Kail did his criming through a shell LLC he set up called "Unix Mercenary".
He took between 10-15% of the total billings for each of the companies he hooked up with this scheme. None of those companies were charged (more's the pity).
They got him on mail fraud, wire fraud, honest services fraud, and money laundering. The victim of the fraud was, of course, Netflix itself.
Additional fun facts from PACER:
He's seeking to exclude his shares in Sumo Logic and Netskope from forfeiture, arguing that they were largely the result of his own hard work, which takes some serious chutzpah.
All of this apparently happened back in 2014 (the conviction is recent). If you're wondering what Netflix thought of all this, Kail apparently left Netflix for a job at Yahoo, from which he was fired after Netflix found out about his scheme and told Yahoo.
Kail's sentencing memorandum is a fun read (again: chutzpah). For instance, this gem:
Further, though Mr. Kail complained of problems with Sumologic (as one would see with any new startup), the product itself was “useful,” according to Ashi Sheth. (R.T. Vol. 8, p. 1670-71). As described below, at the time, Sumologic saved Netflix from paying for a far more expensive and inferior product called Splunk.
A lot of people here are saying this is incredibly common which is frankly pretty surprising to me. Does it really happen through shell LLCs?
I am definitely aware of execs prioritizing startups they've invested in, which is... not a great look.
But this seems to be a different thing. Kail wasn't an investor. He explicitly drafted agreements that paid him a fraction of the money flowing from Netflix. This seems almost like embezzlement to me (not a lawyer! just a guy using words he has heard!):
> Two days before Unix Mercenary was registered, Kail signed a Sales Representative Agreement to receive payments from Netenrich, Inc. amounting to 12% of the billings from Netenrich, Inc. to Netflix for its contract providing staffing and IT services to Netflix. Later in 2012, Kail began to receive 15% of all billing payments that VistaraIT, LLC, a wholly owned company of Netenrich, received from Netflix. From 2012 to 2014, Netenrich, Inc. paid Unix Mercenary approximately $269,986, and VistaraIT, LLC paid Unix Mercenary approximately $177,863. The payments stopped in mid-2014, after Kail left Netflix.
We always check the corporate registries to see if any of the legal entities the execs of a company are related to are making substantial turnover from either the company we are looking at, or a subsidiary. In 200+ DDs this has happened a handful of times. So I would not say it is a common thing but it definitely does happen, and often enough that we feel the need to at least try to establish if it is the case during a routine checkup in case of investment or acquisition.
Of course that would not help a company while it is happening, we only check a very small fraction of all offerings. In a perfect world an accountant would catch this.
One case I ran into was very much like this one: a whole bunch of hardware was sold at above sticker price, on top of that much more hardware was sold than what the business could reasonably expect to be using. The a-technical management never caught on to this until we showed up, the fall out from that case was fairly spectacular.
> We always check the corporate registries to see if any of the legal entities the execs of a company are related to are making substantial turnover from either the company we are looking at, or a subsidiary. In 200+ DDs this has happened a handful of times.
Just to add a few points:
- This is much easier to do in Europe where entities are more public.
- I regularly see (probably 1 out of 20 deals) companies where there is some level of a conflict of interest between the owners/management and a 3rd party. The most typical one is where the CTO of a small ($3M revenue) software company also owns the outsourced dev group in India. The implications are numerous here.
A conflict of interest is one thing, but as long as it is disclosed to all parties who might be on the downside of that conflict it need not be a problem in and of itself (but it still could be, and may very easily become one).
An undisclosed conflict of interest is always a problem.
> An undisclosed conflict of interest is always a problem.
Can you help me understand why this is? If a known conflict of interest may or may not be a problem for the downside party why does that change if the conflict is unknown?
I can see how it can become a problem, and how the downside party is at a disadvantage but I’m not understanding why this is always a problem.
Also, this is the classic "it depends" in consulting.
Example where this went bad:
- "Acme Co." has an offshore/outsourced dev group in India called "Offshore Co.". Offshore does all of their software development, maintenance, infrastructure, etc.
- CTO who is employed by Acme wholly owns Offshore Co.
- PE Group ("PEG") buys Acme Co. and takes a controlling interest
- PEG decides Acme should do something strategic.
- CTO disagrees with strategic direction
- CTO operates Offshore Co and decides to hold the company hostage and directs his resources to stop maintaining the code, infrastructure, etc. anymore unless they do what the CTO says
PEG/Acme could simply stop paying Offshore/CTO but since they don't know how the code works, etc. they basically don't have a choice.
I'm the other DD guy (besides jacquesm, who btw is very knowledgable) that regularly posts here. Happy to answer any questions.
There really isn't any "public" info about tech DDs that I could share. The tech DD world is growing likely crazy so if you have a business and tech mind, you'll likely find companies hiring for roles, even if you don't have specific experience.
