29 ms·

Netflix Executive Sentenced to 30 Months for 700K Bribes, Kickbacks from Vendors

301 points by altmind 5y ago

coding123 5y ago
One thing that is interesting about this is not that these vendors made the initial suggestion of a kickback. Instead Kail said he would get them in as a vendor if they made him some important person at their company. So the idea of the kickback wasn't from the vendor.
0x0nyandesu 5y ago
Why is this even illegal? Perks in the industry is normal. People are always trying to get their own businesses front and center for contracts. Some of these companies just don't have much to give out other than equity and what exactly is wrong about that?
- deleted 5y ago
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- lowkey_ 5y ago
  For another example, look at how college bribery schemes are illegal. They're not illegal because they're unfair or immoral, they're illegal because the administrator is selling the spot that the college owns; it's not his/her spot to sell. If the company wanted to be used by Netflix in exchange for equity, then they could make a deal with Netflix itself. This executive was essentially selling the rights to contracts (akin to spots) that he didn't have the right to sell.
  - 0x0nyandesu 5y ago
    You mean like forcing kids to buy brand new books so that they can get a code to use to take tests on an online platform that the professor gets kickbacks from that has nothing to do with the university the kid is attending?
    - lowkey_ 5y ago
      What's the spot/contract/etc in that case, that the professor is selling but doesn't have the right to sell on behalf of the university for his own enrichment? I don't see an example of how the university is losing revenue and being defrauded in that scenario.
      - 0x0nyandesu 5y ago
        The student is being defrauded. They signed up for something that was supposed to cost x but instead it costs y. Their degree being in jeopardy makes it blackmail from my perspective. It's telling that you were more willing to make sure the university wasn't being defrauded but I guess the student can kick rocks right?
        lowkey_ 5y ago
        No, what I was trying to initially explain is that it is Netflix being defrauded. You pointed out that the company may only have equity to give, and I said that they weren't giving the equity to Netflix. They were giving it to an executive at Netflix in exchange for a contract, and it wasn't the executive's right to give that contract spot away for his own enrichment, because it's not his spot to give. Similarly, in the case of college admissions scandals, it is the college being defrauded. Now here, to make a parallel as you were intending, we'd have to see how the university is being defrauded.
      - Sohcahtoa82 5y ago
        The University is not being defrauded, but the professor is still taking advantage of their position to make a personal profit. Leaving aside the legal issues (I'm not a law expert, so I don't know if it is illegal), don't you think it is incredibly immoral for a professor to require a specific book for their class on the basis that the publisher is going to hand a check to the professor?
  - BeFlatXIII 5y ago
    I thought the college bribery schemes were mostly illegal because the lowered the price for a guaranteed admission slot too much and, more importantly, cut the university out of the loop by paying the admissions personnel directly.
- humanistbot 5y ago
  Officially, the crime is fraud and the victim is Netflix, Inc. He defrauded the other employees and the corporate shareholders. He also laundered the money, which is also illegal and why the IRS got involved. Kickbacks aren't the fundamental issue here. If this was a single-employee startup with no other investors or shareholders, this would be perfectly legal. Or if Netflix, Inc. had a policy that authorized individual executives to personally receive cash and stock from vendors as perks, then this would have been perfectly legal. However, as the article says, Netflix had an internal policy that he blatantly violated: > Netflix policies prohibited conflicts of interest by its employees by its Code of Ethics and its “Culture Deck,” which required the disclosure of actual or apparent conflicts of interest and the reporting of gifts from entities seeking to sell products or services to the company.
  - 0x0nyandesu 5y ago
    As a Netflix share holder I'm gonna say that this is a cost of doing business in Hollywood. Nothing this exec did is actually a problem. Half these people are at each other's houses ever day fucking each other's wives at swinger parties.
    - humanistbot 5y ago
      > this is a cost of doing business in Hollywood. First off, these were tech vendors giving kickbacks to the CIO, not producers bribing studio execs to get someone specific cast. But you seem to be missing that kickbacks aren't illegal in and of themselves. Netflix corporate didn't have to institute an anti-kickback policy for its employees. But they did, likely because they didn't want an environment where execs are negotiating both for the company and for themselves. The moment an executive violates corporate policy to enrich themselves, it becomes fraud.
- s1artibartfast 5y ago
  It was illegal because the kickbacks were kept secret from Netflix. If there was full disclosure to netflix, (but not other companies) this would have been perfectly legal.
- deleted 5y ago
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deleted 5y ago
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de6u99er 5y ago
I don't even allow companies to invite me for dinner or lunch, except if we do it in a way where I pay one time and the business contact pays the other time out of our own pockets. It is important to me that I am able to make the best possible decision at any moment. I don't want someone else veing in a position where I can ve forced to do something I don't want to do.
barcoder 5y ago
Note this is the former IT exec from 2014. These type of trials take a while to complete
- dheera 5y ago
  So did they hold him in prison from 2014 to 2021? What did he do during those years? There should be some law about time waiting for trial counting toward the sentence, which would also incentivize judges to work more quickly.
  - temp_praneshp 5y ago
    Look him up on linkedin :) He was in my leadership chain for part of that time at Yahoo.
  - SippinLean 5y ago
    He was indicted in 2018 and released on bail https://www.justice.gov/usao-ndca/pr/former-netflix-inc-vp-charged-scheme-defraud https://www.justice.gov/usao-ndca/pr/former-netflix-inc-vp-c...
    - dheera 5y ago
      Interesting. Maybe they should take 3 years off his sentence. When the judges find out, next time they will work faster to get trials done in days instead of years.
diab0lic 5y ago
The actual title is "Former Netflix Executive Sentenced To 30 Months For Bribes And Kickbacks From Netflix Vendors ". Mike left Netflix in 2014 and joined Yahoo and CIO for a moment before this all came out and Meyer put him on leave.
- altmind 5y ago
  It wasn't intentional, the headline was too long to fit.
  - diab0lic 5y ago
    That makes sense, haha. That probably is the word I would have removed as well in that case. :)
    - nsgi 5y ago
      HN should really increase the max title length, there's plenty of space and the current limit often requires important details to be cut out
      - krapp 5y ago
        But it isn't truly Hacker News unless it's formatted to be read on an 80 column monitor.
        colejohnson66 5y ago
        With 8 space indents per column for threading as per GNU style?
  - airstrike 5y ago
    I think 'Former' is a key word here, showing Netflix is no longer affiliated with him. And "700K Bribes" reads like the number of bribes, not dollars collected Also @dang
- tgv 5y ago
JohnJamesRambo 5y ago
Now this is what we need to see to effect change in corporate behavior.
- nerdponx 5y ago
  Kind of, but he only got in trouble because he messed with other rich people's money.
  - diob 5y ago
    Very much so, like how only small banks in 2008 got destroyed.
  - artursapek 5y ago
    Not sure why HN is downvoting this, because this is 100% how the world works lmao Here's a nice article on this topic: https://www.bloomberg.com/opinion/articles/2019-03-13/you-have-to-pay-the-right-person?sref=ZYRGK1Uz https://www.bloomberg.com/opinion/articles/2019-03-13/you-ha...
throwfaangus 5y ago
Why risk this even? Surely, he's making much more than 700K as an exec in the first place.
- rvnx 5y ago
  When you deal as a supplier to a big SV company, it can still happen that the employee asks you for a kickback. It's sad and it sucks.
- ipaddr 5y ago
  It might be part of some cultural structure in place. He got caught..
- ghaff 5y ago
