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Former Netflix Executive Found Guilty of Fraud, Bribery

A former Netflix executive was convicted of accepting bribes and kickbacks from other Silicon Valley companies in exchange for approval of a bevy of contracts worth millions.

(CN) --- A former Netflix executive was convicted of bribery, fraud and money laundering in connection to kickbacks he received from technology companies that partnered with the streaming company. 

Michael Kail was found guilty by a federal jury after a week-and-a-half trial and the verdict was handed down by a 12-person jury in San Jose, Calif. in the court of U.S. District Judge Beth Labson Freeman. 

Kail, 52, was vice president of internet technology at Netflix from 2011 until 2014, where he managed contracts with small outside vendors for IT-related services. The evidence presented at trial showed that Kail accepted personal bribes from nine different technology companies for in exchange for arranging contracts between the parties. 

Kail used these bribes for personal use, including purchasing a home in Los Gatos, Calif.. 

"Not only did Mr. Kail deprive Netflix of its money and resources by abusing his position as VP of IT Operations, he created a pay-to-play environment whereby he stole the opportunity to work with an industry pioneer from honest, hardworking, Silicon Valley companies," said FBI Agent Craig Fair in a statement after the trial. 

During his tenure, Kail approved millions of dollars in contracts for Netflix in exchange for various goods and services. In exchange for approval, Kail received approximately $500,000 and stock options from outside companies. 

Kail said he viewed the proceeds from other companies as commission for his services and contested the illegality of the scheme. 

But prosecutors said Kail was sophisticated and careful not leave a paper trail, including creating a limited liability corporation called Unix Mercury. Two days before registering the corporation, Kail signed a deal with a company called Netenrich, Inc. that gave Unix Mercury 12% of the contract between the company and Netflix. 

“Bribery undermines fair competition and innovation in any business arena, and particularly Silicon Valley’s highly competitive environment of cutting-edge innovation,” said Acting United States Attorney Stephanie Hinds in a statement after the trial. 

After inking the kickback scheme with Netenrich, Kail inked similar deals for a 15% cut of the contract with other companies in the market. 

For instance, Kail became an adviser for a company called Sumo Logic in 2012, receiving stock options as part of the role. The next month Kail approved a vendor agreement between Netflix and Sumo Logic. Netflix ended up paying Sumo Logic $300,000 for a one-year agreement before members of Kail’s team began complaining about the company’s performance. 

Despite such complaints, Kail renewed an $800,000 contract later that year. 

"Bribes and kickback schemes, such as those facilitated by Mr. Kail, undermine the fabric of competition in Silicon Valley,” Fair said. 

Categories:Business, Courts, Criminal

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