Opinion ID: 1036112
Heading Depth: 2
Heading Rank: 1

Heading: Agrawal’s Employment with Société Générale

Text: The crimes at issue derive from Agrawal’s employment between early 2007 and November 2009 at SocGen’s New York offices. Agrawal began his career as a “quantitative analyst” in SocGen’s High Frequency Trading (“HFT”) Group. The HFT Group engaged in “index arbitrage,” a process that seeks to profit by quickly exploiting fleeting differences in the prices of securities. Toward this end, the HFT Group used two computer trading systems, “ADP” and “DQS,” to determine when to purchase and sell securities. Each system was made up of highly complicated computer code developed over the course of some years at a cost of several million dollars to SocGen. Using the ADP and DQS systems, the HFT Group executed trades that generated more than $10 million in annual revenue for SocGen during 2007, 2008, and 2009. As a quantitative analyst, Agrawal had no access to the code underlying the DQS or ADP systems. Rather, he developed “indicators” for others to use in refining the DQS system. Like other SocGen employees, however, Agrawal was required periodically to commit that neither during nor after his employment would he “disclose or furnish to any entity . . . any confidential or proprietary information of [SocGen],” and that, upon termination, he would return all documents, papers, files, or other materials in his possession connected to SocGen. GX 3. In April 2009, Agrawal was promoted to “trader” for DQS, a position that put him in charge of that system’s day-to-day operations. In this capacity, Agrawal spent several hours each week working with two SocGen computer programmers: Dominic Thuillier—who had written the underlying computer code for DQS—and Richad Idris. On June 12, 2009, Idris, following instructions from Agrawal’s supervisor, copied the DQS code into an electronic folder from which Agrawal could retrieve the data as necessary. In the process, Idris mistakenly also copied the code for three other systems, including ADP, into the folder, even though Agrawal was not authorized to have access to this additional code. B. Agrawal Steals SocGen’s HFT Code and Offers To Duplicate Its Trading Systems for a Competitor Unbeknownst to SocGen, Agrawal was then actively pursuing outside job opportunities. Toward that end, on June 8, 2009, he met with representatives of a New York–based hedge fund, Tower Research Capital (“Tower”). Agrawal told Tower that he was running one of SocGen’s two index arbitrage strategies, had a “complete understanding” of that strategy, and could help build a “very similar” system for Tower. Tr. 79.1 On Saturday, June 13—five days after his meeting with Tower and the day after he acquired access to SocGen’s DQS code—Agrawal came into SocGen’s New York office, 1 Less than a week before this meeting, a recruiter providing feedback by email on an interview Agrawal had had with another SocGen competitor, advised Agrawal to make clear to prospective employers that he possessed proprietary information. See GX 706. 4 printed out more than a thousand pages of the DQS code,2 put the printed pages into a backpack, and physically transported the papers to his apartment in New Jersey. Three days later, on June 16, Agrawal again met with Tower partners to discuss replicating SocGen’s HFT strategies for Tower. On July 10, Tower proposed to hire Agrawal for this purpose, offering him salary and bonuses exceeding $500,000, plus 20% of profits generated by the anticipated DQS clone and 10% of profits from any ADP clone. Agrawal informally accepted Tower’s offer in August 2009, but delayed disclosing this fact to SocGen for some months in order both to gain more experience with its HFT systems and to collect an anticipated bonus in October. Meanwhile, during August and September 2009, Agrawal copied and printed hundreds more pages of SocGen’s HFT code—these pertaining primarily to the ADP code to which he had mistakenly been given access—and brought them to his home. During these months, Agrawal also continued to meet with Tower partners, discussing the HFT systems he expected to develop for them and providing assurances that he could find out whatever information he needed about SocGen’s systems to fill any gaps in his knowledge. At least one of those meetings was recorded by a Tower representative who was present. Agrawal formally resigned from SocGen on November 17, 2009. In the week before 2 SocGen had various methods in place preventing computers used to access HFT code from copying that information onto disks. Nevertheless, Agrawal was able to copy code onto paper by pasting parts into Microsoft Word documents to which he gave sequentially numbered names, such as “0.doc,” “1.doc,” and “2.doc,” and then printing out those documents. 