  Very well-compensated people apparently can get sufficiently unmoored from a moral compass that they 1.) think the rules don't apply to them and 2.) just don't stop to consider that morals/ethics aside what they're doing is a really dumb potentially life-ruining risk.
- adventured 5y ago
  It probably wasn't just the $700k he was thinking about. I'd guess he was likely aiming for a larger sum over time.
- usea 5y ago
  Wealthy people usually still want more money, even past what non-wealthy people would consider enough.
  - brian_cunnie 5y ago
    The two multimillionaires I know (one sold his company to JPMC, the other, to Google) aren't driven primarily by money. They have a genuine interest in what they do (securitizing carbon offsets, and designing analog circuits, respectively). They're what you'd call "good guys". They wouldn't be caught dead in that crazy kickback scheme that was described. I know this is a small sample set, but what I've come away with is that rich people are like you and me, except they happen to be rich.
kbenson 5y ago
> and serve a three term of supervision upon release from prison. Is there a typo in there, is that just a weird legal term, or is it just me that has a hard time processing what that means?
- deleted 5y ago
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- edoceo 5y ago
  Likely the missing word is Year - ie: he get three years probation after release.
  - kbenson 5y ago
    That makes sense. I just figured that an official release from a government site (I checked the URL after I stumbled on this sentence a couple times to make sure it wasn't some random law blog, but an official .gov site) would be a bit better proof-read, so didn't want to assume. Also, I probably still need another 30 minutes for the coffee this morning to fully suffuse into my being so I can function like a normal person.
- shadowgovt 5y ago
  I'm 99% certain that should say "three-year term."
- everybodyknows 5y ago
  Also this, with directionality of "bribe" reversed: >Mr. Kail chose which IT contracts were awarded by Netflix according to how he was able to bribe those companies to provide him with financial compensation
  - ghaff 5y ago
    Little bit weird but it's not wrong. He bribed the companies with contracts to get them to give him a kickback.
hpoe 5y ago
If you get caught stealing $700,000 you've got a problem. If you get caught stealing $700,000,000 the criminal justice system has a problem.
- calvinmorrison 5y ago
  if you owe the bank 50,000, you have a problem, if you owe the bank 50,000,000, the bank has a problem
  - paulpauper 5y ago
    if you owe the bank 500,000,000,000 the bank has a problem if you owe them 500,000,000,000,000,000 you got a value overflow error
- everybodyknows 5y ago
  Bernie Madoff's damage was a few billion, depending on how you count it. Turned out was a problem for him, eventually. https://www.cnn.com/2021/04/14/business/bernie-madoff-dead/index.html https://www.cnn.com/2021/04/14/business/bernie-madoff-dead/i...
PragmaticPulp 5y ago
Every time this story comes up, the comments are filled with people proclaiming that kickbacks like this are totally normal and very common. I can't tell how much of it is random people projecting their cynicism onto the business world, or if it's people who have been part of bribery/kickback schemes themselves trying to normalize the behavior online. Either way, cases like this should make it clear that the behavior is not a good idea.
- Phillip98798 5y ago
  x
  - cgriswald 5y ago
    That kind of comparison is meaningless and useless. The question should not be, "Should we criminalize fraud if people disagree about the results of this one specific unrelated case?" The question should be, "Should we criminalize fraud and if so what are the optimal penalties for disincentivizing new and repeat activity?"
  - rpmisms 5y ago
    > Eschew flamebait. Avoid unrelated controversies and generic tangents. > Please don't use Hacker News for political or ideological battle. It tramples curiosity. We could definitely talk about the criminal justice system, but basically saying "the jury was wrong and I'm mad" isn't substantive.
  - cowpig 5y ago
    Your point, as I understand it: you disagree with a jury's conclusion in one, high-profile case, therefore the entire justice system isn't necessary or there should be no consequences for white-collar crime. Or perhaps more charitably: you've become disillusioned about the judicial process in general, seeing a lot of results you consider unjust, therefore the entire justice system isn't necessary or there should be no consequences for white-collar crime. Neither is even a bit convincing. If one can significantly increase their personal wealth at mere risk of being fired, then the least honest people will accumulate all the wealth and power.
parhamn 5y ago
Some of the vendors mentioned: - VistaraIT, LLC - Platfora, Inc. - Sumo Logic, Inc - ElasticBox, Inc - Numerify, Inc. - Docurated, Inc - Maginatics, Inc. Is what they did illegal too? Presumably with zero chance of being charged. I haven't fully groked the limits of 'fraud' and 'money laundering' here in the US. These typically feel like they should be civil breach of fiduciary duty type cases.
- shadowgovt 5y ago
  IANAL, but in general: yes. Someone should be on the hook for paying bribes as well as for receiving them. At least, that's what every training on corporate bribery I've ever seen asserts.
  - 8ytecoder 5y ago
    Not just should, they usually are. But I would also assume prosecutors use discretion to decide whether to charge them or not based on whether they do it as a pattern, whether they’re in their jurisdiction and whether they were coerced. I read this to mean one or multiple of it didn’t hold.
- nightpool 5y ago
  From TFA: Evidence at trial showed that several more companies paid Kail. Neither Netenrich, Vistara, nor any of the other companies were charged with criminal conduct. Only Kail was charged with devising the criminal scheme that defrauded Netflix. Since Kail was charged for wire fraud and mail fraud (deceiving Netflix about his personal compensation and conflicts of interest), it seems possible that the companies could be charged with "conspiracy to commit wire fraud" for colluding with him? It's hard for me to say exactly how easy this would be to prove—I think it's pretty clear to say that most companies / people should know that paying someone on the side for inside information on competitors or paying the VP a % of all contracts is an act to defraud Netflix. So the "meeting of the minds" to commit fraud is there, and the actual fraud is there (because one of the participants in the conspiracy committed it). But obviously this stuff is complicated and i'm not a lawyer. Also, the companies themselves would probably be pretty hard to charge, rather than the individual sales reps who signed off on the payments.
clavicat 5y ago
I just lost $5,000 this week and it’s pissing me off, so I can empathize.
errcorrectcode 5y ago
I had a boss at a major university who might've done this had he thought he could get away with it. Instead, he kept his greed down to an "acceptable" level of theft of university property for personal use and exploitation of vendor's client entertainment allowances.
riazrizvi 5y ago
The system isn't much good if infractions against its rules go unpunished. Faith in the system is being restored.
- criddell 5y ago
  I'm waiting for the vendors to be punished as well.
- 0x0nyandesu 5y ago
  Nah it's just a howto manual on not getting caught.
0x0nyandesu 5y ago
I love how it's totally legal for the governor of Florida to send lucrative drug testing contracts to his wife's owned company but a guy getting a few stock options from a client is illegal. I guess we'll just go back to big wads of cash in an envelope instead.
- jounker 5y ago
  Florida is a state in which white collar criminals form a powerful voting bloc.
- bumby 5y ago
  I had to look that up because I’m not familiar with the story, but it seems illegal in most other states. This Netflix case, by contrast, is federal. Still makes the Gov. actions seem sketchy
  - wombatpm 5y ago
    Florida politics is sketchy be definition as they are an outgrowth of representing 'Florida Man'
    - koheripbal 5y ago
      This comment does not belong on HN
    - bumby 5y ago
      You know “Florida Man” is really just an outcome of Florida criminal records being open and creating an availability bias, right? If other states had open records, there’d be much more fodder to create a “Wisconsin Man,” “California Man” etc.
- the_doctah 5y ago
  Whataboutism
- wyldfire 5y ago
  > I guess we'll just go back to big wads of cash in an envelope instead. Uh so wait are you saying that because the elected official isn't held responsible that we should then lower the bar to permit all bribery? That doesn't make any sense.
