Court Overturns Conviction of Ex-Goldman Programmer

February 17, 2012

The New York Times on February 17, 2012 released the following:

“BY PETER LATTMAN

A federal appeals court reversed the conviction late Thursday of Sergey Aleynikov, a former Goldman Sachs programmer found guilty of stealing proprietary code from the bank’s high-frequency trading platform.

The United States Court of Appeals for the Second Circuit overturned the conviction and ordered the trial court to enter a judgment of acquittal. A judgment of acquittal generally bars the government from retrying a defendant.

The reversal was without explanation; it said an opinion would follow “in due course.”

The appeals court ruling came just hours after a three-judge panel heard oral arguments on Mr. Aleynikov’s appeal. Mr. Aleynikov, who was convicted in December 2010, is serving an eight-year sentence at a federal prison in Fort Dix, N.J.

“We are pleased and gratified that the court of appeals has roundly rejected the government’s attempt to rewrite the federal criminal laws,” said Kevin Marino, Mr. Aleynikov’s lawyer. “Mr. Aleynikov spent a year in prison and suffered many other losses as a result of these unjust charges, but he never lost faith in his ability to win an acquittal. This is a wonderful day in his life.”

Ellen Davis, a spokeswoman for the United States attorney’s office in Manhattan, declined to comment.

The reversal deals a major blow to the Justice Department, which has made the prosecution of high-tech crime and intellectual property theft a top priority. This case tested the boundaries of the Economic Espionage Act, a 15-year-old law that makes it a crime to steal trade secrets. Federal prosecutors held up the arrest of Mr. Aleynikov as an example of the government’s crackdown on employees who steal valuable and proprietary information from their employers.

The decision is also a loss for Goldman Sachs, which reported Mr. Aleynikov to federal authorities after it accused him of stealing computer code. The bank had portrayed itself as the victim of a brazen crime.

A crucial issue in the appeal — and a main focus of Thursday’s oral argument — was whether Mr. Aleynikov’s actions constituted a crime under the statutory language of the Economic Espionage Act. The debate centered on whether Goldman’s high frequency trading system was a “product produced for interstate commerce” within the meaning of the law.

Lawyers for Mr. Aleynikov argued that the bank’s trading platform was built for internal use and never placed in the stream of commerce. The government countered that the high-frequency trading system, which Goldman used to trade in markets around the globe, was clearly produced for interstate and foreign commerce.

Mr. Aleynikov’s arrest in 2009 drew attention to a new and lucrative corner of Wall Street. High-frequency trading uses complex computer algorithms to make rapid trades that exploit tiny price discrepancies. The trading became a substantial source of revenue at banks and hedge funds, and these companies vigilantly guard the code underpinning their trading strategies.

Armed with a degree in computer programming, Mr. Aleynikov came to the United States from Russia in 1990. His services were in demand at Goldman, which paid him $400,000 a year to write code for its high-frequency trading business, making him one of the bank’s highest-paid programmers.

He was lured away from Goldman by Teza Technologies, a new firm run by an executive from the Citadel Investment Group, a giant Chicago hedge fund. Teza offered to pay about triple what he made at Goldman.

During his last final days at Goldman, Mr. Aleynikov uploaded source code to a server in Germany that allowed him to do an end run around the company’s security systems. He was arrested shortly thereafter.

At trial, Mr. Marino, the lawyer for Mr. Aleynikov, acknowledge that his client breached Goldman’s confidentiality agreements, but insisted that he did not commit a crime.

Federal prosecutors portrayed Mr. Aleynikov as a thief who stole Goldman’s closely guarded code to help his new employer. After a two-week trial, the jury deliberated for just three hours before reaching a unanimous guilty verdict.

The ruling is the second time in as many months that the Federal Appeals Court in Manhattan has overturned a conviction secured by the United States attorney for the Southern District of New York. In January, the appeals court reversed the conviction of Joseph P. Collins, a former outside lawyer to Refco, the collapsed brokerage firm, citing judicial error.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Appeal

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To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Dallas FBI head to leave agency for private sector

January 31, 2012

The Houston Chronicle on January 30, 2012 released the following:

“DALLAS (AP) — The head of the FBI’s Dallas field office is planning to retire from the agency after five years in command, an agency spokeswoman said Monday.

