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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

#401

Post by grantc »

AlexanderTheGr8 wrote: post #377
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…

I am confused. Why is the company allowed to do this and not any employee. I mean, isn't this insider trading on the company's part? They could in theory take options, then after the value of the firm increases, they could sell them and pay the money to their execs - isn't this strategy just an elaborate insider trading scheme?

The companies being asked to include options/warranty/equity usually aren't public, so this wouldn't be insider trading on that basis. Overall, it's better to think of it as Big Co is making an investment in Little Co that it thinks will appreciate as a result of Big Co's business. The cost of that investment is included in the price of whatever Little Co is selling, ergo, there's a large implied discount because Big Co's business is so valuable.

Re: Former Netflix executive convicted of receiving bribes from contractors

#402

Post by grantc »

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…

The companies paying Kail know enough to never mention this to anyone else at Netflix. They know what they are doing. And this is why it is common in industry--it's commonly undetectable, and, sadly, that alone will influence many folks' moral compass heading.

One point that was mentioned that was interesting was...

> "When an inquiry from the Netflix CEO ensued, Kail falsely denied that he was formally working with Platfora."

This data point suggests that Kail was pushing underwhelming or otherwise odd-shaped vendor products frequently and/or persistently enough that people at Netflix suspected he was a shill for vendors. The fact that Reed Hastings is presumably calling Kail out for this means the bad smells were pretty powerful. Kail probably does not have final boss-level skills at reading the room.

Re: Former Netflix executive convicted of receiving bribes from contractors

#403

Post by borski »

tptacek wrote: post #399
borski wrote: post #335

Earlier quoted context omitted.

It is entirely possible the 'briber' did not know. Companies, particularly startups, tend to assume that the other party will 'do the right thing' and quite literally may not know any better. Ignorance isn't a defense, but assuming that the other party will properly disclose the conflict of interest is not an unfair assumption; that Kail didn't is, frankly, the main problem here, at least with regard to shares. With…

They arranged to pay him a percentage of their billings . It strains credulity to think they might have believed it was innocent, or sanctioned by Netflix. We should all be looking at these companies differently now.

My understanding from reading it (perhaps incorrect) was that they arranged to use a third-party reseller that was actually owned by him; the startups may not have known that fact. Basically, that the percentage of revenue was going directly to Kail may have been known only to Kail; that's how I read it.

Re: Former Netflix executive convicted of receiving bribes from contractors

#404

Post by philwelch »

ludocode wrote: post #278
philwelch wrote: post #221

Earlier quoted context omitted.

This isn't necessarily true in the general case, let alone in this specific case. In the general case, some countries calculate fines according to the criminal's income for this very reason. In this specific case, fines or, in the case of a civil lawsuit, damages in excess of the amount of money the person illegitimately gained would be sufficient.

Fines as a percentage of income do not solve the problem. If I'm a poor person living paycheck to paycheck with nothing left over for savings, a 5% fine would be devastating. If I'm a rich person living off of (debt secured by) my investments, a 5% fine, even if it's hundreds of thousands of dollars, is pocket change compared to my true income and wealth. A fine is obviously not sufficient given how widespread this p…

> If I'm a poor person living paycheck to paycheck with nothing left over for savings, a 5% fine would be devastating.

If you’re a poor person living paycheck to paycheck with nothing left over for savings even after committing enough white collar crime to be convicted in a federal court, I am really curious what you did with all the money.

People always think the old saying “an eye for an eye” is brutal and vindictive, but originally it was about proportion. An eye for an eye means that if someone takes your eye, you can be satisfied by taking their eye in return instead of taking their life. In that vein, I think fines are extremely just for financial crimes.

Re: Former Netflix executive convicted of receiving bribes from contractors

#405

Post by jollybean »

germandiago wrote: post #397
jollybean wrote: post #343

Earlier quoted context omitted.

Lobbying does not imply that the politician is receiving any benefit, in fact, there's a lot of rules in place for that. So, the disproportionate power that corps. may have is an issue of equality, but that's not this kind of corruption, at least not directly.