BINGCHILLING 5y ago
"Kail facilitated the payments, the evidence at trial showed, by creating and controlling a limited liability corporation called Unix Mercenary, LLC." i wonder how much the name choice had to do with the convinction he could have definitely chosen something more tasteful lol
choiway 5y ago
Unix Mercenary, LLC is brazenly on the nose.
hermannj314 5y ago
Can someone with more legal expertise explain why he is charged with wire fraud and not "accepting a kickback"? Is it legal to take bribes if you do it in a way that doesn't create wire fraud? Was the crime taking kickbacks or was the crime being paid in a certain way (i.e. the LLC he created)?
- captainoats 5y ago
  Specific anti-kickback laws only exist at the federal level for specific industries within federal purview like healthcare (through departments like CMS). Wire fraud is more general but is an avenue for the justice department to prosecute behavior like this (the crime is not specific to orchestrating a kickback scheme but defrauding his employer for personal gain).
- deleted 5y ago
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beachy 5y ago
> Shortly thereafter, Kail provided Platfora with Netflix’s internal information about Platfora’s competitors’ prices. Do said competitors now have grounds for a lawsuit against Netflix itself?
encryptluks2 5y ago
If you're poor and steal 700k you go to prison for life. If you're wealthy and do it as an executive you get 1 year with good behavior.
themdonuts 5y ago
Genuine question here. Who took him to court? Did I understand well it was a public institution/Irs? There seems to be no mention of netflix (company) being involved in the trial on the accusation side.
- parhamn 5y ago
  It's a federal crime. The US Government took him to court. As for who tipped them off, thats a different question.
duffpkg 5y ago
I created a company around an Open Source Electronic Medical Records system I also created, ClearHealth. It took me a couple of years to realize we were losing deals for health systems not because our system was bad (it was great), not because our sales teams were bad (they were great) but because we weren't engaging in kick-backs and outright bribery. This has become such a normalized part of business at institutions that it is extremely hard to be competitive if you don't do it. https://www.justice.gov/opa/pr/electronic-health-records-vendor-pay-155-million-settle-false-claims-act-allegations https://www.justice.gov/opa/pr/electronic-health-records-ven...
- deleted 5y ago
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- lordnacho 5y ago
  Did people ask you for bribes, did you say no, did you miss the hints, or did you just not know that you needed to do this?
  - duffpkg 5y ago
    After losing some deals that just seemed like there was no credible way we could lose, better "product", better price, better team, etc. You start asking hard questions about all the people involved and eventually someome will confidentially explain what happened. Especially people who actually need to work with the worse vendor that just got selected. If you read through the settlement I linked ("The settlement also resolves allegations that ECW paid kickbacks to certain customers in exchange for promoting its product.") and other documentation regarding that case you can find details of several situations. I am singling out ECW there because that settlement exists. You would have to be pretty naive to think they were the only vendor engaged in that type of behavior and that the recipients of kick backs were only receiving kick backs from them alone.
    - lordnacho 5y ago
      Thanks for answering, I always wonder how people find out things like this. For me it's like racism, how will you ever know the real motivation? I guess sometimes you will get some discreet feedback.
tonymet 5y ago
Only $700,000? Must not have been very ambitious
throwawayFanta 5y ago
What this exec did was very illegal, but anyone in the startup scene would know that things like this are very common, but probably on a smaller scale. Maybe there are no wads of cash changing hands, but I've personally seen contracts being earned less due to the feature set, but more because the startup got introduced to some C level and them applying downward pressure to choose that startup during the vetting process. It's kinda noticeable when you're on a call with a big company's tech team and they sound defeated when talking about the success criteria and stuff
coldcode 5y ago
I worked at a company where the CIO routinely bought technologies for us to use, but we never did as they were mostly pointless to our business. He also always wrote articles for the companies bragging how much the software improved our business. One time one company sent a PR person to interview us and they were astonished to find out we never used it. Long after I left he was perp walked out of the company by a new CEO; turned out they company finally hired someone with more tech knowledge than this guy. Of course he had been taking kickbacks but knew just enough to convince the other execs we "needed" it. A week later he had another CIO job. I think he was fired from that one too. No idea if he was ever put on trial, probably the case was too embarrassing to pursue.
sudo-it-all 5y ago
The fact that "this is common" does not excuse the fact that it is wrong and unethical. This is similar to how Intel paid companies to not use AMD processors. It is anti-competitive behavior.
wly_cdgr 5y ago
Shoulda been more like 120 months, but it's better than nothin'
camel_gopher 5y ago
Did he get feedback from his peers?
scotty79 5y ago
Does anyone feel like wire fraud is a catchall term for when some people are hellbent on sentencing someone, who didn't do anything that was by itself a crime? Shouldn't this be a civil case between Netflix and this guy? Why is criminal justice system even involved in this? It looks like very bad way to spend tax payers money.
- ghaff 5y ago
  Because, cynicism (and specific elected officials) aside, the government has a vested interest in people viewing it as a country of laws rather than a country of whatever you get off with is fair game.
  - scotty79 5y ago
    For me it looks even worse. Netflix, instead of creating civil lawsuit against this guy, that they would have to pay for, silently bribed the right people in the justice system to charge him with some crime instead. This way Netflix punishes the man that did them dirty without paying a cent of their taxed legal money. Instead now every taxpayer pays for salaries of prosecutors and judges and whoever else is necessary to help one corporation exact a little vengeance.
    - ghaff 5y ago
      Presumably you think investors in Theranos should also have also have been on the hook for pursuing legal claims. So basically most white collar crime should be pursued because it's mostly not worthwhile on a dollars and cents basis for government to do so. Or Enron? It's just fraud. It's a small step to go from there to say that white collar crime doesn't really hurt anyone and it's on those who think they've been hurt to pursue redress in the courts on their own.
      - scotty79 5y ago
        I think in Enron and Theranos cases, there were specific actual crimes happening. Like lying in the published information that's influencing the stock market. Or falsifying you financial records. Things specifically forbidden and labeled as criminal. Not a thing that is so non-specific (in it's criminality) that you have to label it wire-fraud or mail-fraud (whatever that is) to even have a chance at making it look like actual crime, not just immoral thing he did that could harm his employer (but it's hard to tell to what extent it actually did). Do you try to straw man me into position "all white collar crimes shouldn't be crimes"?
qwertyuiop_ 5y ago
Why is Vistara LLC not charged for bribing this guy ?https://www.linkedin.com/company/vistara https://www.linkedin.com/company/vistara I know anecdotally a lot of US based Indian Outsourcing companies, TCS, Infosys, Mahindra, HCL bribe the mid-senior IT executives by buying them offshore properties under LLCs. If you look at Avis, Disney and other corps, the top level IT execs are bribed to the gills by these companies.
- everybodyknows 5y ago
  Maybe they don't leave a paper trail a mile wide and deep, unlike this clown? > Two days before Unix Mercenary was registered with the California Secretary of State, Kail signed a Sales Representative Agreement to receive cash payments from Netenrich, Inc., amounting to 12% of any billings ... This is not to excuse the criminality, but rather to suggest an unhappy likelihood that the great bulk of graft flows by more sophisticated arrangements.
jbkiv 5y ago
