Former Netflix executive convicted of receiving bribes from contractors • Hacker News Board

Re: Former Netflix executive convicted of receiving bribes from contractors

#91

Post by tptacek » Tue, Oct 19, 2021, 4:16 PM UTC

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…

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.

Re: Former Netflix executive convicted of receiving bribes from contractors

#92

Post by tptacek » Tue, Oct 19, 2021, 4:17 PM UTC

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…

Yes, it obviously is illegal. He was just convicted of fraud.

Re: Former Netflix executive convicted of receiving bribes from contractors

#93

Post by wombatpm » Tue, Oct 19, 2021, 4:18 PM UTC

namdnay wrote: post #23

anonymous4828 wrote: post #5

Earlier quoted context omitted.

Doesn't this sort of thing happen in government all the time?

there's a long road from "I'll buy from you but don't forget that I retire in 5 years' time, I hope there's a cushy job waiting for me" to "I'll buy from you, here's my bank account, make me a consultant wink wink"

Sole source contracts happen all of the time. Where it becomes murky is if the contracting officer ends up retiring his government job and takes a highly paid job with vendor.

Re: Former Netflix executive convicted of receiving bribes from contractors

#94

Post by nilsbunger » Tue, Oct 19, 2021, 4:18 PM UTC

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…

People often set up an LLC for their consulting thinking it will help with 1) taxes and 2) liability.

But neither of those are quite right:

1) the same tax deductions are available on your normal schedule C

2) while acting on behalf of your LLC you’re still personally liable for your actions (let alone your illegal schemes).

Re: Former Netflix executive convicted of receiving bribes from contractors

#95

Post by boppo1 » Tue, Oct 19, 2021, 4:18 PM UTC

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.

You mean they said "we'll write the contract so you get a finder's fee"?

Re: Former Netflix executive convicted of receiving bribes from contractors

#96

Post by handrous » Tue, Oct 19, 2021, 4:19 PM UTC

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…

> 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 kind of thing that ought to be illegal, to a normal person) that works out great for them and sure looks like it was a necessary step on their journey to hundreds of millions of dollars and being on the cover of TIME or whatever.

Add in normal corporate business practices just feeling gross as hell on a pretty regular basis, and I can kinda see why people might see this as not really that different from how you're "supposed to" do things—if you aren't a chump, anyway.

Kinda like the college admissions bribery scandal. There was a lot of "oh, so their crime was not being rich enough to bribe the correct way?" in people's reactions, because... well, the system's officially corrupt, in a lot of people's opinions, so prosecuting unofficial corruption feels more like a very fancy organized crime racket putting the screws to the (relatively) little guy to protect their own corruption, than good old feel-good justice.

Re: Former Netflix executive convicted of receiving bribes from contractors

#97

Post by Phillip98798 » Tue, Oct 19, 2021, 4:20 PM UTC

paulpauper wrote: post #81

germandiago wrote: post #41

I do not understand this. I mean, politicians do this all the time and do not go to jail (Spain). I do not mean people offer themselves for briving. But did anyone ever think what would happen if politicians did not have much power to regulate? Companies would not be able to lobby. That means there would not be nearly as much incentive to brive as there is today. Once a regulator is in the middle, the incentive for c…

There is less political corruption in the US than people think. Everything is so scrutinized these days, especially compared to the rest of the world. White House Chief of Staff John H. Sununu's travel expenses scandal was a big deal at the time, and this was in 1992 (before social media) and the amount of $ was pretty small. I think insider trading is possible concern though, although that too has gotten considerabl…

I doubt that. In the contracting world, I've repeatedly seen multi-million dollar contracts given to essentially shell corporations. Sure, it's nothing as overt as this case, and technically legal, but there is almost always a vested interest on the government side to go with one company or another. That interest usually has to do with the security of their government position. The ethical difference is a matter of degree.

Re: Former Netflix executive convicted of receiving bribes from contractors

#98

Post by [deleted] » Tue, Oct 19, 2021, 4:21 PM UTC

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…

[deleted]

Re: Former Netflix executive convicted of receiving bribes from contractors

#99

Post by jacquesm » Tue, Oct 19, 2021, 4:21 PM UTC

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…

We always check the corporate registries to see if any of the legal entities the execs of a company are related to are making substantial turnover from either the company we are looking at, or a subsidiary. In 200+ DDs this has happened a handful of times. So I would not say it is a common thing but it definitely does happen, and often enough that we feel the need to at least try to establish if it is the case during a routine checkup in case of investment or acquisition.

Of course that would not help a company while it is happening, we only check a very small fraction of all offerings. In a perfect world an accountant would catch this.

One case I ran into was very much like this one: a whole bunch of hardware was sold at above sticker price, on top of that much more hardware was sold than what the business could reasonably expect to be using. The a-technical management never caught on to this until we showed up, the fall out from that case was fairly spectacular.

Re: Former Netflix executive convicted of receiving bribes from contractors

#100

Post by simonh » Tue, Oct 19, 2021, 4:22 PM UTC

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?

You mean the fraud that's been uncovered and successfully prosecuted? Unfortunately the article and press release don't disclose how this came to light, unless you know something more?