5 he gave notice, Agrawal deleted from SocGen’s computer system the Word documents into which he had pasted DQS and ADP code, as well as the ADP code files that Idris had mistakenly copied for him. Agrawal’s resignation triggered a leave period of several months, during which he was paid by SocGen but did little work for it. Although Agrawal was prohibited from working for any SocGen competitor while on leave, he continued to meet with Tower personnel, including the computer programmers who were to write the code that would replicate SocGen’s two HFT systems. Agrawal provided Tower personnel with detailed handwritten descriptions of the HFT system he wanted them to build, including mathematical information derived from SocGen’s code that he identified as “what is done in DQS.” Tr. 621.3 C. Agrawal’s Arrest and the Seizure of the Stolen Code On April 19, 2010, the day Agrawal was to begin work at Tower, FBI agents arrested him at his home in New Jersey. Searches of his apartment resulted in the seizure of thousands of pages of carefully indexed and filed computer code pertaining to SocGen’s two HFT systems. Agrawal admitted to an arresting agent that he had printed out the code and taken it home without disclosing that fact to his SocGen supervisors or receiving authorization to do so. 3 SocGen programmer Thuillier, the author of the DQS code, described some of Agrawal’s notes as “pseudo code” in that it was a “simplified rewriting of the code in human language.” Tr. 493, 623 (“It’s just written in plain English. But it explains the algorithm. And it’s scanning down the real time calculation loop of the DQS satellite into details.”). 6 D. Agrawal’s Prosecution and Conviction On May 13, 2010, a grand jury sitting in the Southern District of New York charged Agrawal in a two-count indictment with violations of the EEA and the NSPA. After detailing pertinent facts in 18 numbered paragraphs, the indictment charged the two crimes both generally and specifically. With respect to the EEA, the indictment alleged as follows: From at least on or about June 12, 2009, up through and including in or about April 2010, in the Southern District of New York and elsewhere, SAMARTH AGRAWAL, the defendant, unlawfully, willfully, and knowingly, without authorization copied, duplicated, sketched, drew, photographed, downloaded, uploaded, altered, destroyed, photocopied, replicated, transmitted, delivered, sent, mailed, communicated, and conveyed a trade secret, as that term is defined in Title 18, United States Code, Section 1839(3), with intent to convert such trade secret, that was related to and included in a product that was produced for and placed in interstate and foreign commerce, to the economic benefit of someone other than the owner thereof, and intending and knowing that the offense would injure the owner of that trade secret, to wit, AGRAWAL, while in New York, New York, without authorization copied, printed and removed from the offices of the Financial Institution proprietary computer code for the Financial Institution’s high frequency trading business, with the intent to use that code for the economic benefit of himself and others. Indictment ¶ 19. With respect to the NSPA, the indictment alleged as follows: From at least on or about June 12, 2009, up through and including in or about April 2010, in the Southern District of New York and elsewhere, SAMARTH AGRAWAL, the defendant, unlawfully, willfully, and knowingly, transported, transmitted, and transferred in interstate and foreign commerce, goods, wares, merchandise, securities, and money, of the value of $5,000 and more, knowing the same to have been stolen, converted and taken by fraud, to wit, AGRAWAL, while in New York, New York, without authorization, removed from the offices of the Financial Institution proprietary computer code for the Financial Institution’s high frequency trading business, the value of which exceeded $5,000, and brought that stolen code to his home in Jersey City, New Jersey. Indictment ¶ 21. 7 At trial, Agrawal testified in his own defense. Judge Rakoff would subsequently characterize this testimony as effectively “admitt[ing] under oath all of the elements of the charges.” Tr. 1211. Notably, Agrawal admitted that he had printed out SocGen’s DQS and ADP code and had taken the printed paper copies to his New Jersey home. He acknowledged that such information was proprietary to SocGen and that, nevertheless, he had shared some of it with Tower in order to facilitate his getting a job with that entity. What he denied was that, at the exact time he transported each stack of copied code from New York to New Jersey, his intent was to steal or convert it. He maintained that at that time, he intended to use the code for SocGen’s benefit by following through on a supervisor’s request that he work from home on a project to combine elements of the DQS and ADP systems. Only later, in Agrawal’s telling, did he decide to convert the code for his own benefit and Tower’s.4 Even before Agrawal gave this testimony, Judge Rakoff had cautioned that there was no basis in either the indictment or the law for requiring the government to prove that Agrawal possessed culpable intent at the precise time he