This is not an uncommon practice in the Silicon Valley. Startup wants to business with Big Co., invites Big Co.'s decision maker (VP Marketing, CIO, CTO, CFO) to join the "board of advisors". Then startups pays for expenses, travel and grant "stock options" to Big Co. senior manager. Understand that ANY product has a "side" price tag, paid by granting options or "payment for expenses" to the senior individual. Another way to look at that. Ask ANY member of your board of advisors to disclose ANY conflict of interest. If StartUp sells product/services/SaaS to BigCo. then BigCo. "advisor" should disclose ANY payment, direct or indirect, travel or non-travel, and ANY stock options. This is what had to be done with the large drug companies, forcing them to disclose payments to providers/medical doctors who had the authority to buy drugs. Full disclosure + penalties for lack of disclosure ---> that was the end for the drug sales rep who were doling "educational conference tickets, all expenses paid for you and your spouse, ALL expenses paid, and of course compensation for your time". Of course said conference had to happen in Tahiti, San Francisco, Seychelles, etc...
deleted 5y ago
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dustymcp 5y ago
Imagine the money he has to pay in prison for protection
- kingcharles 5y ago
  I know this is just an off-the-cuff quip, but the real answer is probably zero. He's minimum security. He's going to have very little problems like this, even as a rich white guy. When I was locked up, I was in Max with mostly murderers. I got tricked out of a $10 phone card in my first week, and the guy said he'd protect me as a thank you. After I realized I'd been dumb I never made that mistake again. I found just being polite, but firm, was enough. He'll be fine. He'll probably never get into a single fight. He'll be asked for commissary. He'll share some of his commissary, but everyone does that in prison anyway, especially with the guys that have nothing.
  - sizzle 5y ago
    Wow don’t mean to pry, but how long were you there for? Is it like the movies where you have to find your ethnic race clique and they protect you? What would you change about the prison system? Do you think mental health treatment would help reduce the prison population from repeat offenders?
    - kingcharles 5y ago
      I was in for 8 years, 1 month. I was never convicted. I was just in jail because I didn't have the money to bail out, otherwise I would not have spent a day inside. It's not like the movies at all. All the races talked to each other and were pretty respectful. If there was a fight it was usually enforced to be only one-on-one. Every now and again someone from a person's gang would back him up in a fight, but it wasn't necessarily race-specific as the gangs have become very multicultural - you'll find Latino gangs with blacks and vice-versa. Often it's because people are so mixed now - is the guy black, mixed, Latino? Who knows? I would change the prison system by practically abolishing the prison system. I don't think putting people in a box helps them. Almost every single person I met in jail was in there because of a raft of mental health issues that made it so their brain said committing a crime was OK and fuck the possible consequences. We need vastly more mental health support, especially for men who typically are not open about their weaknesses.
artursapek 5y ago
Imagine being a Netflix executive and risking years of your life for $700,000
pwarner 5y ago
I haven't even gotten a new Datadog shirt in years :-(
colpabar 5y ago
When I read things like this, I can't help but think of how no one went to jail after the 2008 financial crisis. $700k from a group of private companies? WHO CARES? Congress just said insider trading is ok when they do it, can we maybe go after some of that next time?
meabed 5y ago
And just name every consulting org or big vendor that they don’t do this in every industry.
blamethenetwork 5y ago
I was there and saw some of this during my time at Netflix. I've also been in the industry long enough to get my own sense of what is / what is not reasonable. The first thing, Netflix wise, is to understand their culture deck at the time. One of the main things was "Act in Netflix's best interest". That basically described their philosophy of how employees should act. So, when signing a contract, where you get a 10% kickback, (eg the company pays $200/hour and you get $20 as a commission, its better to have the company pay $180.) Also, signing contracts that he was enriched by - stock, kickbacks etc. (he received what is now worth: $862,500 of sumologic, and $2,167,700 of netskope - trial document #276 He also signed contracts that were never deployed, had a long support lifetime, or didnt meet the companies needs - eg: Numerify, and docurated - trial document # 288 In some cases, I personally experienced us having to use tools that Mike had signed for that were not right for the job. Eg: Sumologic at the time was a horrendous product. It certainly was not a realtime logging system. Realtime was up to 15 minutes delayed. If you wanted realtime, it was all about syslog. I brought this up, and was told that we were using the product because of Mike, even though it clearly did not help our problems. Grep on the unix server was considerably faster and more up to date, (but it wouldnt have got Mike $2M of stock). Mike also had me meet with him and various vendors who were pitching some fly-by-night ideas. In a normal world, I'd say they were very early startup ideas that weren't a match for our needs. Now, I'm wondering if these were meetings where Mike was looking to get an "advisory" angle. In summary, I've been to coffee, dinners, very nice meals etc. with vendors. I've had them invite me places for meetings, and I've gone with my companies permission and understanding. I've had non-compensated advisory positions. The difference though, is my company was aware of it, and I did not receive stock or engineer contracts such that I received kickbacks. Thats where the line was, and thats why he's going to jail.
ChrisArchitect 5y ago
Some previous discussion about the conviction 2 months ago: https://news.ycombinator.com/item?id=28918805 https://news.ycombinator.com/item?id=28918805
skuhn 5y ago
I'm glad to see the verdict and a relatively severe sentence handed down (I expected 6-12 months). What Mike did was indeed unethical and fraudulent. It's also extremely foolish and shows poor judgment on his part -- his role at Netflix was to lead the organization to identify and implement the best solutions for the company and its customers. Instead he saw the opportunity for short-term personal gain at the company's expense, and by doing so he jeopardized his lifetime earnings potential that would have been many times greater. I hope this sends a message to anyone else in his position that there can be consequences. I've been responsible for tens to hundreds of millions in annual expenditure, and to even have the appearance of vendor favoritism (let alone kickbacks, bribes, payoffs) is anathema to me. I have vendors that I like to work with because they do good work and they help me to make things happen, but even my favorite vendor is evaluated and earns the business on the merits every single time. I have declined seemingly innocent gifts from vendors (and notified my management). I always turn down things like sports tickets and paid trips. I do let vendors pay for the occasional lunch, but only up to a point that I feel comfortable. Maintaining my independence is absolutely key to my role and my career. I've also worked at places where even a paid for lunch is not acceptable. That won't influence my decision-making one iota, but if those are the rules then I follow them. Not everyone does that, but I don't know anyone in the industry who thinks Mike's behavior is OK. Anyone working for me who made unjustifiable decisions with vendor agreements would make me re-evaluate their position -- and if I found a pattern along the lines of Mike's behavior, they would be dismissed and sued just like him.
- herodoturtle 5y ago
  This is both an insightful as well as an important comment. Thanks for sharing it. Readers of HN should take note - especially young up-and-comers.
- dano 5y ago
  This kind of full disclosure is terribly important to build and maintain trust in an organization. I've even go so far as to disclose my investment portfolio to the CFO and clarify the purchasing decisions when there is overlap. Back in the day my budget was in the ten's of millions and it wasn't uncommon to make a $1m purchase of servers and storage. The moral ambiguity of accepting something in turn for making a buying decision is really beyond the pale. Thank you for your great post.
moneywoes 5y ago
Did Netflix not pay him enough?