Politicians should not have power to rule. There are 1 million ways to benefit indirectly from favors to lobbies, do not be innocent. Sometimes demonstrating corruption is really difficult. You are worried about business that give people improvements or products every day, but you are not worried about regulators that twist stuff to get benefits without producing anything for people and that tax the people that produ…

This comment makes no sense.

We elect politicians to oversee government and make laws.

Anybody can 'lobby' them, we generally want that, because we want politicians to be informed and responsive.

We do have to be careful about undue influence, which is why we have rules for that.

Re: Former Netflix executive convicted of receiving bribes from contractors

#406

Post by [deleted] »

rand846633 wrote: post #286
jacquesm wrote: post #281

Earlier quoted context omitted.

> how many of these cases do you miss because the recipients use a not easy traceable proxy entity to collect the payment? That's the 'million dollar question', and in some cases substantially more than one million. I think the reason a good number of these people get caught is (1) things like the Panama papers and other leaks like that have made it harder to do this, and have also brought the not insubstantial resou…

I don’t see offshore leeks as a big deterrent, unfortunately. The three big ICIJ leaks were not published as in dumped to the public. Only politicians, PEPs, obvious money launderers and some obvious other criminals were selected and exposed. (It’s only money laundering if you can proof the money comes from the proceedings of crime) There are some criminal service industry leaks that are public, or have been public,…

[deleted]

Re: Former Netflix executive convicted of receiving bribes from contractors

#407

Post by philwelch »

ludocode wrote: post #278
philwelch wrote: post #221

Earlier quoted context omitted.

This isn't necessarily true in the general case, let alone in this specific case. In the general case, some countries calculate fines according to the criminal's income for this very reason. In this specific case, fines or, in the case of a civil lawsuit, damages in excess of the amount of money the person illegitimately gained would be sufficient.

Fines as a percentage of income do not solve the problem. If I'm a poor person living paycheck to paycheck with nothing left over for savings, a 5% fine would be devastating. If I'm a rich person living off of (debt secured by) my investments, a 5% fine, even if it's hundreds of thousands of dollars, is pocket change compared to my true income and wealth. A fine is obviously not sufficient given how widespread this p…

Follow-up point I forgot to add:

> If the fine is double what you gained but you are less than 50% likely to get caught, logic dictates you should commit the crime.

It turns out that people’s decisions whether or not to break the law have very little to do with any rational economic calculation about the probability of being caught. Consider how shoplifting is basically not enforced in San Francisco anymore. People just steal things from the store in broad daylight and nobody bothers even trying to stop them. Sure, this does result in a lot of shoplifting, but the question is, why does anyone bother paying when they could just brazenly take their desired merchandise out the door with no risk of ever facing any consequences?

Re: Former Netflix executive convicted of receiving bribes from contractors

#409

Post by lern_too_spel »

bpodgursky wrote: post #387
lern_too_spel wrote: post #311

Earlier quoted context omitted.

The prosecutors were making a case against Kail. If they make it seem like the startups were complicit or even proposed it, that would hurt their case against Kail. These arrangements were obviously illegal, and it beggars belief to suggest that so many startups were unaware of that.

If complicity weakens the case against Kail, why are you suggesting the startups did something illegal? You can't have it both ways. The complicity is either a crime alongside Kail's crime (and completely independent), or it isn't.

They both did something illegal. Did something I say make you believe I think otherwise?

The prosecutors chose to go after Kail because he is easier to nail. They get to charge him separately for the fraud he committed with each startup, so it's more likely that at least one will stick. The startups are required to help the DOJ build a case and get a warning that they won't get off so easily if they're caught again. Since they weren't charged this time, these cases are fair game to litigate in the future together with any new charges.

What these startups did is obviously illegal, and they and the DOJ are obviously well aware.

Re: Former Netflix executive convicted of receiving bribes from contractors

#410

Post by jjeaff »

jacquesm wrote: post #394
jjeaff wrote: post #331

Earlier quoted context omitted.

That of course wouldn't have found this particular type of conflict unless you are able to look into the companies that your vendors are dealing with.

That's not how this works. How it works is like this: we have some expectations about what things should cost, if something is wildly deviant from the regular market rate then that's worth looking into.

I'm sure plenty of shady vendors out there would be more than willing to offer a market rate plus bribes. Especially in software since they have the margins to afford it.
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