Robert E. Casey will leave the bureau April 30 to take a job in the private sector, FBI spokeswoman Lydia Maese said. She declined to say where Casey was going.

Casey, 54, was appointed in May 2006 to head the Dallas field office, which supervises 12 satellite offices in North and East Texas. After working as a Houston police officer, Casey joined the FBI in September 1986 and worked in field offices in Phoenix, Chicago and Miami, as well as at the agency’s Washington headquarters, according to his official biography.

During his tenure in Dallas, FBI agents investigated and arrested a Jordanian man, Hosam Smadi, after he pressed a button thinking he was detonating a bomb that would blow up a 60-story Dallas office tower and kill thousands of people. An undercover agent had tried but failed to talk Smadi out of the plot, and the bomb was a fake.

Smadi was sentenced in 2010 to 24 years in prison.

Casey was also the subject of death threats from a fired FBI agent, who was sentenced last year to two years in prison for retaliating against a federal official.

Casey declined to comment on his departure.

U.S. Attorney Sarah Saldana, the top federal prosecutor in Dallas, said through a spokeswoman that her office had “the greatest respect for and the admiration of the job Mr. Casey has done.”

“He has been a tireless leader in working with our office to further the ends of justice in our community,” she said.”

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To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Multi-Ton Cocaine Seizure from Interdicted Drug Smuggling Vessel

October 30, 2011

The Federal Bureau of Investigation (FBI) on October 28, 2011 released the following:

“TAMPA, FL— United States Attorney Robert E. O’Neill announces the recovery of an estimated 6,700 kilograms of cocaine from a submerged drug smuggling vessel in the Caribbean Sea. The vessel, a self-propelled semi-submersible vessel, or SPSS, was interdicted by the U.S. Coast Guard Cutter (USCGC) MOHAWK on September 30, 2011, in international waters of the Caribbean some 110 miles off of the coast of Honduras. The vessel sank during the interdiction, and USCGC MOHAWK detained the four crew members, who were later transferred to Tampa for prosecution.

Shortly after the interdiction, a multi-agency effort began to recover the suspected drug cargo of the sunken SPSS. This effort included the deployment of the FBI Laboratory’s Technical Dive Team, located in Quantico, Virginia, which conducted dive operations at the site of the submerged vessel from USCGC CYPRESS. These operations yielded evidence including packages of cocaine totaling an estimated 6,700 kilograms from the SPSS.

Today, this evidence arrived at Coast Guard Sector St. Petersburg aboard USCGC CYPRESS, where it will be transferred to the custody of investigators of the Panama Express Strike Force. The crew of the SPSS (Jorge Colomer, 47, of Honduras; Guilforth Romero, 24, of Honduras; Manuel Cuero, 30, of Colombia; and Marcos Salazar, 30, of Colombia) have been indicted by a federal grand jury in the Middle District of Florida for violation of the Drug Trafficking Vessel Interdiction Act of 2008 and are being prosecuted by the U.S. Attorney’s Office in Tampa. If convicted, each defendant faces a maximum penalty of 15 years in federal prison.

A similar recovery operation earlier this year yielded over 6,000 kilograms of cocaine from an interdicted SPSS that also sank in the Caribbean. The crew of that vessel is being prosecuted by the U.S. Attorney’s Office in Tampa.

An indictment is merely a formal charge that a defendant has committed a violation of the federal criminal laws, and every defendant is presumed innocent unless, and until, proven guilty.

This case is being investigated by OCDETF’s Panama Express Strike Force, comprised of agents and analysts from the Federal Bureau of Investigation, Drug Enforcement Administration, Immigration and Customs Enforcement’s Homeland Security Investigations, United States Coast Guard Investigative Service, Pinellas County Sheriff’s Office, and Joint Interagency Task Force South. It will be prosecuted by Special Assistant United States Attorney Austin Shutt.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

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To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


John A. Ortiz Sentenced to 18 Months in Federal Prison for Structuring More Than $943,000 in Cash Transactions

August 26, 2011

The Federal Bureau of Investigation (FBI) on August 25, 2011 released the following:

“David B. Fein, United States Attorney for the District of Connecticut, announced that JOHN A. ORTIZ, 54, of Stratford, was sentenced today by United States District Judge Janet C. Hall in Bridgeport to 18 months of imprisonment, followed by two years of supervised release, for illegally structuring more than $943,000 in cash transactions. Judge Hall also ordered ORTIZ to forfeit approximately $388,540 to the government, and to pay a fine in the amount of $75,000.