printed and removed the HFT code from SocGen’s New York offices. Insofar as Agrawal purported to locate that requirement in the indictment’s “to wit” clauses, Judge Rakoff observed that those clauses could not be read in isolation or divorced from the preceding 18 paragraphs of the indictment, which indicated that the charged conduct spanned the period from June 12, 2009, through April 4 Agrawal’s testimony was refuted by the supervisor of SocGen’s HFT Group, who stated that a combination of the two systems made no sense as they were “totally distinct.” Tr. 1037. On this appeal we review the evidence in the light most favorable to the prosecution and, therefore, assume that the jury rejected any claim that Agrawal’s possession was authorized. See United States v. Broxmeyer, 616 F.3d 120, 125 (2d Cir. 2010). 8 2010. As to the law, Judge Rakoff concluded that the EEA’s intent element could be satisfied by proof that Agrawal possessed the requisite intent to convert when he “removed the code or at any point thereafter when he was still in unauthorized possession of the computer code,” and so charged the jury. Tr. 1006 (emphasis added). In so instructing the jury, Judge Rakoff explained that “without authorization” meant that SocGen “did not approve the removal of the computer code by the defendant for his intended purpose. For example, an employer might approve an employee taking a trade secret home to work on it for the employer’s benefit; but if the employee then starts using the trade secret for his own benefit or the benefit of another, at that point the removal becomes unauthorized.” Id. at 1314. Agrawal did not challenge this interpretation of the EEA, but maintained that to charge it in light of the “to wit” clause effected a constructive amendment of the indictment. Judge Rakoff had also proposed to charge the jury that to convict Agrawal of the EEA count, the government had to prove that, “as a factual matter, the computer code was related to a product that was, at least in part, produced for, or placed in, interstate or foreign commerce.” Appellee’s Addendum 13. The government remarked that it did not “know[] exactly what the defense is going to argue on this particular point, if anything” and, therefore, requested that the court charge this element by reference to both statutory options, i.e., that the computer code was “related to” or “included in” a product produced for or placed in interstate or foreign commerce. Tr. 885. The court agreed to do so, but observed that it did not foresee this jurisdictional element being “a matter that is going to be materially disputed in any event.” Id. at 885–86. The defense never contended otherwise.5 5 Judge Rakoff’s prediction proved correct. In summation, the government argued this point only by reference to the computer code being “related to,” not “included in,” a product 9 Nor did the defense object to Judge Rakoff’s further instruction as to how the government could satisfy this EEA element: “[I]t is sufficient if the government proves that the purpose of the computer code was to effectuate securities trades, at least some of which were in interstate or foreign commerce.” Id. at 1315. Indeed, Agrawal never suggested to either the district court or the jury that the government had failed to plead or prove that SocGen’s HFT computer code was related to or included in a product produced for or placed in interstate commerce. Rather, when, at the close of all the evidence, Agrawal moved to dismiss the indictment pursuant to Fed. R. Crim. P. 29, he argued only that the two counts “as explicated by the Court’s charge and by the evidence presented by the government in this case constitute[d] a prejudicial variance and a constructive amendment of the charges of the grand jury indictment” as reflected in the “to wit” clauses. Id. at 1214. The court denied the motion, and the jury found Agrawal guilty on both the EEA and NSPA crimes charged. Thereafter, Judge Rakoff calculated Agrawal’s Sentencing Guidelines to recommend a prison sentence in the range of 63 to 78 months. Instead, on February 28, 2011, the court exercised its discretion to impose a non-Guidelines sentence of concurrent 36-month prison that was produced for or placed in interstate or foreign commerce: The code, you didn’t hear a lot about this, but the code was related to a product that was produced for or placed in interstate or foreign commerce. It is one of the requirements that Judge Rakoff will tell you about. There is plenty of interstate commerce here. You remember that one of the things the [HFT] system is designed to do is trade stocks, the indexes associated with those stocks and futures. A couple witnesses talked about where futures were traded on the America[n] Stock Exchange and not shockingly Chicago. That is plenty of interstate [commerce]. That is satisfied. Tr. 1258 (emphasis added). The defense made no mention in summation of the EEA’s jurisdictional element. 10 terms on the two counts of conviction. This timely appeal followed.