301 points by altmind 5y ago

One thing that is interesting about this is not that these vendors made the initial suggestion of a kickback. Instead Kail said he would get them in as a vendor if they made him some important person at their company. So the idea of the kickback wasn't from the vendor.

0x0nyandesu 5y ago

Why is this even illegal? Perks in the industry is normal. People are always trying to get their own businesses front and center for contracts. Some of these companies just don't have much to give out other than equity and what exactly is wrong about that?

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lowkey_ 5y ago
For another example, look at how college bribery schemes are illegal. They're not illegal because they're unfair or immoral, they're illegal because the administrator is selling the spot that the college owns; it's not his/her spot to sell. If the company wanted to be used by Netflix in exchange for equity, then they could make a deal with Netflix itself. This executive was essentially selling the rights to contracts (akin to spots) that he didn't have the right to sell.
- 0x0nyandesu 5y ago
  You mean like forcing kids to buy brand new books so that they can get a code to use to take tests on an online platform that the professor gets kickbacks from that has nothing to do with the university the kid is attending?
  - lowkey_ 5y ago
    What's the spot/contract/etc in that case, that the professor is selling but doesn't have the right to sell on behalf of the university for his own enrichment? I don't see an example of how the university is losing revenue and being defrauded in that scenario.
    - 0x0nyandesu 5y ago
      The student is being defrauded. They signed up for something that was supposed to cost x but instead it costs y. Their degree being in jeopardy makes it blackmail from my perspective. It's telling that you were more willing to make sure the university wasn't being defrauded but I guess the student can kick rocks right?
      - lowkey_ 5y ago
        No, what I was trying to initially explain is that it is Netflix being defrauded. You pointed out that the company may only have equity to give, and I said that they weren't giving the equity to Netflix. They were giving it to an executive at Netflix in exchange for a contract, and it wasn't the executive's right to give that contract spot away for his own enrichment, because it's not his spot to give. Similarly, in the case of college admissions scandals, it is the college being defrauded. Now here, to make a parallel as you were intending, we'd have to see how the university is being defrauded.
    - Sohcahtoa82 5y ago
      The University is not being defrauded, but the professor is still taking advantage of their position to make a personal profit. Leaving aside the legal issues (I'm not a law expert, so I don't know if it is illegal), don't you think it is incredibly immoral for a professor to require a specific book for their class on the basis that the publisher is going to hand a check to the professor?
- BeFlatXIII 5y ago
  I thought the college bribery schemes were mostly illegal because the lowered the price for a guaranteed admission slot too much and, more importantly, cut the university out of the loop by paying the admissions personnel directly.
humanistbot 5y ago
Officially, the crime is fraud and the victim is Netflix, Inc. He defrauded the other employees and the corporate shareholders. He also laundered the money, which is also illegal and why the IRS got involved. Kickbacks aren't the fundamental issue here. If this was a single-employee startup with no other investors or shareholders, this would be perfectly legal. Or if Netflix, Inc. had a policy that authorized individual executives to personally receive cash and stock from vendors as perks, then this would have been perfectly legal. However, as the article says, Netflix had an internal policy that he blatantly violated: > Netflix policies prohibited conflicts of interest by its employees by its Code of Ethics and its “Culture Deck,” which required the disclosure of actual or apparent conflicts of interest and the reporting of gifts from entities seeking to sell products or services to the company.
- 0x0nyandesu 5y ago
  As a Netflix share holder I'm gonna say that this is a cost of doing business in Hollywood. Nothing this exec did is actually a problem. Half these people are at each other's houses ever day fucking each other's wives at swinger parties.
  - humanistbot 5y ago
    > this is a cost of doing business in Hollywood. First off, these were tech vendors giving kickbacks to the CIO, not producers bribing studio execs to get someone specific cast. But you seem to be missing that kickbacks aren't illegal in and of themselves. Netflix corporate didn't have to institute an anti-kickback policy for its employees. But they did, likely because they didn't want an environment where execs are negotiating both for the company and for themselves. The moment an executive violates corporate policy to enrich themselves, it becomes fraud.
s1artibartfast 5y ago
It was illegal because the kickbacks were kept secret from Netflix. If there was full disclosure to netflix, (but not other companies) this would have been perfectly legal.
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de6u99er 5y ago

I don't even allow companies to invite me for dinner or lunch, except if we do it in a way where I pay one time and the business contact pays the other time out of our own pockets. It is important to me that I am able to make the best possible decision at any moment. I don't want someone else veing in a position where I can ve forced to do something I don't want to do.

barcoder 5y ago

Note this is the former IT exec from 2014. These type of trials take a while to complete

dheera 5y ago
So did they hold him in prison from 2014 to 2021? What did he do during those years? There should be some law about time waiting for trial counting toward the sentence, which would also incentivize judges to work more quickly.
- temp_praneshp 5y ago
  Look him up on linkedin :) He was in my leadership chain for part of that time at Yahoo.
- SippinLean 5y ago
  He was indicted in 2018 and released on bail https://www.justice.gov/usao-ndca/pr/former-netflix-inc-vp-charged-scheme-defraud https://www.justice.gov/usao-ndca/pr/former-netflix-inc-vp-c...
  - dheera 5y ago
    Interesting. Maybe they should take 3 years off his sentence. When the judges find out, next time they will work faster to get trials done in days instead of years.

diab0lic 5y ago

The actual title is "Former Netflix Executive Sentenced To 30 Months For Bribes And Kickbacks From Netflix Vendors ". Mike left Netflix in 2014 and joined Yahoo and CIO for a moment before this all came out and Meyer put him on leave.

altmind 5y ago
It wasn't intentional, the headline was too long to fit.
- diab0lic 5y ago
  That makes sense, haha. That probably is the word I would have removed as well in that case. :)
  - nsgi 5y ago
    HN should really increase the max title length, there's plenty of space and the current limit often requires important details to be cut out
    - krapp 5y ago
      But it isn't truly Hacker News unless it's formatted to be read on an 80 column monitor.
      - colejohnson66 5y ago
        With 8 space indents per column for threading as per GNU style?
- airstrike 5y ago
  I think 'Former' is a key word here, showing Netflix is no longer affiliated with him. And "700K Bribes" reads like the number of bribes, not dollars collected Also @dang
tgv 5y ago

JohnJamesRambo 5y ago

Now this is what we need to see to effect change in corporate behavior.

nerdponx 5y ago
Kind of, but he only got in trouble because he messed with other rich people's money.
- diob 5y ago
  Very much so, like how only small banks in 2008 got destroyed.
- artursapek 5y ago
  Not sure why HN is downvoting this, because this is 100% how the world works lmao Here's a nice article on this topic: https://www.bloomberg.com/opinion/articles/2019-03-13/you-have-to-pay-the-right-person?sref=ZYRGK1Uz https://www.bloomberg.com/opinion/articles/2019-03-13/you-ha...

throwfaangus 5y ago

Why risk this even? Surely, he's making much more than 700K as an exec in the first place.