Federal law requires all financial institutions to file a Currency Transaction Report (CTR) for currency transactions that exceed $10,000. To evade the filing of a CTR, individuals will often structure their currency transactions so that no single transaction exceeds $10,000. Structuring involves the repeated depositing or withdrawal of amounts of cash less than the $10,000 limit, or the splitting of a cash transaction that exceeds $10,000 into smaller cash transactions in an effort to avoid the reporting requirements. Even if the deposited funds are derived from a legitimate means, financial transactions conducted in this manner are still in violation of federal criminal law.

According to court documents and statements made in court, ORTIZ maintained a money market savings account at a credit union, and also had a personal line of credit at a bank. Between May 2006 and October 2009, ORTIZ made more than 70 large cash deposits into his savings account and more than 30 large cash payments to his personal line of credit account. The vast majority of the cash transactions were in the amount of $9000, and none exceeded $10,000. In total, ORTIZ structured approximately $943,000 in cash deposits and line of credit payments.

ORTIZ used the deposited funds to purchase, or to obtain credit in order to purchase, properties in Connecticut and Florida. ORTIZ also used more than $270,000 of the structured funds to settle a business dispute with his former partner.

ORTIZ owns and operates towing and auto repair businesses in Bridgeport and Stratford.

On May 25, 2011, ORTIZ waived his right to indictment and pleaded guilty to one count of structuring cash transactions.

This matter was investigated by the Internal Revenue Service—Criminal Investigation and the Federal Bureau of Investigation. The case was prosecuted by Senior Litigation Counsel Richard J. Schechter.”

To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN List Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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Solomon Hobbs, Jr. Pleaded Guilty in Austin Federal Court to Wire Fraud, Student Assistance Program Fraud, and Aggravated Identity Theft

August 25, 2011

The U.S. Attorney’s Office Western District of Texas on August 24, 2011 released the following:

“DALLAS MAN PLEADS GUILTY TO DEFRAUDING FEDERAL STUDENT LOAN PROGRAM

United States Attorney John E. Murphy announced that in Austin this morning, 47-year-old Solomon Hobbs, Jr., (a.k.a. Virgil Clinton Powell) of Dallas, Texas, pleaded guilty to federal charges in connection with a scheme to fraudulently obtain over $37,000 in student loans.

In all, Hobbs pleaded guilty to three counts of wire fraud, three counts of student assistance program fraud and one count of aggravated identity theft. By pleading guilty, Hobbs admitted that since 2004, he developed a scheme to fraudulently obtain $37,395.05 in federal student financial aid, including $6,573.50 by using another individual’s name and identifying information, from five universities in Texas including: University of Texas at Tyler, University of Texas at El Paso, University of Texas at Arlington, Midwestern State University (Wichita Falls) and Texas State University. Hobbs further admitted that he had no intent of using the financial aid for educational expenses after repeatedly obtaining funds, then failing out of the institutions due to his lack of attendance.

Hobbs faces up to 30 years imprisonment per wire fraud charge; up to five years imprisonment per student assistance program fraud charge; and, a mandatory two years in federal prison on the aggravated identity theft charge.

Hobbs remains on bond pending sentencing before United States District Judge Lee Yeakel. No sentencing date has been scheduled.

This case was investigated by the U.S. Department of Education Office of Inspector General. Assistant United States Attorney Jennifer Freel is prosecuting this case on behalf of the Government.”

To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN List Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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Six More Charged in Houston Federal Criminal Court with a Series of Houston Area Armed Bank Robberies

July 15, 2011

The U.S. Attorney’s Office Southern District of Texas on July 14, 2011 released the following:

“HOUSTON – A sealed superseding indictment charging six more Houston area residents for their alleged involvement in a series of Houston area bank robberies including the New Year’s Eve robbery of a Pearland bank was unsealed today, United States Attorney José Angel Moreno announced today along with FBI-Houston acting Special Agent in Charge Russell D. Robinson and Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Special Agent in Charge J. Dewey Webb announced today.

