiff sentence. Ouch.
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Wouldn't the only way to calculate the damages involve GS revealing how much they ripped off US markets with the help of Uncle Sam ?
It's kind of like the Madoff issue. They don't want to talk about it for obvious reasons (Government involvement).
I couldn't get through this article. There's a flashing ad on the left hand side asking me to check my credit rating. The ad was distracting and driving me crazy. You've got to do something about these flashing ads.
I totally agree. It's on our list. Believe me.
If you are using the Firefox browser try this:
https://addons.mozilla.org/en-US/firefox/addon/1865
It works pretty well on all of my computers. The website probably streams those ads as part of the service.
I have not seen an ad in many years. The usercontent.css in Firefox will block what you tell it to. The morons are still running ads from the same blocked sites. My blockage is pretty complete and I have not changed a thing in years.
Adblocker plus with firefox. Haven't seen an ad in months...
Quiet you!
Enough complaining about the ads people! Close one eye while reading or buy more ZH shit so they can just drop them altogether! Now back to more Merrillwide bullshit follow-ons...........
OR you coul use firefox w/adblock, champ!
Lucky you're anonymous.
I assume that sergey will reveal that the algorithm actually belongs to the Enron Group as Goldman hired much of their trading team. So in actuality, the system belongs to the Enron creditors. Could lead to billions in Goldman losses.
Thank you for the analysis, Marla.
I recall your statement of being "...a reformed legal professional".
Are you an attorney and if so, what area(s) of law are your specialties? Naturally, I do understand if you prefer to pass on the question and I certainly respect that.
who cares?
Well below the sentencing guidelines....maybe four years max, then a movie deal like Leeson (speaking of bank robbers).
If he is allowed to have this code on his machine and they cannot prove he initiated the transfer to the "German Server" will make an interesting case for theft. This becomes a civil event and GS settles and Alexy settle this before trial.
How ca GS prove its value or potential loss without some interesting dscovery.
The guy is a patsy. Need I remind you what (usually) happens to patsies?
"MARK IT ZERO,DUDE"
Poor guy - I think if he uploaded the code it was, like with a lot of programmers, probably stuff he worked on, for his own use in a new job, not an 'intent to steal' per se, but just a couple of things that might otherwise be tedious to write again from scratch.
If he were really guilty of something more, would he have not just called a lawyer right away rather than spilled the beans to the Feds?
Any similar cases anyone know of that were treated in the criminal courts rather than the civil courts?
Correct, this will quietly go away.
Oh, I think it best for Serge to just blow the whistle on GS and their market manipulations.
This code theft accusation is just that, nothing has been proven and no one has referenced any agreements he may or may not have had with GS, this is a civil deal.
Considering the statements by the U.S, Attorney could the code not be seen as a "Manipulative and Deceptive Device" as defined in 15 U.S.C. § 78j?
If yes, then GS and the SEC would probably not want to go to court and discuss this in the open and explain that to a jury.
Even if it goes to court, GS would have to prove an actual loss and that it was caused by someone using their code against them and of course they must prove intent, i.e. that he did it knowingly. He claims it was copied by accident.
Listen to this little flunkey, this little quisling: "If enough people put pressure on members of Congress and the President to appoint the appropriate people, then we should solve most of these issues. I’m not sure what new policy initiatives would be needed." It's not about people, it's about individually enforceable rights. Today was all the confirmation we needed that we're going lower-possibly much lower after Friday's big selloff. hat tip to http://tinyurl.com/n854tt for the good articles
DIAF, twit.
As long as Sergey and Lloyd C. Blankfein serve the same amount of time, I don't care.
If I were a betting man, I'd go with the long shot.
Serge turns States evidence, reveals that G.S. has been manipulating the market for at least since he's been there. He will provides names, dates, emails, code etc. He will get 6 months probation go into the witness protection program and promise he will never work in finance again. and just like Kiser Soze, he's gone, never to be seen or heard from again. But the G.S. survivors will tell their evil spawn that like Kiser Soze should they manipulate the market Serge will be there to destroy not just them but their friends and family as well. =;)
I don't know, is the AG that smart? But its the best Idea I've heard yet.
I assume this algorithm once belonged to the Enron Group which utilized this system to manipulate the energy markets. They were found guilty. This system was then acquired by goldman. Manipulation? Thats their pedigree.
Here you have the US Attorney telling a judge that the proprietary GS code " could manipulate markets" and the US DOJ is going after Sergey A to protect GS's ability to manipulate markets. Fordyce & Fordyce all over again...it appears.
