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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

#141

Post by nitrogen »

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…

The movie The Informant! illustrates how this kind of thing might happen.

Re: Former Netflix executive convicted of receiving bribes from contractors

#143

Post by vkou »

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?

Laws don't prevent murder, but they are an after-the-fact tool we can use to beat a killer over the head with.

Re: Former Netflix executive convicted of receiving bribes from contractors

#144

Post by nowherebeen »

omarhaneef wrote: post #65

One item seems to have caused a lot of confusion in the comments so I will take a stab at clarifying: It is perfectly legal for Netflix to ask for options or any other consideration in exchange for the contract. Companies do this sort of thing frequently. They know that merely signing a large contract with a large firm will increase the value of the contractor. It is not legal for someone working for Netflix to ask f…

> It is not legal for someone working for Netflix to ask for shares in their own personal capacity as individuals.

Yup, that's called a kickback, which is illegal.

Re: Former Netflix executive convicted of receiving bribes from contractors

#145

Post by temp_praneshp »

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…

> All of this apparently happened back in 2014 (the conviction is recent). If you're wondering what Netflix thought of all this, Kail apparently left Netflix for a job at Yahoo, from which he was fired after Netflix found out about his scheme and told Yahoo.

I was at Yahoo around the time this was revealed, and I don't think he was fired immediately after Netflix making the claims public. He was still CISO/CIO/some shit and used to participate in mailing lists, iirc.

I wonder how much he got in severance from yahoo, to round out the list of chutzpah-s

Re: Former Netflix executive convicted of receiving bribes from contractors

#146

Post by dang »

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…

We've changed the URL to that from https://www.businessofbusiness.com/articles/why-a-former-net.... Thanks!

Re: Former Netflix executive convicted of receiving bribes from contractors

#147

Post by elliekelly »

stadium wrote: post #78
ghaff wrote: post #32

Earlier quoted context omitted.

I can't imagine any BoD would be cool with an executive responsible for signing deals getting essentially paid for signing those deals given what a clear conflict of interest that would be. And the BoD itself would probably be found to be failing their fiduciary responsibility under those circumstances.

What are the disclosure laws if an exec has a stake in a public or private company, and there is an actual or potential vendor relationship with that company? Are there even laws for this, or is it more about company policies set by the BoD?

Usually disclose and recuse. You’re conflicted, so you shouldn’t make the decision or be involved in making the decision, but if it’s the best vendor for the company the company isn’t prohibited from using their services. Most large companies will have a policy for declaring and managing that type of conflict.

In addition to generic criminal laws against fraud and bribery there’s also honest services fraud (which I’ve mentioned elsewhere in this thread) which boils down to depriving someone to whom you owe a duty of the right to your honest services.

Re: Former Netflix executive convicted of receiving bribes from contractors

#148

Post by funnyflamigo »

Aeolun wrote: post #118
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.

Seriously, given -

> Kail faces a maximum sentence of twenty years in prison and a fine of $250,000, or twice his gross gain or twice the gross loss to Netflix, whichever is greater, for each count of a wire or mail fraud conviction, and ten years in prison and a fine of $250,000 for each count of a money laundering conviction.

As well as

> Kail was indicted May 1, 2018, of nineteen counts of wire fraud, three counts of mail fraud, and seven counts of money laundering

> The jury returned a verdict of guilty on 28 of the 29 counts.

At max sentencing that would be over 400 years of prison for just the fraud. I have no idea how you go from that to asking for 1 year of house arrest

Re: Former Netflix executive convicted of receiving bribes from contractors

#149

Post by Phillip98798 »

ludocode wrote: post #140
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.

Aren't there better targets to make a point with though? Military contractors, oil companies? We're talking about billions of dollars in bribes. Do you think this case will even put a dent in that corruption? This is not a lot of money and as the popularity of this thread insinuates, this is how things have always been. There is no Silicon Valley without these types of deals unfortunately.

Re: Former Netflix executive convicted of receiving bribes from contractors

#150

Post by nhumrich »

kami8845 wrote: post #104
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.

In those instances, do the managers at BiggerCorp who initiate the deal get the equity or the company?

Usually, the manager.
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