With the arrest of these additional six defendants, a total of 13 defendants are now charged with conspiring to and committing a series of armed bank robberies of Houston area banks including the robbery of the Pearland Chase branch bank on Dec. 31, 2010. The 16-count superseding indictment was returned under seal on Wednesday, July 6, 2011, and completely unsealed today following the appearance of the last of the newly charged defendants before U.S. Magistrate Judge Stephen Smith in Houston. The six now charged in the superseding indictment include John Berley Scott aka Fresh, 30, Derrick Lashon Paley aka Crybaby, 33, Michael Maurice Wilson Jr. aka Blue/Mikey Poo, 25, Roderick Marshall Beagle, 39, Michael Dushon Duncan aka Mikey, 19, and Kelvin Dewayne Thomas aka Little Kevin, 21, all of Houston.

One or more new defendants have been added to several of the already existing counts in the original indictment and also charged with new counts. Scott is charged with committing an armed bank robbery on Sept. 15, 2010, of the Amegy Bank located on the 300 block of N. Sam Houston Parkway in Houston; Scott along with Paley is also charged with committing an armed bank robbery on Oct. 12, 2010, of the Comerica Bank located on the 14600 block of Memorial Drive in Houston; Raymond Tierra Johnson aka T, 30, and Samuel Glen Bonner aka Glen, 39, are charged with Hostage Taking for their role in the New Year’s Eve robbery in Pearland.

Three defendants were arrested in the Houston area this week. Paley was arrested on July 12, 2011, while Beagle was arrested the following day. Thomas was arrested today. Paley has made his initial appearances before Judge Smith and been ordered to remain in custody pending a hearing on the government’s motion to detain him without bond pending trial set for tomorrow, July 15, 2011, at 10:00 a.m. before Judge Smith. Beagle’s initial appearance is set for today at 2:00 pm before Judge Smith. Thomas is also expected to make his initial appearance before Judge Smith this afternoon with a setting for his detention hearing to be scheduled at that time.

The fourth newly charged defendant, Duncan, was originally charged by criminal complaint for his role in the New Year’s Eve bank robbery in Pearland. He remains in federal custody without bond by order of the court and is expected to make his initial appearance to answer the charges in the superseding indictment in the near future. The remaining two newly charged defendants, Wilson Jr. and Scott are both presently in state custody on unrelated charges. Both are expected to be transferred into federal custody in the near future to answer the new charges.

The seven others previously charged for their alleged involvement in this bank robbery spree and also named in the superseding indictment are Johnson and Bonner, along with Gregory Wayne Ferguson, 18, Larry Smith, 34, Arlington Davis Wilkes aka AD, 20, Carl Ray Turner Jr. aka CT, 24, and Edward Johnson, 26.

The superseding indictment accuses all 13 defendants of conspiring together to rob several Houston area banks through force and intimidation including Wells Fargo branch banks on Grant Road on Aug. 23, 2010, Memorial Drive and Kimberly Lane on Oct. 7, 2010, the Coamerica Bank branch banks on the NW Freeway and the 14600 block of Memorial Drive, the Citibank Branch on Cypresswood on Sept. 14, the Amegy Bank on N. Sam Houston Parkway on Sept. 15, the Chase Bank branch on the NW Freeway in Cypress, Texas, on Oct. 27 and the Chase branch bank on North Main in Pearland, Texas, on Dec. 31, 2010. Each of these robberies is alleged as an individual substantive count against two or more of the various defendants. The seven other defendants previously charged by indictment for their alleged involvement in the robbery spree are presently in federal custody without bond pending trial.

The conspiracy, according to allegations in the indictment, involved “casing” banks for robberies and the selection of banks that did not have security guards or bullet resistant bandit barriers. The conspirators allegedly used lookouts during robberies and used stolen or “hot” cars as get-a-way vehicles to commit the offenses. According to the indictment, the co-conspirators recruited others to assist them to rob the banks in exchange for a share of the proceeds taken. Bank robberies were effected through the use of demand notes allegedly written by Smith and through the brandishing and firing of firearms during the course of the robbery to ensure compliance with their demands.

