Former Netflix executive sentenced to 30 months for taking bribes

LOS GATOS >> A former Netflix executive has been sentenced to 2½ years in prison for accepting bribes and kickbacks from outside companies seeking to do business with the Los Gatos-based media-streaming giant, according to the U.S. Attorney’s Office.

Handed down Dec. 14, the sentence comes eight months after a jury found Michael Kail, 52, of Los Gatos, guilty of more than two dozen counts of fraud and money laundering.

“Bribery and kickbacks are pernicious crimes that stifle Silicon Valley’s culture of competitive innovation,” said acting U.S. Attorney Stephanie M. Hinds in a statement.

“Michael Kail used his highly compensated Netflix position to siphon cash and valuable stock options from his tech vendors, the same vendors whose Netflix contracts he signed and whose technologies he pushed his teams to use,” Hinds continued. “Such crimes come with a cost, as reflected by the prison sentence that Kail will now serve.”

In addition to the prison sentence, U.S. District Court Judge Beth L. Freeman ordered Kail to forfeit $700,000, pay a $50,000 fine and serve three years of supervised release.

As Netflix’s vice president of IT operations from 2011 until July 2014, Kail approved contracts to purchase IT products and services from outside companies and authorized payments to them. Netflix’s code of ethics required Kail to disclose conflicts of interest and report gifts from outside companies seeking to sell products or services to Netflix.

Prosecutors said evidence presented during the threeweek trial showed Kail solicited and received bribes and kickbacks from nine companies. In exchange, he approved millions of dollars in contracts for goods and services provided by them to Netflix.

Kail received more than $500,000 and stock options from the companies, which he then used to pay his personal expenses and to buy a home in Los Gatos, according to prosecutors.

None of the companies was charged with criminal conduct.

In a sentencing memorandum, Kail said he regretted losing the trust of Netflix CEO Reed Hastings and other employees.

“I realize that had I been fully transparent with him regarding my advisor positions and compensation, I likely would not have ended up in my present situation,” he said. “I made incorrect assumptions about what was expected.”

Kail’s defense attorney, Julia M. Jayne, said in the same memo that Netflix “suffered absolutely no loss” and ultimately “benefited from the startups (Kail) introduced to his teams.” Jayne requested that her client be sentenced to just one year of home confinement, 500 hours of community service and three years of supervised release.

“From advertising technology, to security, to the swift identification of technological failures (which ultimately affected the end customer), Mr. Kail’s implementation of his vision for Netflix help lead it to the successful company it is today,” Jayne said.

Jayne said Dec. 15 that “A hindsight view into startup technology 10 years later doesn’t accurately reflect a given product’s usefulness or value at the relevant time.”

She added that Kail would be appealing the conviction and sentence.

Freeman ordered Kail to surrender March 8 to begin serving his prison sentence.