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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

#71

Post by mabbo »

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.

Re: Former Netflix executive convicted of receiving bribes from contractors

#72

Post by csmythe15 »

cabcabcab wrote: post #48
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

This is super common in the Valley. This isn't the exception it's the norm. Every single angel investor I have ever pitched asked for/suggested this. If this is illegal 99% of the Valley is committing fraud.

That's more of what I'm looking to substantiate...thank you.

Re: Former Netflix executive convicted of receiving bribes from contractors

#73

Post by cmckn »

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…

He was working at Netflix. He ensured that the deals between Netflix and the startups would be greenlit, as long as the startups handed him some cash/stock under the table. It’s classic bribery. The article is a bit confusing by only mentioning the implementation of the bribe (“consulting”), but it’s just bribery.

Re: Former Netflix executive convicted of receiving bribes from contractors

#74

Post by aidenn0 »

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…

And an indirect victim is all of the competitors to the companies that were complicit in this scheme; presumably their services were displaced by those who paid-to-play.

Re: Former Netflix executive convicted of receiving bribes from contractors

#75

Post by ksdale »

iammisc wrote: post #39

So after reading the article, I'm still not sure of the crime, or the motivations (from netflix's perspective at least). Can someone help me?

He worked for Netflix, he was responsible for finding a vendor, and he basically chose a vendor based on who would pay him, personally, to let them be the vendor for Netflix. He didn't choose based on who would be the best vendor for Netflix, even though that's what Netflix was paying him to do. Netflix presumably would not have wanted him to do this if they had known what he was doing.

Re: Former Netflix executive convicted of receiving bribes from contractors

#76

Post by mc32 »

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?

Re: Former Netflix executive convicted of receiving bribes from contractors

#77

Post by [deleted] »

cabcabcab wrote: post #48
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

This is super common in the Valley. This isn't the exception it's the norm. Every single angel investor I have ever pitched asked for/suggested this. If this is illegal 99% of the Valley is committing fraud.

[deleted]

Re: Former Netflix executive convicted of receiving bribes from contractors

#78

Post by stadium »

ghaff wrote: post #32
earthscienceman wrote: post #18

Earlier quoted context omitted.

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

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?

Re: Former Netflix executive convicted of receiving bribes from contractors

#80

Post by inetknght »

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…

Maybe, instead of hiring a single person, you should hire Netflix itself. Netflix itself surely knows a lot about the kinds of companies that do business with Netflix.

Let Netflix worry about compensating the people who are doing the work.

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