Preet from the deep
U.S. prosecutors have their own vampire squid problem. Federal law enforcers wrapped their tentacles around a former Goldman Sachs programmer for swiping computer code but lost in court. Now their New York counterparts are taking a shot. Such dual-action tactics evoke the kind of overreach that has foiled insider trading cases.
It’s clear Sergey Aleynikov breached company policy by transferring high-frequency trading code outside the bank. Instead of merely suing him, though, Goldman called the FBI. An appeals court tossed his eventual conviction, ruling his actions weren’t federal crimes. New York’s district attorney is now pursuing Aleynikov under somewhat broader state laws.
It was troubling enough that Manhattan U.S. Attorney Preet Bharara’s office attempted to stretch espionage and hacking laws to cover his behavior. It’s reminiscent of his team’s overly broad interpretation of rules against insider trading. A federal appeals court lambasted those views last December when it overturned the convictions of hedge fund managers Todd Newman and Anthony Chiasson.
The tendency to overreach may be linked to an appetite for publicity. Bharara has courted attention by boasting in tweets, speeches and news conferences about taking Wall Street scalps. Sometimes he goes too far.
On Friday, U.S. District Judge Valerie Caproni warned that “a media blitz orchestrated” by his office threatened the rights of Sheldon Silver, a New York politician charged with corruption. Bharara strayed “close to the edge of the rules governing his own conduct,” Caproni wrote in denying Silver’s motion to quash the indictment.
New York District Attorney Cyrus Vance has also proven touchy about public opinion. In dropping a 2011 sexual assault investigation against former IMF boss Dominique Strauss-Kahn, for example, he issued a highly unusual document justifying his decision to a global audience.
Many criminal cases are better handled as lawsuits. The lower standard of proof in civil litigation may still allow the Securities and Exchange Commission to penalize Chiasson, for example, despite dire warnings that the December ruling gutted insider trading law. Criminal charges grab headlines, though, even if they inflict serious damage on those wrongly accused.
It was a 2010 Rolling Stone magazine article that famously gave Goldman its moniker as a deep-sea cephalopod feeding its appetite for money. Substitute “self-aggrandizement” in place of “money” and it’s a pretty fair description of prosecutors’ behavior as well.