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Former Netflix executive convicted of receiving bribes from contractors

justice.gov

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Re: Former Netflix executive convicted of receiving bribes from contractors

#111

Post by jacquesm »

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

If you are aware of such stories I'd caution against sharing the details with people online without first ascertaining your own legal position before passing this information on.

Re: Former Netflix executive convicted of receiving bribes from contractors

#112

Post by tcbawo »

tptacek wrote: post #31
philipkiely wrote: post #14

Earlier quoted context omitted.

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…

The vendors effectively helped defraud Netflix. If Kail initiated the scheme, demanding kickbacks for deals to move forward (as seems likely to be the case given the number of vendors involved) they're unlikely to face consequences, but they're morally culpable regardless. It is not unlawful to offer incentives to the company itself in order for them to make a deal. In fact, that's effectively how most deals close (t…

What seems especially common are indirect incentives such as dinners, drinks, vacations, and other entertainment perks.

Re: Former Netflix executive convicted of receiving bribes from contractors

#113

Post by jacquesm »

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.

The fact that this even needs explaining is pretty sad.

Re: Former Netflix executive convicted of receiving bribes from contractors

#114

Post by Cd00d »

spenczar5 wrote: post #62
tptacek wrote: post #43

The DOJ press release is clearer than this article is: https://www.justice.gov/usao-ndca/pr/former-netflix-executiv... Some fun details: Kail did his criming through a shell LLC he set up called "Unix Mercenary". He took between 10-15% of the total billings for each of the companies he hooked up with this scheme. None of those companies were charged (more's the pity). They got him on mail fraud, wire fraud, honest se…

Thanks, this is indeed a better source. A lot of people here are saying this is incredibly common which is frankly pretty surprising to me. Does it really happen through shell LLCs? I am definitely aware of execs prioritizing startups they've invested in, which is... not a great look. But this seems to be a different thing. Kail wasn't an investor. He explicitly drafted agreements that paid him a fraction of the mone…

>not a lawyer! just a guy using words he has heard!

Thank you for your honesty and self-awareness. This framing also amused me.

Re: Former Netflix executive convicted of receiving bribes from contractors

#115

Post by jacquesm »

tomp wrote: post #61
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.

But the article doesn't say that he was taking "kickbacks", but that he was hired as a "consultant". Is that illegal? "We'd like to do business with Netflix, hmmm whom should we hire as a consultant, maybe someone at Netflix, surely knows a lot about the kinds of companies that do business with Netflix." Edit: I agree it's immoral just like how FDA leaders approving drugs then getting hired by the drug industry is im…

The words you are looking for are 'conflict of interest'. If you are acting on behalf of a corporation and you have such a conflict of interest you are required to disclose it.

Re: Former Netflix executive convicted of receiving bribes from contractors

#116

Post by elliekelly »

mc32 wrote: post #76
tptacek wrote: post #43

The DOJ press release is clearer than this article is: https://www.justice.gov/usao-ndca/pr/former-netflix-executiv... Some fun details: Kail did his criming through a shell LLC he set up called "Unix Mercenary". He took between 10-15% of the total billings for each of the companies he hooked up with this scheme. None of those companies were charged (more's the pity). They got him on mail fraud, wire fraud, honest se…

So all the Sox compliance in the world did nothing to prevent this fraud?

Netflix identified the issue and filed a civil suit against him alleging fraud before criminal charges were brought by the DOJ. It’s very likely Netflix tipped them off.

https://www.bloomberg.com/news/articles/2014-11-26/netflix-c...

Re: Former Netflix executive convicted of receiving bribes from contractors

#117

Post by sokoloff »

tptacek wrote: post #91
spenczar5 wrote: post #62

Earlier quoted context omitted.

Thanks, this is indeed a better source. A lot of people here are saying this is incredibly common which is frankly pretty surprising to me. Does it really happen through shell LLCs? I am definitely aware of execs prioritizing startups they've invested in, which is... not a great look. But this seems to be a different thing. Kail wasn't an investor. He explicitly drafted agreements that paid him a fraction of the mone…

I think it's probably pretty common, because I've worked jobs where clients have floated the idea (it was gross, we turned them down). Kail's own sentencing memorandum points out that OpenDNS rewarded a different Netflix employee with stock options. Also, presumably, super illegal.

I don’t want to come off as holier than average, but I always assumed the standard was to disclose the relationship I had with any company we were considering and to explicitly exclude myself from the evaluation process. Seems like common sense and is drilled into all our leaders as part of code of conduct behavior.

Companies that I’ve worked for and companies that I’ve advised or invested in have never had a problem with me making an intro under such terms (and sometimes we bought, sometimes we didn’t, but in either case, I was out of it after the intro; the very most an advised company would get is a better/more truthful explanation of why we decided not to buy.).

Re: Former Netflix executive convicted of receiving bribes from contractors

#118

Post by Aeolun »

whymauri wrote: post #12

>In his own memorandum to the court, requesting that he be sentenced to a year of house arrest, Kail, 49, described himself as a “global power leader, top dev ops influencer and a thought leader.” So very humble of him.

I just don’t understand how he can possibly think saying something like that is a good idea.

He must be living inside his own reality distortion field.

Re: Former Netflix executive convicted of receiving bribes from contractors

#119

Post by jacquesm »

veltas wrote: post #4
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

When it's a commonly committed crime but only certain people get prosecuted, it reaks of high-level corruption. Sounds like this exec stepped on the wrong toes.

No, it's just that prosecuting such cases takes a lot of time and effort. Besides that this guy seems to be hell bent on making things worse for himself, he should have probably folded earlier on rather than to keep pushing. Not that I mind.

And 'commonly' doesn't translate into 'every exec does it', but it does happen, in my experience about 2 to 3 percent of the businesses out there have such a thing going on. That's only in my backyard, it is very well possible that different localities or professions would have a multiple or a fraction of that, and it is possible that we're not looking hard enough and that the numbers are much higher.

Re: Former Netflix executive convicted of receiving bribes from contractors

#120

Post by ksdale »

eganist wrote: post #102
ksdale wrote: post #64

Earlier quoted context omitted.

When I was in law school, I felt patronized by the amount of time we spent talking about conflicts of interest because it seemed so obvious to me. In retrospect, having read so many of the disbarment announcements in the bar association newsletter, it's clear that a great many people do not understand what a conflict of interest is.

s/understand/care

Perhaps I'm naive, but I think the number of people who know and don't care is a small fraction of the people who honestly don't understand that they're doing something wrong. I mean, obviously this guy knew he was doing something wrong, but a lot of people just can't imagine that their own unethical behavior wouldn't be obvious to them.
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