Conspiracy to commit a bank robbery carries a maximum punishment of five years imprisonment and/or a $250,000 fine upon conviction. Each count of bank robbery carries a maximum punishment upon conviction of 20 years incarceration or 25 years if a firearms displayed and/or a $250,000 fine. Brandishing or discharging a firearm during and in furtherance of a bank robbery carries a mandatory punishments of seven and 10 years, respectively, which must be served consecutive to any sentences imposed for the underlying bank robbery conviction. hostage taking carries a maximum punishment of up to life in prison and/or a $250,000 fine.

The charges against these defendants are the result of a federal investigation conducted by the FBI and the ATF with the substantial assistance and cooperation of the Houston Police Department, Harris County Sheriff’s Office, Harris County Precinct 4 Constable’s Office, Harris County District Attorney’s Office, Crimestoppers, Friendswood Police Department, Pearland Police Department and the Brazoria County District Attorney’s Office. The United States Attorney wishes to recognizes each of these investigative agencies as well as the security departments of Wells Fargo and JP Morgan Chase for their outstanding efforts.

Assistant U.S. Attorneys Suzanne Elmilady and Kebharu Smith are prosecuting the case.

An indictment is a formal accusation of criminal conduct, not evidence.
A defendant is presumed innocent unless and until proven guilty through due process of law.”

To find additional federal criminal news, please read The Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN List Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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Gregory Lashon Thomas, Aja D. Crawford, and Ernest Ohenekitiwa McMillan Set for a Federal Criminal Trial Before Honorable Chief U.S. District Judge Sidney A. Fitzwater

July 7, 2011

The U.S. Attorney’s Office Northern District of Texas on July 6, 2011 released the following:

“TRIAL DATE SET IN MULTI-MILLION DOLLAR MORTGAGE FRAUD CASE

Alleged Fraud Involved Approximately $6 Million in Fraudulently Obtained Loan Proceeds

DALLAS — An August 29, 2011, trial date, before Chief U.S. District Judge Sidney A. Fitzwater, has been set for three defendants charged with running a multi-million dollar mortgage fraud scheme in the Dallas area, announced U.S. Attorney James T. Jacks of the Northern District of Texas. Gregory Lashon Thomas, Aja D. Crawford, aka Aja Abercrombie and Ernest Ohenekitiwa McMillan were arrested on conspiracy to commit mail fraud and mail fraud charges outlined in a four-count indictment returned last month. All three pleaded not guilty and have been released on bond.

According to the indictment, Gregory Thomas, 40, of Desoto, Texas, owned and operated Myriad Investments and Investors Source, two real-estate “investment” companies in the Dallas area. Gregory Thomas recruited individuals, including Ernest McMillan, 41, of Dallas, and others to buy residential real estate by telling them that they were purchasing “investment” properties. Thomas further worked with various loan officers, including Aja Crawford, 34, of Irving, Texas, to prepare false loan applications on behalf of the individual purchasers. The loan applications included misrepresentations about the individuals’ monthly income, intention to occupy the property, assets and liabilities. Some loans also included fake documents attempting to justify an individual’s credit-worthiness, such as fake bank records to show that the individual had sufficient money in the bank to qualify for the mortgage

For certain properties involved in the scheme, Thomas provided the down payment at closing. Shortly after closing, Thomas received payment from the seller that wasn’t disclosed on the HUD-1 Settlement Statement. Thomas would then pay the individual purchaser or another recruiter for purchasing the property.

The indictment alleges that from February 2006 through July 2008, Thomas recruited individuals to purchase real estate properties resulting in approximately $6 million in fraudulently obtained proceeds and $2 million in estimated losses.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: http://www.stopfraud.gov

An indictment is an accusation by a federal grand jury, and a defendant is entitled to the presumption of innocence unless proven guilty. If convicted, however, the conspiracy to commit mail fraud count and each of the substantive mail fraud counts carry a maximum statutory sentence of 20 years in prison and a $250,000 fine. Restitution could also be ordered.

The case is being investigated by the FBI. Assistant U.S. Attorney J. Nicholas Bunch is in charge of the prosecution.”

To find additional federal criminal news, please read The Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN List Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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