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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

#131

Post by ludocode »

cabcabcab wrote: post #46

This is so incredibly common and is actually taught as tactic at many accelerators. You can form "customer advisory boards" which basically pay small percentages of common to early users to use the product. Like, seriously, more than half of the companies funded by YC do this. I think this is the norm more than the outlier.

No, you misunderstand. If the stock and advisory role were given to Netflix as part of the deal, it would have been fine. That's not what happened here.

The benefits went to the executive directly. He asked for personal bribes to sign contracts on behalf of Netflix. He enriched himself at the expense of his employer. This is illegal.

Re: Former Netflix executive convicted of receiving bribes from contractors

#132

Post by jacquesm »

tcbawo wrote: post #112
tptacek wrote: post #31

Earlier quoted context omitted.

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.

Dinner and drinks are ok as long as they are not excessive and in line with the expected return for the company, say two people discussing business over lunch or dinner, with a maximum of $x / head. Fairly typical companies will have very explicit rules about what is and is not permitted to the point of spelling out exactly how much you are allowed to spend on a business relationship and the reverse: what to do when/if you are offered an invitation to join for dinner and who is to bear the expense.

Vacations are typically forbidden and would immediately be seen as a bribe. This has led to all kinds of things that are practically vacations but officially are business (such as: conferences in sunny resorts, conferences that take three weeks and so on). Other 'entertainment' can come in many different forms and if not disclosed can get both parties in hot water.

On the whole, pay your own way, do not accept anything that might be construed as a bribe afterwards (so no discount on that shiny item from the company you are deciding to do business with, or not), no gifts over a very low dollar value and in case of doubt clear with legal/linemanager/accountant, transparency is key here, just a failure to disclose can turn an otherwise innocent thing into a potential bribe.

It's really not all that hard to keep your nose clean.

Re: Former Netflix executive convicted of receiving bribes from contractors

#133

Post by toss1 »

numbsafari wrote: post #44
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

The amount of "I don't get why this is wrong?" going on in this thread would seem to support the prosecutors' view that this is a widespread practice. Long ago, before Dotcom went Dotbomb, I worked for a firm where the CIO was being paid kickbacks by our hardware reseller. He was terminated for other reasons and, shortly after he left, our head of network ops got a call from the distributor asking where they should s…

Yup, it is, at every level

One main reason I started my first computer consultancy was that I found out that although computer stores and Value Added Resellers advertised independent objective advice to customers, they accepted major software & hardware vendors giving bonuses "spiffs" directly to the salespeople, blatantly corrupting their 'objective advice' (vs supporting the overall organization's ability to sell and support the equipment). One of the first things that went in the employee manual, and of course had to can some salesguy who tried to collect a spiff under the radar (our actual practice was the spiff goes to the company or goes uncollected, and if collected, we generally added half to discretionary bonuses).

Pretty small step from that culture of working to directly corrupt "independent" advice to trying to collect it on the other end. I'd like to know how many startups actively offer this kind of deal to execs in order to get the bigger deal?

Re: Former Netflix executive convicted of receiving bribes from contractors

#134

Post by notyourday »

tcbawo wrote: post #112
tptacek wrote: post #31

Earlier quoted context omitted.

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.

Walmart procurement has very strict rules where if they accept any incentives i.e. dinner, drinks, vacation, entertainment, etc are grounds for immediate termination.

Re: Former Netflix executive convicted of receiving bribes from contractors

#135

Post by [deleted] »

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.

[deleted]

Re: Former Netflix executive convicted of receiving bribes from contractors

#136

Post by ludocode »

paulpauper wrote: post #57

The shady-sounding plot was described by the government during a criminal trial earlier this year in San Jose federal court. Kail was found guilty of more than two dozen fraud and money laundering counts. At his sentencing Oct. 19, prosecutors will ask that he get a stiff punishment of seven years in prison as well as be ordered to pay fines, restitution, and forfeit a $3.3 million home in Los Gatos, California. That…

He hasn't been sentenced yet. That's just what the prosecution is asking for. The defense is asking for house arrest. The judge might still let him off with a slap on the wrist.

Re: Former Netflix executive convicted of receiving bribes from contractors

#137

Post by nonameiguess »

handrous wrote: post #96
numbsafari wrote: post #44

Earlier quoted context omitted.

The amount of "I don't get why this is wrong?" going on in this thread would seem to support the prosecutors' view that this is a widespread practice. Long ago, before Dotcom went Dotbomb, I worked for a firm where the CIO was being paid kickbacks by our hardware reseller. He was terminated for other reasons and, shortly after he left, our head of network ops got a call from the distributor asking where they should s…

> The amount of "I don't get why this is wrong?" going on in this thread would seem to support the prosecutors' view that this is a widespread practice. I think it's because a lot of "hustle" culture and stories of the early business careers of very successful founders involve a bunch of stuff that sure looks like fraud or otherwise like something that ought to be illegal (it may not be, but I mean that it feels like…

The worst example of this is the recent NCAA shoe company bribery scandal, where shoe companies paid student athletes and their families to attend particular schools sponsored by the companies. In any other industry, delivering money to people who become a part of your organization and generate revenue for it is just employment, and having your sponsors pay them directly is just cutting out the middleman. Only in amateur sports is that considered bribery and an offense that can get a person sent to prison.

Kickbacks, of course, are quite different, where a company official has a legal duty to negotiate in good faith in the best interests of their company and not make purchasing decisions based on which vendor gives them the biggest personal cut of the deal. It's hard for me to see the other side of that, how anyone can possibly not understand that that is illegal.

Re: Former Netflix executive convicted of receiving bribes from contractors

#138

Post by atarian »

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

I thought that was very interesting too. Especially when you pointed out that tweet from Alexis.

Re: Former Netflix executive convicted of receiving bribes from contractors

#139

Post by AlwaysRock »

mabbo wrote: post #71
cabcabcab wrote: post #46

This is so incredibly common and is actually taught as tactic at many accelerators. You can form "customer advisory boards" which basically pay small percentages of common to early users to use the product. Like, seriously, more than half of the companies funded by YC do this. I think this is the norm more than the outlier.

> Like, seriously, more than half of the companies funded by YC do this. I think this is the norm more than the outlier. Then charge them all. That will put a halt to the practice pretty quickly.

Until YC funds a company that specializes in making shell company^2 to make sure your C suite side deals are undetectable.

Re: Former Netflix executive convicted of receiving bribes from contractors

#140

Post by ludocode »

Phillip98798 wrote: post #68

Well, I'll be losing sleep hoping Netflix can make it through this tough time. Seriously, is there one person alive who believes the guy should get seven years in prison? Fire him, do your character assassination thing, but prison time? Why are our tax dollars being used to defend a multi-billion dollar corporation? Let Netflix run its own company. Change compensation structure or something to reduce corruption. Douc…

I absolutely believe he should go to prison. If a fine is the only punishment for a crime, then that law only exists for the lower classes. The only way to punish a rich person and deter other rich people from crime is to take away their freedom.
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