Those ball room dancing video's ought to do Serge well if or when he ends up in "D" block at USP Lewisberg.
I am Jack's complete lack of conjugal visits.
"Even if it goes to court, GS would have to prove an actual loss and that it was caused by someone using their code against them and of course they must prove intent, i.e. that he did it knowingly. He claims it was copied by accident."
Loss will be easy to prove if they have to stop using the code because it has been disseminated. Or if they have to do a major rewrite. How much money is lost while they shut down their programmed trading? of course if they continue to trade, (there was some question about this, but now the NYSE has assured everyone that GS continues to program trade) then you are right. Where are the damages?
Intent is going to be relatively easy as well. Serge intentionally uploaded code that belonged to GS. He can't deny that. He can claim he thought it was his code, but I am sure that he signed all kinds of nondisclosure agreements that spelled out exactly what belonged to whom. His signature on the nondisclosure agreement is going to make it pretty clear to a jury that he was well aware that he was committing a crime. Also he tried to erase the .bash files which suggest he was covering his tracks. If he was innocent, without intent to commit a crime, why try to cover up the fact?
"Intent is going to be relatively easy as well. Serge intentionally uploaded code that belonged to GS."
That isn't the intent that must be proved.
"In order to establish a violation of 18 U.S.C. § 1832, the government must prove: (1) the defendant stole, or without authorization of the owner, obtained, destroyed or conveyed information; (2) the defendant knew this information was proprietary; (3) the information was in fact a trade secret; (4) the defendant intended to convert the trade secret to the economic benefit of anyone other than the owner; (5) the defendant knew or intended that the owner of the trade secret would be injured; and (6) the trade secret was related to or was included in a product that was produced or placed in interstate or foreign commerce."
http://www.usdoj.gov/usao/eousa/foia_reading_room/usam/title9/crm01129.htm
Beyond demonstrating in a § 1832 case that the defendant both knew
that the information he took was proprietary and that he intended the
misappropriation to economically benefit someone other than the rightful
owner, the government must also prove that the defendant intended to
“injure” the owner of the trade secret. See 18 U.S.C. § 1832(a). This
provision “does not require the government to prove malice or evil intent,
but merely that the actor knew or was aware to a practical certainty that his
conduct would cause some disadvantage to the rightful owner.” H.R. Rep.
No. 104-788, at 11-12 (1996), reprinted in 1996 U.S.C.C.A.N. 4021, 4030.
http://www.usdoj.gov/criminal/cybercrime/ipmanual/04ipma.pdf
Re: 18 USC 2314
The United States appeals from a dismissal by the district court of an indictment charging the defendant, John M. Brown, with three counts of violations of the National Stolen Property Act, 18 U.S.C. Secs. 2314 and 2315.1 The indictment was dismissed on the ground that the allegedly stolen property, a computer program in source code form, did not come within the ambit of 18 U.S.C. Secs. 2314 and 2315 as goods, wares or merchandise. We affirm.
2
* At the hearing on the motion to dismiss the indictment, government counsel stated that defendant Brown worked as a computer programmer for The Software Link, Inc. (hereinafter TSL), a computer software company located in Georgia (II R. 31). One asset of TSL was a computer program known as PC-MOS/386.2 Later in New Mexico, Brown was the subject of an FBI investigation which culminated in the issuance and execution of a search warrant for his apartment. During the search of Brown's residence, the FBI discovered five three-ring notebooks and a hard disk3 which contained portions of the source code4 for the PC-MOS/386 program. II R. at 47.
US v. Brown 925 F.2d 1301 (10th Cir. 1991)
I guess GS will not be able to argue that just the use of their algorithm guarantees positive returns, thus an inabilitity to use it guarantees a loss.
Even in normal times just using the algortihtm doesn't guarantee a profit, a loss could also be the result of the algortithm's use.
So unless GS is claiming that the algorithm is certain to make always a profit - which is something I would love to hear explained and argued in court - they must prove that the actual loss was due to someone else having knowledge of or using the algorithm and that it was not due to other reasons, like a derteriorating economy, for example.
Besides, in a stock exchange GS must take into account that their trading strategy one day might cease to work. A competitor might all by himself come up with a better algorithm. So there is no guarantee that a profit would have been made in a subsequent year, just because one was made in a previous year.
As to intent. Yes, he uploaded the code. But so far we only have negligence. He negligently grabed more files than he intented to, at least that's what he claims.
That's not criminal. The prosecutor will have to prove that Serge had this intention.
Did he really try to erase his tracks, or was he doing something else which was legitimate? We will see.