Superseding Indictment Charges Former New York State Senate Majority Leader Joseph L. Bruno with Alleged Scheme to Defraud Citizens of His Honest Services

May 3, 2012

The Federal Bureau of Investigation (FBI) on May 3, 2012 released the following:

Explicitly Charges Bribery and Kickback Theory, Pursuant to Decision of the U.S. Court of Appeals for the Second Circuit

ALBANY, NY— A federal grand jury in Albany returned a superseding indictment today against Joseph L. Bruno, the former New York State Senate majority leader. Bruno is charged with carrying out a scheme to defraud the state of New York and its citizens of the right to his honest services through bribery and kickbacks by soliciting and accepting payments from an Albany businessman totaling $440,000. Bruno will be arraigned this afternoon at 2:00 p.m. before United States Magistrate Judge David R. Homer in Albany, New York.

Today’s indictment follows a trial and an appeal. In December of 2009, a jury convicted Bruno of two counts of honest services fraud. Then, in 2010, the United States Supreme Court decided United States v. Skilling, holding that the honest services statute criminalizes only fraudulent schemes involving bribes or kickbacks. On November 16, 2011, the United States Court of Appeals for the Second Circuit issued an opinion vacating Bruno’s conviction and authorizing a retrial, as requested by the United States. The Court of Appeals noted that the jury had been instructed pursuant to the law in effect at the time of the trial, which had not required bribery or kickbacks to constitute honest services fraud, but the subsequent Skilling decision had changed the law. In determining that a retrial was proper, the Court of Appeals reviewed the case against the elements of honest services fraud as altered by Skilling and held that the evidence presented at trial was sufficient for a reasonable jury to find that Bruno accepted “payments that were intended to and did influence his conduct as a public official,” and to find that “Bruno’s actions deprived New York citizens of his honest services as a New York senator under the standard announced in Skilling.” The Court of Appeals also endorsed the government’s proposal to seek a superseding indictment, commenting: “While the indictment alleges sufficient facts to support a bribery charge, it does not explicitly charge a bribery or kickback theory, and does not contain language to the effect that Bruno received favors or gifts ‘in exchange for’ or ‘in return for’ official actions. It would be preferable and fairer, of course, for the government to proceed on explicit rather than implicit charges, and as the government intends to seek a superseding indictment, we dismiss the indictment, without prejudice.”

United States Attorney Richard S. Hartunian said: “Based on the decision issued by the Second Circuit, a federal grand jury has returned a superseding indictment today charging Joseph L. Bruno with depriving New York of his honest services through bribery, kickbacks, and the exploitation of his official position for personal enrichment. Before Skilling, a trial jury determined that Bruno committed honest services fraud, and the Court of Appeals determined that the evidence presented at that trial was sufficient to convict Bruno under the Skilling standard. We look forward to having an impartial jury consider this superseding indictment and the evidence in this case as soon as possible.”

According to the indictment:

  • Bruno solicited payments from an Albany businessman who directed that several companies pay Bruno a total of $440,000. The payments were disguised as “consulting” payments and $80,000 in payments for a virtually worthless horse. Bruno did not perform legitimate consulting work commensurate with the money that he was paid; the horse payments were to make up for expected consulting payments that had been stopped; and Bruno accepted the payments knowing, understanding, and believing that (a) he was not entitled to the payments; (b) the payments were made in return for official acts as opportunities arose rather than being given for reasons unrelated to his office; and (c) his reasonably perceived ability to influence official action, at least in part, motivated the making of the payments.
  • The payments gave the Albany businessman greater access to the New York State Senate majority leader than was available to the other citizens of New York state. In return for the payments, Bruno would and did perform official acts benefitting the interests of the Albany businessman and his companies as opportunities arose, including (a) in or about February 2004, Bruno directed the award of a $250,000 grant to Evident Technologies, Inc.; (b) in or about April 2004, Bruno recommended that the Albany’s businessman’s partner be appointed to the board of the New York Racing Association; (c) in or about July 2005, Bruno directed the award of a $2.5 million grant to the Sage Colleges for the benefit of Evident Technologies, Inc.; (d) in or about the fall of 2005, Bruno sought the acceleration of the award of the NYRA franchise; and (e) in or about November 2005, Bruno sought the dismissal of certain NYRA officials.

An indictment is merely an accusation, and Bruno is presumed innocent unless and until proven guilty. None of the other persons or entities identified in the indictment have been accused of federal criminal violations. If convicted, Bruno faces a maximum sentence of up to 20 years’ imprisonment and fines of up to $250,000 on each of the two counts of the indictment under the federal mail fraud statute.

The investigation which led to this indictment was conducted by the Albany Division of the Federal Bureau of Investigation. The United States is represented in this prosecution by Assistant United States Attorneys Elizabeth C. Coombe and William C. Pericak.”

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

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense 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 Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

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


Appeals Court Limits Scope of Corporate Espionage Laws in Goldman Programmer Case

April 11, 2012

The New York Times on April 11, 2012 released the following:

“BY MICHAEL J. DE LA MERCED AND PETER LATTMAN

A federal appeals court has restricted the use of a federal law cited in federal prosecutors’ efforts to prosecute a former Goldman Sachs programmer accused of illegally downloading computer code from his onetime employer.

