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Ex-Netflix VP guilty of fraud after taking $500K in bribes and kickbacks from tech companies for streaming contracts

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A FORMER Netflix executive has been found guilty of fraud after accepting more than $500,000 in bribes and kickbacks while overseeing the streaming giant’s internet technology department.

Michael Kail, 49, was found guilty by a federal jury on Friday of accepting lucrative stock options and more than a half-million dollars in bribes from tech companies to approve IT contracts with Netflix.

Michael Kail, 49, was vice president of internet technology at Netflix between 2011 and 2014

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Michael Kail, 49, was vice president of internet technology at Netflix between 2011 and 2014Credit: Quora

Kail, who was vice president of internet technology at Netflix between 2011 and 2014, was indicted in 2018 on 19 counts of wire fraud, three counts of mail fraud, and seven counts of money laundering.

He had pleaded not guilty to each of the charges against him.

The trial began on April 19 in federal court in San Jose, California, and he was found guilty on 28 of the 29 charges against him on Friday.

“We are very disappointed in the jury’s verdict,” defense attorney Julia Jayne said.

“It goes to show that an innocent person can be convicted when there are so many counts stacked against them and there is a powerful corporation, Netflix, driving the investigation and prosecution.”

He found guilty by a federal jury of accepting lucrative stocks and more than a half-million dollars in bribes and kickbacks from tech companies to approve IT contracts with Netflix

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He found guilty by a federal jury of accepting lucrative stocks and more than a half-million dollars in bribes and kickbacks from tech companies to approve IT contracts with NetflixCredit: Getty

Prosecutors alleged that Kail had accepted more than $500,000 in kickbacks — as well as valuable stock options — in exchange for approving millions of dollars in contracts for nine tech companies seeking to do business with Netflix between February 2012 and July 2014.

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Kail created and controlled a limited liability company, Unix Mercenary LLC, to receive bribes, fund personal expenses and buy a home in Los Gatos, California, prosecutors said.

His total take was estimated to be worth around $690,000, prosecutors wrote in their indictment.

During the trial, jurors heard testimony from Kail’s former co-workers, including former chief financial officer David Wells, who all said they didn’t know Kail was receiving equity and hundreds of thousands of dollars in commissions from vendors.

One vendor testified that he had given Kail a bottle of 2004 Dom Pérignon champagne worth about $250.

Netflix prohibits its employees from having conflicts of interest and requires them to disclose actual or apparent conflicts of interest and to report gifts from people or entities seeking to sell to the company, authorities said.

Netflix prohibits its employees from having conflicts of interest and requires them to disclose actual or apparent conflicts of interest and to report gifts

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Netflix prohibits its employees from having conflicts of interest and requires them to disclose actual or apparent conflicts of interest and to report giftsCredit: AP

Speaking on the stand towards the close of the three-week trial, Kail claimed he had been “very public” about advising vendors and that he thought his Netflix colleagues knew he was receiving commissions or equity as an adviser.

Prosecutors, meanwhile, accused him of attempting to conceal his crimes by routing communications with vendors to his home address and to a personal email address.

Kail quit Netflix in 2014 after being confronted by then-CEO Reed Hastings, who questioned him over conflicts of interest, to which he reportedly “falsely denied that he was receiving compensation from vendors,” according to an indictment.

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Netflix later sued him in Santa Clara County Superior Court and the parties came to a private settlement in late 2015.

Following his conviction last week, Kail is now facing up to 20 years in prison in addition to hundreds and thousands of dollars in fines.

The Los Gatos home he bought while allegedly carrying out the scheme – which is valued at $3 million – will also likely be forfeited to the federal government.

He is due to be sentenced in three months time, according to the US Department of Justice. He remains free on bond in the meantime.

Netflix declined to comment on the verdict.

In a statement, FBI Special Agent in Charge Craig D. Fair said: “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.

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“Bribes and kickback schemes, such as those facilitated by Mr. Kail, undermine the fabric of competition in Silicon Valley, and the FBI will aggressively pursue anyone who attempts to criminally exploit their position for personal gain.”

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