These are two books that might help you provide perspective on M&A/PE that you would learn if you got into DD:
Assuming the receiver uses a proper offshore construct to accept the payment, this would go by unnoticed by your DD?
But most interesting: What is your best guess - Your partner says you find “a hand full” from a few hundred - how many of these cases do you miss because the recipients use a not easy traceable proxy entity to collect the payment?
Do you try to uncover such hidden actions, if yes, how?
Also, is there a good reason why someone would not use a offshore proxy/holding?
> how many of these cases do you miss because the recipients use a not easy traceable proxy entity to collect the payment?
That's the 'million dollar question', and in some cases substantially more than one million. I think the reason a good number of these people get caught is (1) things like the Panama papers and other leaks like that have made it harder to do this, and have also brought the not insubstantial resources of the authorities to review these constructs and (2) most people never expect that during DD such a thing would be checked.
It's typically quite a surprise when we start asking about the activities of companies that the other party believes are well hidden.
I don’t see offshore leeks as a big deterrent, unfortunately.
The three big ICIJ leaks were not published as in dumped to the public. Only politicians, PEPs, obvious money launderers and some obvious other criminals were selected and exposed. (It’s only money laundering if you can proof the money comes from the proceedings of crime)
There are some criminal service industry leaks that are public, or have been public, yet it doesn’t appear more than a few individual have the motivation to follow trough in combing them. At least this is true for groups who would publish on their findings.
Fair enough. I go on the assumption that there will always be stuff we miss, and my customers do as well - especially given the time pressure that we are under to deliver. Even so, it's a given that some people will get away with these things. Interesting detail: over the years you'd expect something like this to pop up after the fact or in a subsequent DD if it goes on for long enough, but that has never happened. So maybe the number of missed cases is lower than what I would personally expect it to be (a factor of two would not surprise me).
> It's typically quite a surprise when we start asking about the activities of companies that the other party believes are well hidden.
Also, if you do tech DD - most techies are happy to share details that unknowingly might expose because they tend to be less business savvy. CEO/CFO's on the other hand...
Haha, true. Was most probably me who let that deal fall through back then when I admitted the algorithm was basically a bunch of haphazard excel sheets.
Managed to BS the second team way better after that — and they were eager enough to have a share of the rocket ship at all cost.
Guess they weren‘t too happy losing most if their series B invest.
Note that these articles are now about a decade old, I probably should update them to reflect the experience gained since then and changes to the state of the art in tech.
That's not how this works. How it works is like this: we have some expectations about what things should cost, if something is wildly deviant from the regular market rate then that's worth looking into.
I'm sure plenty of shady vendors out there would be more than willing to offer a market rate plus bribes. Especially in software since they have the margins to afford it.
I don’t want to come off as holier than average, but I always assumed the standard was to disclose the relationship I had with any company we were considering and to explicitly exclude myself from the evaluation process. Seems like common sense and is drilled into all our leaders as part of code of conduct behavior.
Companies that I’ve worked for and companies that I’ve advised or invested in have never had a problem with me making an intro under such terms (and sometimes we bought, sometimes we didn’t, but in either case, I was out of it after the intro; the very most an advised company would get is a better/more truthful explanation of why we decided not to buy.).
I can’t find the OpenDNS citation — could you post a link? I would be super disappointed to find out that the founder of OpenDNS was involved in this sort of behavior.
IANAL, but: One can be both an advisor to a company and their company can be a customer of it. That is not, in itself, illegal.
It is illegal when they are tied together as a quid pro quo, and further, when it is undisclosed. In every case any company I ran has ever done this, we fully expected the other party to disclose the conflict of interest to their company before becoming an advisor. Of course we have no way of confirming this, but this is also why none of the startups themselves were charged here.
I worked on the services side for many years and eventually worked my way into the sales and contract writing level of the operation. I was definitely too much of a square for anyone corrupt to want to pull me into their schemes, but I also never caught any kind of whiff of impropriety. We worked for a pretty wide array of clients including Fortune 50s and startups, contracts in the $500K-$20MM range. Never heard a whisper of kickbacks and we were typically squeezed to utilize every penny so it would be really, really hard to make more than 1% of our contract price disappear. The worst I ever saw was small-time expense abuse like buying steak dinners and wine on trips.
Second hand, an acquaintance worked on a tobacco account where they were spending government-mandated anti-smoking funds on a digital marketing campaign and they were asked to deliberate overbill and churn on work without delivering. People went to jail.
Third handed story because I knew some folks who used this software, a vendor once extracted about 1000% of their contract price in kickbacks building HR software for the city of new york: https://www.nytimes.com/2014/04/29/nyregion/three-men-senten...
Subchapter S corporations or LLCs facilitate paying yourself distributions, which are exempt from Medicare and Social Security taxes, saving you an initial 15%. Although, there are details and caveats to be aware of. I don't know of any way to get that benefit without a corporation.
Social Security stops at something under $150K per year.