In an opinion released on Wednesday, the United States Court of Appeals for the Second Circuit ruled that the former employee, Sergey Aleynikov, did not violate the Electronic Espionage Act of 1996 or federal stolen property laws.

The opinion elaborates on the decision by a three-judge panel of the appeals court to overturn Mr. Aleynikov’s conviction in February. That move set the programmer free, dealing a blow to one of the most prominent federal prosecutions of corporate espionage in recent years.

Mr. Aleynikov was arrested nearly three years ago, after Goldman accused him of downloading programming code for its high-speed computerized trading operations.

The act was almost literally on Mr. Aleynikov’s way out the door, shortly before a going-away party. He had accepted a job at a software company catering to other trading firms.

Mr. Aleynikov’s lawyers had argued that while their client had violated Goldman’s confidentiality policy, he had not broken the law.

Writing for the appeals court, Chief Judge Dennis Jacobs, who presided over the February hearing, agreed. While conceding that Goldman’s code was “highly valuable,” the investment bank’s trading program was never intended to be sold. That fell short of the interstate commerce requirements of the Electronic Espionage Act, according to the appeals court’s reading of the statute.

Because the high-frequency trading “system was not designed to enter or pass in commerce, or to make something that does, Aleynikov’s theft of source code relating to that system was not an offense under the EEA,” Judge Jacobs wrote in the opinion.

The judge also found that while Mr. Aleynikov had taken code and uploaded it to his own computers, he had not actually taken a physical object — and therefore did not violate the letter of federal law. That he later transferred the code to a thumb drive still did not make his actions a federal crime.

“We decline to stretch or update statutory words of plain and ordinary meaning in order to better accommodate the digital age,” Judge Jacobs wrote.

In a separate opinion, Judge Guido Calabresi said that while he agreed with the court’s analysis, it was hard for him “to conclude that Congress, in this law, actually meant to exempt the kind of behavior in which Aleynikov engaged.”

Judge Calabresi said he hoped Congress would return to the issue and clarify what it meant to make criminal under the Electronic Espionage Act.

A spokeswoman for the United States attorney’s office for the Southern District of New York, which prosecuted the case, declined to comment.”

US v Sergey Aleynikov – 2nd Circuit Opinion

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

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

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 C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


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.


Judges Rule Galleon Chief Must Go to Prison

December 2, 2011
Raj Rajaratnam

The New York Times on December 1, 2011 released the following:

“BY PETER LATTMAN

A federal court has denied Raj Rajaratnam’s request to remain free on bail while he appeals his insider-trading conviction, a ruling that forces the fallen hedge fund manager to report to prison on Monday.

Mr. Rajaratnam, the former head of the hedge fund Galleon Group, is set to serve his 11-year sentence — the longest prison term to date for insider trading — in a federal prison in Ayer, Mass.

In a last-ditch try to keep their client out of jail pending his appeal, his lawyers appeared at the United States Court of Appeals for the Second Circuit in Lower Manhattan on Wednesday. They argued that his case raised substantial questions of law that mandated his release until the appeal was resolved.

In a short order issued Thursday afternoon, the three-judge panel, without explanation, denied Mr. Rajaratnam’s request. During the hearing, the judges had expressed concern that Mr. Rajaratnam was a flight risk and could have an incentive to flee to his native Sri Lanka.

“Wouldn’t he rather be living as a centimillionaire in his own country rather than as a convict in a jail?” Judge Dennis Jacobs asked Patricia A. Millett, a lawyer for Mr. Rajaratnam, at the hearing on Wednesday.

Beginning Monday, Mr. Rajaratnam will be living at the Federal Medical Center Devens in Massachusetts. Mr. Rajaratnam, 54, was assigned there because of his health problems. He has diabetes that could lead to eventual kidney failure, according to medical records submitted to the court.

The Devens prison is located about 200 miles from his luxury apartment on Sutton Place in Manhattan, where he lives with his wife and three children.

Mr. Rajaratnam’s surrender to the Bureau of Prisons is a milestone in the government’s most prominent insider trading prosecution since the 1980s. Federal authorities arrested Mr. Rajaratnam in October 2009, charging him with orchestrating a multiyear insider trading conspiracy involving senior corporate executives, management consultants and other hedge fund managers.

In May, a jury found him guilty of securities fraud and conspiracy. Between the criminal case and a parallel civil proceeding brought by the Securities and Exchange Commission, Mr. Rajaratnam has been ordered to pay about $157 million in fines, the largest penalty assessed so far in an insider trading case.

The pursuit of insider trading by federal prosecutors appears to be continuing unabated. Before year end, the government is expected to bring a new set of insider trading charges against traders at Diamondback Capital Management and Level Global Investors, according to a person with direct knowledge of the case who spoke on the condition of anonymity because he was not authorized to discuss it publicly.

The new cases are based in part on wiretapped conversations between the traders and illegal tipsters, this person said. Dozens of secretly recorded conversations between Mr. Rajaratnam and his accomplices also formed the core of the evidence against him at trial.

They will also form the core of Mr. Rajaratnam’s appeal, which could take as long as a year to resolve. His lawyers will argue that the government improperly obtained judicial authorization to wiretap his telephone, violating the law and Mr. Rajaratnam’s constitutional rights.”

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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.