[ by Melanie Gretchen ]

Suggestion: When accusing an employee of espionage, make sure they'll be found guilty.

Talk about a fight to the end: A former Goldman Sachs isn't letting go of $2.4 million he's spent defending himself in both an overturned federal case and a pending state proceeding by the Manhattan district attorney.  Ahead of his scheduled arraignment today, Sergey Aleynikov sued the New York firm on Tuesday in Federal District Court in New Jersey, to pay his legal fees, on the grounds that he was an officer of the firm during the time in question.

Then and Now. Three years ago, he was arrested after Goldman reported him to the United States attorney in Manhattan. As a VP at the time, he was charged with stealing source code for high-frequency trading software as he was leaving to join a start-up.  In 2010, a jury found him guilty, and Mr. Aleynikov was sentenced to 8 years in federal prison, before an appeals court reversed that conviction this year; Mr. Aleynikov was released from prison shortly thereafter.

Round Two. District Attorney Cyrus Vance Jr. heads the 2nd case against Mr. Aleynikov.  He is charged again with stealing valuable computer code from the investment bank.  To defend himself, his lawyer, Kevin Marino, has requested a $500,000 retainer fee as he and his partners at Marino, Tortorella & Boyle in Chatham, N.J., prepare Mr. Aleynikov's defense.  To meet this obligation, Mr. Aleynikov has sued Goldman for assistance, having exhausted his financial resources before the federal district trial.

"Aleynikov incurred significant legal fees and expenses in connection with his successful defense of the federal charges," the complaint read. "Because he succeeded on each federal charge brought against him, Aleynikov is entitled to indemnification for the reasonable fees and expenses incurred in his defense." -- The complaint, filed on Tuesday.

For his part, Mr. Aleynikov is relying on friends to provide him with housing and cannot afford to pay his lawyers, since his employment ended in July 2009.  As part of their case, Mr. Aleynikov's lawyers point to a section of Goldman's bylaws that, they said, requires the firm to indemnify employees charged in criminal or civil proceedings in connection with their status as an officer or director of the bank.

Following Precedent. Mr. Aleynikov may be in luck.  Goldman paid much of the legal fees for a former director, Rajat Gupta, whose conviction of leaking boardroom talks to hedge fund manager Raj Rajaratnam has not been overturned.  In addition, Fabrice Tourre, the subject of a securities fraud lawsuit by the SEC, was covered as he awaits trial.

Take Two. Mr. Aleynikov's suit shouldn't come as too much of a surprise for Goldman.  Late last month, Mr. Aleynikov requested that the firm advance him money to cover some of the fees for his defense in the state court case.  To his credit, he even offered to refund the money if he were ultimately found ineligible for such treatment, according to court papers.

C-I Note: Can the same be said for Mr. Gupta and Mr. Tourre?  Certainly, since leaving Goldman, things have begun turning around.  Since his release from prison, Mr. Aleynikov founded Omnibus, LLC, which offers consulting services for financial clients.

For further details, go to [Dealbook, 9/25/12] and Sergei Aleynikov's [Fees Memorandum of Law] and [Legal Fees Complaint].