rvnx 5y ago
When you deal as a supplier to a big SV company, it can still happen that the employee asks you for a kickback. It's sad and it sucks.
ipaddr 5y ago
It might be part of some cultural structure in place. He got caught..
ghaff 5y ago
Very well-compensated people apparently can get sufficiently unmoored from a moral compass that they 1.) think the rules don't apply to them and 2.) just don't stop to consider that morals/ethics aside what they're doing is a really dumb potentially life-ruining risk.
adventured 5y ago
It probably wasn't just the $700k he was thinking about. I'd guess he was likely aiming for a larger sum over time.
usea 5y ago
Wealthy people usually still want more money, even past what non-wealthy people would consider enough.
- brian_cunnie 5y ago
  The two multimillionaires I know (one sold his company to JPMC, the other, to Google) aren't driven primarily by money. They have a genuine interest in what they do (securitizing carbon offsets, and designing analog circuits, respectively). They're what you'd call "good guys". They wouldn't be caught dead in that crazy kickback scheme that was described. I know this is a small sample set, but what I've come away with is that rich people are like you and me, except they happen to be rich.

kbenson 5y ago

> and serve a three term of supervision upon release from prison. Is there a typo in there, is that just a weird legal term, or is it just me that has a hard time processing what that means?

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edoceo 5y ago
Likely the missing word is Year - ie: he get three years probation after release.
- kbenson 5y ago
  That makes sense. I just figured that an official release from a government site (I checked the URL after I stumbled on this sentence a couple times to make sure it wasn't some random law blog, but an official .gov site) would be a bit better proof-read, so didn't want to assume. Also, I probably still need another 30 minutes for the coffee this morning to fully suffuse into my being so I can function like a normal person.
shadowgovt 5y ago
I'm 99% certain that should say "three-year term."
everybodyknows 5y ago
Also this, with directionality of "bribe" reversed: >Mr. Kail chose which IT contracts were awarded by Netflix according to how he was able to bribe those companies to provide him with financial compensation
- ghaff 5y ago
  Little bit weird but it's not wrong. He bribed the companies with contracts to get them to give him a kickback.

hpoe 5y ago

If you get caught stealing $700,000 you've got a problem. If you get caught stealing $700,000,000 the criminal justice system has a problem.

calvinmorrison 5y ago
if you owe the bank 50,000, you have a problem, if you owe the bank 50,000,000, the bank has a problem
- paulpauper 5y ago
  if you owe the bank 500,000,000,000 the bank has a problem if you owe them 500,000,000,000,000,000 you got a value overflow error
everybodyknows 5y ago
Bernie Madoff's damage was a few billion, depending on how you count it. Turned out was a problem for him, eventually. https://www.cnn.com/2021/04/14/business/bernie-madoff-dead/index.html https://www.cnn.com/2021/04/14/business/bernie-madoff-dead/i...

PragmaticPulp 5y ago

Every time this story comes up, the comments are filled with people proclaiming that kickbacks like this are totally normal and very common. I can't tell how much of it is random people projecting their cynicism onto the business world, or if it's people who have been part of bribery/kickback schemes themselves trying to normalize the behavior online. Either way, cases like this should make it clear that the behavior is not a good idea.

Phillip98798 5y ago
x
- cgriswald 5y ago
  That kind of comparison is meaningless and useless. The question should not be, "Should we criminalize fraud if people disagree about the results of this one specific unrelated case?" The question should be, "Should we criminalize fraud and if so what are the optimal penalties for disincentivizing new and repeat activity?"
- rpmisms 5y ago
  > Eschew flamebait. Avoid unrelated controversies and generic tangents. > Please don't use Hacker News for political or ideological battle. It tramples curiosity. We could definitely talk about the criminal justice system, but basically saying "the jury was wrong and I'm mad" isn't substantive.
- cowpig 5y ago
  Your point, as I understand it: you disagree with a jury's conclusion in one, high-profile case, therefore the entire justice system isn't necessary or there should be no consequences for white-collar crime. Or perhaps more charitably: you've become disillusioned about the judicial process in general, seeing a lot of results you consider unjust, therefore the entire justice system isn't necessary or there should be no consequences for white-collar crime. Neither is even a bit convincing. If one can significantly increase their personal wealth at mere risk of being fired, then the least honest people will accumulate all the wealth and power.

parhamn 5y ago

Some of the vendors mentioned: - VistaraIT, LLC - Platfora, Inc. - Sumo Logic, Inc - ElasticBox, Inc - Numerify, Inc. - Docurated, Inc - Maginatics, Inc. Is what they did illegal too? Presumably with zero chance of being charged. I haven't fully groked the limits of 'fraud' and 'money laundering' here in the US. These typically feel like they should be civil breach of fiduciary duty type cases.

shadowgovt 5y ago
IANAL, but in general: yes. Someone should be on the hook for paying bribes as well as for receiving them. At least, that's what every training on corporate bribery I've ever seen asserts.
- 8ytecoder 5y ago
  Not just should, they usually are. But I would also assume prosecutors use discretion to decide whether to charge them or not based on whether they do it as a pattern, whether they’re in their jurisdiction and whether they were coerced. I read this to mean one or multiple of it didn’t hold.
nightpool 5y ago
From TFA: Evidence at trial showed that several more companies paid Kail. Neither Netenrich, Vistara, nor any of the other companies were charged with criminal conduct. Only Kail was charged with devising the criminal scheme that defrauded Netflix. Since Kail was charged for wire fraud and mail fraud (deceiving Netflix about his personal compensation and conflicts of interest), it seems possible that the companies could be charged with "conspiracy to commit wire fraud" for colluding with him? It's hard for me to say exactly how easy this would be to prove—I think it's pretty clear to say that most companies / people should know that paying someone on the side for inside information on competitors or paying the VP a % of all contracts is an act to defraud Netflix. So the "meeting of the minds" to commit fraud is there, and the actual fraud is there (because one of the participants in the conspiracy committed it). But obviously this stuff is complicated and i'm not a lawyer. Also, the companies themselves would probably be pretty hard to charge, rather than the individual sales reps who signed off on the payments.

clavicat 5y ago

I just lost $5,000 this week and it’s pissing me off, so I can empathize.

errcorrectcode 5y ago

I had a boss at a major university who might've done this had he thought he could get away with it. Instead, he kept his greed down to an "acceptable" level of theft of university property for personal use and exploitation of vendor's client entertainment allowances.

riazrizvi 5y ago

The system isn't much good if infractions against its rules go unpunished. Faith in the system is being restored.

criddell 5y ago
I'm waiting for the vendors to be punished as well.
0x0nyandesu 5y ago
Nah it's just a howto manual on not getting caught.

0x0nyandesu 5y ago

I love how it's totally legal for the governor of Florida to send lucrative drug testing contracts to his wife's owned company but a guy getting a few stock options from a client is illegal. I guess we'll just go back to big wads of cash in an envelope instead.

jounker 5y ago
Florida is a state in which white collar criminals form a powerful voting bloc.
bumby 5y ago
I had to look that up because I’m not familiar with the story, but it seems illegal in most other states. This Netflix case, by contrast, is federal. Still makes the Gov. actions seem sketchy
- wombatpm 5y ago
  Florida politics is sketchy be definition as they are an outgrowth of representing 'Florida Man'
  - koheripbal 5y ago
    This comment does not belong on HN
  - bumby 5y ago
    You know “Florida Man” is really just an outcome of Florida criminal records being open and creating an availability bias, right? If other states had open records, there’d be much more fodder to create a “Wisconsin Man,” “California Man” etc.
the_doctah 5y ago
Whataboutism
wyldfire 5y ago
> I guess we'll just go back to big wads of cash in an envelope instead. Uh so wait are you saying that because the elected official isn't held responsible that we should then lower the bar to permit all bribery? That doesn't make any sense.

