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Former Netflix executive convicted of receiving bribes from contractors

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Re: Former Netflix executive convicted of receiving bribes from contractors

#11

Post by joshstrange »

> There was just one catch to landing that deal: It had to hire the streaming company’s vice president of IT operations, Michael Kail, as a consultant and an advisor, and pay him with fees and stock options.

I completely get how a startup would take this deal, however gross it is, but what I don't understand is how the exec got away with it from Netflix's side. And the fact this wasn't just 1 but 8 other startups he did this to/with as well. I can't tell from the article if Netflix was aware or unaware of this "Agreement" and if they weren't aware... how? Did no one ever mention "Oh yeah, we hired Kail like you asked/required us to"?

Re: Former Netflix executive convicted of receiving bribes from contractors

#13

Post by luckydata »

joshstrange wrote: post #11

> There was just one catch to landing that deal: It had to hire the streaming company’s vice president of IT operations, Michael Kail, as a consultant and an advisor, and pay him with fees and stock options. I completely get how a startup would take this deal, however gross it is, but what I don't understand is how the exec got away with it from Netflix's side. And the fact this wasn't just 1 but 8 other startups he…

HR and rules are for the little people. VPs can do pretty much whatever they want for a LOOOONG time at large tech companies before any consequence catches up with them.

Re: Former Netflix executive convicted of receiving bribes from contractors

#14

Post by philipkiely »

tptacek wrote: post #8
earthscienceman wrote: post #3

Earlier quoted context omitted.

Some feedback from an outsider: IMO you do a poor job clearly outlining the transgressions and the legal issues at play. You bounce around phrases like "pay-to-play"but as someone not inside the startup world, I didn't get to the end of your article and understand exactly what he did that was illegal/immoral and the context for how it's harmful to startups. In other words, I know he is accused of doing something wron…

The article describes an absolutely standard kickback scheme. If you're an employee of a company and arrange to take kickbacks from vendors without the approval of your employer, you're defrauding your employer.

Gotcha. So, legally speaking, the victim of the crime here is Netflix, and if the exec had performed the same activities with the express permission of someone within Netflix with the authority to authorize such things (IDK, board of directors?) it would not have been illegal?

Is there additional/secondary fraud against the vendors as well, or is the fraud strictly against the employer in this situation?

(Edit: Board of Director approval is totally hypothetical, I understand that no BoD would ever actually condone such a thing.)

(Edit: Thanks for the clarification, everyone!)

Re: Former Netflix executive convicted of receiving bribes from contractors

#15

Post by ghaff »

earthscienceman wrote: post #7
autarch wrote: post #6

Earlier quoted context omitted.

The first sentence of the second paragraph says: "There was just one catch to landing that deal: It had to hire the streaming company’s vice president of IT operations, Michael Kail, as a consultant and an advisor, and pay him with fees and stock options." That seems pretty clear to me.

It seems very unclear to me. I don't understand why that's illegal or wrong. Someone was hired and paid using fees and stock options? Seems fine to me. I don't understand corporate structure enough to understand why that's problematic... “leveraged his status as a leader of the IT community in Silicon Valley to subvert the trust of Netflix and others to profit at their expense” How did he leverage it in a way that wa…

It's a kickback because there's a clear conflict of interest just as if he were given a week on a tropical island as a quid pro quo even if that quid pro quo only took place in a nudge-nudge wink-week sort of way (which it certainly didn't in this case).

Re: Former Netflix executive convicted of receiving bribes from contractors

#16

Post by SamoyedFurFluff »

earthscienceman wrote: post #7
autarch wrote: post #6

Earlier quoted context omitted.

The first sentence of the second paragraph says: "There was just one catch to landing that deal: It had to hire the streaming company’s vice president of IT operations, Michael Kail, as a consultant and an advisor, and pay him with fees and stock options." That seems pretty clear to me.

It seems very unclear to me. I don't understand why that's illegal or wrong. Someone was hired and paid using fees and stock options? Seems fine to me. I don't understand corporate structure enough to understand why that's problematic... “leveraged his status as a leader of the IT community in Silicon Valley to subvert the trust of Netflix and others to profit at their expense” How did he leverage it in a way that wa…

I think this is less the fault of the reporter and more an audience that is unfamiliar with the notion of a kickback scheme and why it’s illegal. Might I recommend reading up on what a kickback is?

Re: Former Netflix executive convicted of receiving bribes from contractors

#18

Post by earthscienceman »

philipkiely wrote: post #14
tptacek wrote: post #8

Earlier quoted context omitted.

The article describes an absolutely standard kickback scheme. If you're an employee of a company and arrange to take kickbacks from vendors without the approval of your employer, you're defrauding your employer.

Gotcha. So, legally speaking, the victim of the crime here is Netflix, and if the exec had performed the same activities with the express permission of someone within Netflix with the authority to authorize such things (IDK, board of directors?) it would not have been illegal? Is there additional/secondary fraud against the vendors as well, or is the fraud strictly against the employer in this situation? (Edit: Board…

This is exactly why I'm confused. I would also like this clarified.

Re: Former Netflix executive convicted of receiving bribes from contractors

#19

Post by ghaff »

anonymous4828 wrote: post #5
csmythe15 wrote: post #2

Hey, I'm the author of the article -- just wanted to point out that what made this story interesting to me is the implication that this kind of conduct could be very widespread. Prosecutors definitely hinted at that. If anyone knows of any similar stories, I'd be very interested in hearing them. christie.smythe@businessofbusiness.com

Doesn't this sort of thing happen in government all the time?

I'm not saying people don't get away with it but the US government is actually stricter than many/most companies about gifts/perks from organizations that the government is doing business with.

Re: Former Netflix executive convicted of receiving bribes from contractors

#20

Post by prasadjoglekar »

anonymous4828 wrote: post #5
csmythe15 wrote: post #2

Hey, I'm the author of the article -- just wanted to point out that what made this story interesting to me is the implication that this kind of conduct could be very widespread. Prosecutors definitely hinted at that. If anyone knows of any similar stories, I'd be very interested in hearing them. christie.smythe@businessofbusiness.com

Doesn't this sort of thing happen in government all the time?

It's just as illegal there if you're a government employee. If you're an elected official, general principle still applies but rules are a bit different.

See https://www.nytimes.com/2015/12/01/nyregion/sheldon-silver-g...

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