Talent in Demand as IP Theft Surges
Intellectual property theft is a problem that is more common than widely believed, reports Dow Jones. It’s also a threat that doesn’t come cheap. The U.S. Chamber of Commerce estimates that IP theft costs the U.S. economy $250 billion per year (FBI) and has resulted in the loss of 750,000 jobs (U.S. Customs and Border Protection). That estimate does not include hacked or hijacked information that goes unnoticed or unreported. The government agency states, “The IP of innovative industries is increasingly under assault around the globe as governments and non-governmental organizations aggressively seek to erode patent, trademark, and copyright protections.” And as ZDNet recently warned, “The biggest threat to your systems (and business) often comes from within.”
In one of the most recent high profile cases, Sergey Aleynikov, a former Goldman Sachs computer programmer has been charged by U.S. prosecutors with stealing the bank’s trading technology. Aleynikov allegedly stole propriety computer programs the financial giant uses to make rapid trades in the financial markets. The programmer’s arrest came just one day after he started a new position with Teza Technologies LLC, a Chicago- based firm, according to Bloomberg. The report adds that Teza has since suspended Aleynikov without pay pending an investigation.
Aleynikov’s attorney argues the government’s allegations are “preposterous,” explaining that Aleynikov was downloading programs to his personal computer to work at home and hasn’t disseminated the code, according to Bloomberg. The report also notes that Teza says Aleynikov passed background checks and indicated he wasn’t violating anyone’s intellectual property rights.
Theft of intellectual property is one risk Goldman overlooked according to ZDNet. A recent article states, “Goldman Sachs is a master at gauging risk. It managed to get out of toxic mortgages before they unraveled and shorted them on the way down…The one risk Goldman didn’t count on: Worker espionage.” ZDNet puts Aleynikov’s alleged theft of the code behind Goldman’s proprietary trading systems in perspective by calling it “the equivalent of stealing the algorithm behind Google’s search.”
Bloomberg adds that Goldman may lose millions over the stolen code. The report states, “At a court appearance July 4 in Manhattan, Assistant U.S. Attorney Joseph Facciponti told a federal judge that Aleynikov’s alleged theft poses a risk to U.S. markets. Aleynikov transferred the code, which is worth millions of dollars, to a computer server in Germany, and others may have had access to it, Facciponti said, adding that New York-based Goldman Sachs may be harmed if the software is disseminated.”
Today, the arrest of Aleynikov is drawing attention to a problem that is more common than widely believed, reports Dow Jones Financial News, citing market participants and observers. FierceCIO.com also reports the Goldman case may be symptomatic of a larger trend. Back in March UBS filed suit against three former employees in its algorithmic group, Jatin Suryawanshi, Partha Sarkar and Sanjay Girdhar, when they moved to Jefferies & Co. earlier this year, according to Traders Magazine. In the firm’s complaint, UBS charged the three with misappropriation of trade secrets, breach of contract, breach of fiduciary duty, unfair competition and other wrongdoing. The report also reveals the UBS complaint alleges that Sarkar copied 25,000 lines of physical source code from UBS - roughly equal to one algorithm, or sections of several, sources said. Sarkar allegedly emailed the code to his personal email account to develop or reproduce for later use, adds Traders Magazine. The attorney representing the three contends the allegations are completely inaccurate.
Digital IP theft is a growing threat, reports CIO.com. The report also warns that companies in any industry may be vulnerable. CIO.com states, “As businesses increasingly collaborate with external partners and expand globally, they’re also increasing their exposure to criminals—and possibly foreign governments—who may have more on their minds than scoring some Social Security numbers.”
Insider theft incidents surged last year, and this source of data theft was most prevalent in the financial services industry, where layoffs may have created scores of disgruntled employees with access to sensitive data, CIO.com adds.
One recent example is Richard Garaventa Jr, a former Morgan Stanley Vice President in the operations division of the firm’s institutional securities business, who recently pleaded guilty to grand larceny in the first degree and falsifying business records in the first degree at a hearing in New York State Supreme Court in Manhattan, according to Dow Jones. The report adds the theft includes more than $2.5 million over a seven-year period. Garaventa faces two to six years in prison under a recommendation by prosecutors from the Manhattan District Attorney’s office, reports Dow Jones. He also agreed to pay restitution of $250,000.
Employees often have “super access” to sensitive company systems and know those systems’ weaknesses. Now amid high profile fraud cases, experts say that companies will need to re-examine their financial controls, corporate governance, compliance and transparency policies. As these massive instances of fraud took place right under the noses of experienced investors and regulators, the Association of Certified Fraud Examiners (ACFE) argues corporate executives and management should now be tackling the issue of fraud in their own companies.
Facing the growing threat of IP theft and fraud…as well as its dire consequences, executive search firm, A.E. Feldman, reports that corporations are increasingly looking to corporate security experts to identify and help prevent white-collar crime. The recruiting firm is already addressing this growing need and is currently working with the industry’s leading fraud specialists.
Are you working in corporate security? If you want to grow your career or discuss your firm’s talent or security needs, contact A.E. Feldman’s President, Mitch Feldman, today.
