SAN JOSE (CBS SF) -- A federal jury convicted Netflix's former vice president of IT Friday for conducting a kickback scheme for years during the mid 2010s.
The jury convicted 52-year-old Los Gatos resident Michael Kail on charges of wire fraud, mail fraud, and money laundering for accepting a series of bribes in exchange for IT contracts with Netflix. The jury returned a verdict of guilty on 28 of the 29 counts Kail faced.
"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 M. Hinds. "As Netflix's Vice President of IT Operations, Michael Kail wielded immense power to approve valuable Netflix contracts with small tech vendors, and he rigged that process to unlock a stream of cash and stock kickbacks to himself.
Kail began working Vice President in charge of IT Operations for Netflix in 2011. The following year, Kail set up a company called Unix Mercenary, LLC that had no employees or address but a bank account connected to Kail. He then awarded a series of contracts worth millions of to nine different IT companies, who repaid Kail with over $500,000 and stock options. Kail reportedly accepted so-called "commissions" of 12 to 15% on the contracts he approved.
"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 Special Agent in Charge Craig D. Fair. "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."
After leaving Netflix in August 2014, Kail went to work for Sunnyvale-based Yahoo as chief information officer. He left that job the following May in the wake of a civil lawsuit filed against him by Netflix in Santa Clara County Superior Court in November 2014. The two parties came to a confidential settlement the next year.
The federal government indicted Kail back in May of 2018 on nineteen counts of wire fraud, three counts of mail fraud, and seven counts of money laundering.
Kail faces a maximum sentence of twenty years in prison and a fine of $250,000, or twice his gross gain or twice the gross loss to Netflix, whichever is greater, for each count of a wire or mail fraud conviction, and ten years in prison and a fine of $250,000 for each count of a money laundering conviction.
Kail remains released on bail. The government expects Judge Beth L. Freeman to schedule a sentencing hearing to occur in three months.
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