BINGCHILLING 5y ago

"Kail facilitated the payments, the evidence at trial showed, by creating and controlling a limited liability corporation called Unix Mercenary, LLC." i wonder how much the name choice had to do with the convinction he could have definitely chosen something more tasteful lol

choiway 5y ago

Unix Mercenary, LLC is brazenly on the nose.

hermannj314 5y ago

Can someone with more legal expertise explain why he is charged with wire fraud and not "accepting a kickback"? Is it legal to take bribes if you do it in a way that doesn't create wire fraud? Was the crime taking kickbacks or was the crime being paid in a certain way (i.e. the LLC he created)?

captainoats 5y ago
Specific anti-kickback laws only exist at the federal level for specific industries within federal purview like healthcare (through departments like CMS). Wire fraud is more general but is an avenue for the justice department to prosecute behavior like this (the crime is not specific to orchestrating a kickback scheme but defrauding his employer for personal gain).
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beachy 5y ago

> Shortly thereafter, Kail provided Platfora with Netflix’s internal information about Platfora’s competitors’ prices. Do said competitors now have grounds for a lawsuit against Netflix itself?

encryptluks2 5y ago

If you're poor and steal 700k you go to prison for life. If you're wealthy and do it as an executive you get 1 year with good behavior.

themdonuts 5y ago

Genuine question here. Who took him to court? Did I understand well it was a public institution/Irs? There seems to be no mention of netflix (company) being involved in the trial on the accusation side.

parhamn 5y ago
It's a federal crime. The US Government took him to court. As for who tipped them off, thats a different question.

duffpkg 5y ago

I created a company around an Open Source Electronic Medical Records system I also created, ClearHealth. It took me a couple of years to realize we were losing deals for health systems not because our system was bad (it was great), not because our sales teams were bad (they were great) but because we weren't engaging in kick-backs and outright bribery. This has become such a normalized part of business at institutions that it is extremely hard to be competitive if you don't do it. https://www.justice.gov/opa/pr/electronic-health-records-vendor-pay-155-million-settle-false-claims-act-allegations https://www.justice.gov/opa/pr/electronic-health-records-ven...

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lordnacho 5y ago
Did people ask you for bribes, did you say no, did you miss the hints, or did you just not know that you needed to do this?
- duffpkg 5y ago
  After losing some deals that just seemed like there was no credible way we could lose, better "product", better price, better team, etc. You start asking hard questions about all the people involved and eventually someome will confidentially explain what happened. Especially people who actually need to work with the worse vendor that just got selected. If you read through the settlement I linked ("The settlement also resolves allegations that ECW paid kickbacks to certain customers in exchange for promoting its product.") and other documentation regarding that case you can find details of several situations. I am singling out ECW there because that settlement exists. You would have to be pretty naive to think they were the only vendor engaged in that type of behavior and that the recipients of kick backs were only receiving kick backs from them alone.
  - lordnacho 5y ago
    Thanks for answering, I always wonder how people find out things like this. For me it's like racism, how will you ever know the real motivation? I guess sometimes you will get some discreet feedback.

tonymet 5y ago

Only $700,000? Must not have been very ambitious

throwawayFanta 5y ago

What this exec did was very illegal, but anyone in the startup scene would know that things like this are very common, but probably on a smaller scale. Maybe there are no wads of cash changing hands, but I've personally seen contracts being earned less due to the feature set, but more because the startup got introduced to some C level and them applying downward pressure to choose that startup during the vetting process. It's kinda noticeable when you're on a call with a big company's tech team and they sound defeated when talking about the success criteria and stuff

coldcode 5y ago

I worked at a company where the CIO routinely bought technologies for us to use, but we never did as they were mostly pointless to our business. He also always wrote articles for the companies bragging how much the software improved our business. One time one company sent a PR person to interview us and they were astonished to find out we never used it. Long after I left he was perp walked out of the company by a new CEO; turned out they company finally hired someone with more tech knowledge than this guy. Of course he had been taking kickbacks but knew just enough to convince the other execs we "needed" it. A week later he had another CIO job. I think he was fired from that one too. No idea if he was ever put on trial, probably the case was too embarrassing to pursue.

sudo-it-all 5y ago

The fact that "this is common" does not excuse the fact that it is wrong and unethical. This is similar to how Intel paid companies to not use AMD processors. It is anti-competitive behavior.

wly_cdgr 5y ago

Shoulda been more like 120 months, but it's better than nothin'

camel_gopher 5y ago

Did he get feedback from his peers?

scotty79 5y ago

Does anyone feel like wire fraud is a catchall term for when some people are hellbent on sentencing someone, who didn't do anything that was by itself a crime? Shouldn't this be a civil case between Netflix and this guy? Why is criminal justice system even involved in this? It looks like very bad way to spend tax payers money.

ghaff 5y ago
Because, cynicism (and specific elected officials) aside, the government has a vested interest in people viewing it as a country of laws rather than a country of whatever you get off with is fair game.
- scotty79 5y ago
  For me it looks even worse. Netflix, instead of creating civil lawsuit against this guy, that they would have to pay for, silently bribed the right people in the justice system to charge him with some crime instead. This way Netflix punishes the man that did them dirty without paying a cent of their taxed legal money. Instead now every taxpayer pays for salaries of prosecutors and judges and whoever else is necessary to help one corporation exact a little vengeance.
  - ghaff 5y ago
    Presumably you think investors in Theranos should also have also have been on the hook for pursuing legal claims. So basically most white collar crime should be pursued because it's mostly not worthwhile on a dollars and cents basis for government to do so. Or Enron? It's just fraud. It's a small step to go from there to say that white collar crime doesn't really hurt anyone and it's on those who think they've been hurt to pursue redress in the courts on their own.
    - scotty79 5y ago
      I think in Enron and Theranos cases, there were specific actual crimes happening. Like lying in the published information that's influencing the stock market. Or falsifying you financial records. Things specifically forbidden and labeled as criminal. Not a thing that is so non-specific (in it's criminality) that you have to label it wire-fraud or mail-fraud (whatever that is) to even have a chance at making it look like actual crime, not just immoral thing he did that could harm his employer (but it's hard to tell to what extent it actually did). Do you try to straw man me into position "all white collar crimes shouldn't be crimes"?

qwertyuiop_ 5y ago

Why is Vistara LLC not charged for bribing this guy ?https://www.linkedin.com/company/vistara https://www.linkedin.com/company/vistara I know anecdotally a lot of US based Indian Outsourcing companies, TCS, Infosys, Mahindra, HCL bribe the mid-senior IT executives by buying them offshore properties under LLCs. If you look at Avis, Disney and other corps, the top level IT execs are bribed to the gills by these companies.

everybodyknows 5y ago
Maybe they don't leave a paper trail a mile wide and deep, unlike this clown? > Two days before Unix Mercenary was registered with the California Secretary of State, Kail signed a Sales Representative Agreement to receive cash payments from Netenrich, Inc., amounting to 12% of any billings ... This is not to excuse the criminality, but rather to suggest an unhappy likelihood that the great bulk of graft flows by more sophisticated arrangements.

jbkiv 5y ago

This is not an uncommon practice in the Silicon Valley. Startup wants to business with Big Co., invites Big Co.'s decision maker (VP Marketing, CIO, CTO, CFO) to join the "board of advisors". Then startups pays for expenses, travel and grant "stock options" to Big Co. senior manager. Understand that ANY product has a "side" price tag, paid by granting options or "payment for expenses" to the senior individual. Another way to look at that. Ask ANY member of your board of advisors to disclose ANY conflict of interest. If StartUp sells product/services/SaaS to BigCo. then BigCo. "advisor" should disclose ANY payment, direct or indirect, travel or non-travel, and ANY stock options. This is what had to be done with the large drug companies, forcing them to disclose payments to providers/medical doctors who had the authority to buy drugs. Full disclosure + penalties for lack of disclosure ---> that was the end for the drug sales rep who were doling "educational conference tickets, all expenses paid for you and your spouse, ALL expenses paid, and of course compensation for your time". Of course said conference had to happen in Tahiti, San Francisco, Seychelles, etc...

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dustymcp 5y ago

Imagine the money he has to pay in prison for protection

kingcharles 5y ago
I know this is just an off-the-cuff quip, but the real answer is probably zero. He's minimum security. He's going to have very little problems like this, even as a rich white guy. When I was locked up, I was in Max with mostly murderers. I got tricked out of a $10 phone card in my first week, and the guy said he'd protect me as a thank you. After I realized I'd been dumb I never made that mistake again. I found just being polite, but firm, was enough. He'll be fine. He'll probably never get into a single fight. He'll be asked for commissary. He'll share some of his commissary, but everyone does that in prison anyway, especially with the guys that have nothing.
- sizzle 5y ago
  Wow don’t mean to pry, but how long were you there for? Is it like the movies where you have to find your ethnic race clique and they protect you? What would you change about the prison system? Do you think mental health treatment would help reduce the prison population from repeat offenders?
  - kingcharles 5y ago
    I was in for 8 years, 1 month. I was never convicted. I was just in jail because I didn't have the money to bail out, otherwise I would not have spent a day inside. It's not like the movies at all. All the races talked to each other and were pretty respectful. If there was a fight it was usually enforced to be only one-on-one. Every now and again someone from a person's gang would back him up in a fight, but it wasn't necessarily race-specific as the gangs have become very multicultural - you'll find Latino gangs with blacks and vice-versa. Often it's because people are so mixed now - is the guy black, mixed, Latino? Who knows? I would change the prison system by practically abolishing the prison system. I don't think putting people in a box helps them. Almost every single person I met in jail was in there because of a raft of mental health issues that made it so their brain said committing a crime was OK and fuck the possible consequences. We need vastly more mental health support, especially for men who typically are not open about their weaknesses.

artursapek 5y ago

Imagine being a Netflix executive and risking years of your life for $700,000

pwarner 5y ago

I haven't even gotten a new Datadog shirt in years :-(

colpabar 5y ago

When I read things like this, I can't help but think of how no one went to jail after the 2008 financial crisis. $700k from a group of private companies? WHO CARES? Congress just said insider trading is ok when they do it, can we maybe go after some of that next time?

meabed 5y ago

And just name every consulting org or big vendor that they don’t do this in every industry.

blamethenetwork 5y ago

I was there and saw some of this during my time at Netflix. I've also been in the industry long enough to get my own sense of what is / what is not reasonable. The first thing, Netflix wise, is to understand their culture deck at the time. One of the main things was "Act in Netflix's best interest". That basically described their philosophy of how employees should act. So, when signing a contract, where you get a 10% kickback, (eg the company pays $200/hour and you get $20 as a commission, its better to have the company pay $180.) Also, signing contracts that he was enriched by - stock, kickbacks etc. (he received what is now worth: $862,500 of sumologic, and $2,167,700 of netskope - trial document #276 He also signed contracts that were never deployed, had a long support lifetime, or didnt meet the companies needs - eg: Numerify, and docurated - trial document # 288 In some cases, I personally experienced us having to use tools that Mike had signed for that were not right for the job. Eg: Sumologic at the time was a horrendous product. It certainly was not a realtime logging system. Realtime was up to 15 minutes delayed. If you wanted realtime, it was all about syslog. I brought this up, and was told that we were using the product because of Mike, even though it clearly did not help our problems. Grep on the unix server was considerably faster and more up to date, (but it wouldnt have got Mike $2M of stock). Mike also had me meet with him and various vendors who were pitching some fly-by-night ideas. In a normal world, I'd say they were very early startup ideas that weren't a match for our needs. Now, I'm wondering if these were meetings where Mike was looking to get an "advisory" angle. In summary, I've been to coffee, dinners, very nice meals etc. with vendors. I've had them invite me places for meetings, and I've gone with my companies permission and understanding. I've had non-compensated advisory positions. The difference though, is my company was aware of it, and I did not receive stock or engineer contracts such that I received kickbacks. Thats where the line was, and thats why he's going to jail.

ChrisArchitect 5y ago

Some previous discussion about the conviction 2 months ago: https://news.ycombinator.com/item?id=28918805 https://news.ycombinator.com/item?id=28918805

skuhn 5y ago

I'm glad to see the verdict and a relatively severe sentence handed down (I expected 6-12 months). What Mike did was indeed unethical and fraudulent. It's also extremely foolish and shows poor judgment on his part -- his role at Netflix was to lead the organization to identify and implement the best solutions for the company and its customers. Instead he saw the opportunity for short-term personal gain at the company's expense, and by doing so he jeopardized his lifetime earnings potential that would have been many times greater. I hope this sends a message to anyone else in his position that there can be consequences. I've been responsible for tens to hundreds of millions in annual expenditure, and to even have the appearance of vendor favoritism (let alone kickbacks, bribes, payoffs) is anathema to me. I have vendors that I like to work with because they do good work and they help me to make things happen, but even my favorite vendor is evaluated and earns the business on the merits every single time. I have declined seemingly innocent gifts from vendors (and notified my management). I always turn down things like sports tickets and paid trips. I do let vendors pay for the occasional lunch, but only up to a point that I feel comfortable. Maintaining my independence is absolutely key to my role and my career. I've also worked at places where even a paid for lunch is not acceptable. That won't influence my decision-making one iota, but if those are the rules then I follow them. Not everyone does that, but I don't know anyone in the industry who thinks Mike's behavior is OK. Anyone working for me who made unjustifiable decisions with vendor agreements would make me re-evaluate their position -- and if I found a pattern along the lines of Mike's behavior, they would be dismissed and sued just like him.

herodoturtle 5y ago
This is both an insightful as well as an important comment. Thanks for sharing it. Readers of HN should take note - especially young up-and-comers.
dano 5y ago
This kind of full disclosure is terribly important to build and maintain trust in an organization. I've even go so far as to disclose my investment portfolio to the CFO and clarify the purchasing decisions when there is overlap. Back in the day my budget was in the ten's of millions and it wasn't uncommon to make a $1m purchase of servers and storage. The moral ambiguity of accepting something in turn for making a buying decision is really beyond the pale. Thank you for your great post.

moneywoes 5y ago

Did Netflix not pay him enough?