If you’re going to try to avoid it by paying no salary and all distributions for work that you personally did, you’ll likely fall afoul of the “reasonable salary” test, designed to prevent exactly this.
Everyone needs to understand this. I’ve had two friends get audited and fined for massively underpaying themselves for contract work via their LLCs. Many of the people I run into who claim all kinds of benefits from this route are actually commiting low level tax fraud, knowingly or otherwise.
Many accountants make a living doing this. Many are also setup as s-corps taking low salary. You need to educate yourself and Understand the risks/rewards
You don't avoid it all via the S-Corp. You just avoid the half the employer (in this case, also you) normally pays.
I'm not a tax accountant or a lawyer, just happen to run my own consulting through an S-Corp. I still pay myself around half of the net revenue the S-Corp brings in as a regular employee, and that portion is taxed under FICA.
You are right about that, and I probably should've mentioned it in my comment. But I feel it's a niche case for these reasons:
1) The benefit only applies to profits above "a reasonable salary". You need to determine and potentially later defend what you chose as a "reasonable salary".
2) Once you have over ~150K income (including your day job's salary and LLC profit), social security taxes phase out so most of the benefit is gone (just the medicare portion remains), unless you have a HUGE LLC profit.
3) There's overhead in filing taxes on an s-corp.
All this probably makes sense if you have >$100K LLC profits and no other big income source, or maybe if you have >$500K LLC profits regardless. You'll def want an accountant. Companies like Collective.com exist to make it easier to go the s-corp route if you choose to go that way. But it is complicated for some minor savings.
It can depend and IANAL buuuut I do have an LLC taxed as an S Corp, because you can dramatically reduce your tax burden. Essentially you buffer your money in your LLC and pay yourself a "reasonable salary". For example: maybe you earn $200k this year as a software contractor. You go to glassdoor and find that mean salary for software engineers is $96k/yr. You pay yourself $8k/mo (pre-tax), deducting payroll taxes and putting $1,650 (the max contribution) into a 401k. You also max out your 25% 401k business contribution at another $2k. Depending on state taxes, your total tax burden is something like 19%, after you've put $43,500 into retirement. If you didn't have an LLC, it'd be closer to 30% (or higher, ugh) with only $19,500 in retirement. In raw dollars, in this hypothetical you're down ~$24k.
Your business also gets tax breaks you don't, namely on (paying for your) health care, (paying for your) retirement savings, depreciating assets, (paying for your) salaries, food, travel, lodging, equipment, and services. Further, the cap on business 401k accounts is way, way higher [1]. The ability to sock away even more pre-tax money in a retirement account, and deduct your health insurance from your taxes is insane.
The biggest downsides, at least for me, have been the infra to get it all going. I have an accountant, a lawyer, a financial planner, and an army of online services that help me stay legal and paid up. That said, I'm still coming out ahead (e.g. they don't cost $24k/yr and you guessed it, startup costs are tax deductible), so the gains are there.
(I think paying taxes is patriotic, but I don't think it's reasonable to pay taxes on $200k of income for one year, and then only make $60k of income the next year. I also don't think it's reasonable for me to pay ~40% of my income in taxes while big corporations and the rich pay very little so....)
See below; this S-corp "reasonable salary" thing was called out to me as an audit flag by my accountant, and other people have stories of friends being audited. It's not worth it (and the ethics of it aren't great; most people can't work for S-corps they own, and can't avail themselves of this "favorable treatment".)
The 401k part is available to sole proprietors too. "Solo 401k" or SEP-IRA are the tools for the job. They're easy to set up and you can put up to that same limit ($45Kish?) away if you have enough income. And if you have a LOT of income ($200K+?) you can really turbocharge it with a defined-benefit plan, which lets you put away close to 50% of the consulting income for retirement.
Most of the other things you list are available to sole proprietors too: "(paying for your) retirement savings, depreciating assets, (paying for your) salaries, food, travel, lodging, equipment, and services"
I'm not sure about health care, are you sure there's no way to deduct it as a sole proprietor?
Yeah, that's fair (yeah you can also deduct health care premiums on Schedule C). I think the liability shield is really important though, and if you're not wild about the S corp administrative overhead you can choose to be taxed as a sole proprietor.
An LLC doesn't help you against your own actions though:
"forming an LLC will not protect you against personal liability for your own negligence, malpractice, or other personal wrongdoing that you commit related to your business"
Yeah I mean, if you commit negligence or malpractice (which are serious, not like the client didn't like your work) you're liable, so you need insurance. And you can still go to jail for actual crimes. But the creditor/bankruptcy liability is nice and basically free.
From my understanding, an LLC does help with _financial_ liability - if the company fails and goes bankrupt, your personal assets generally won't be on the line.
Obviously, an LLC cannot shield you from criminal liability.
Small time LLCs are not going to get so much as a credit card without a personal guarantee. Sometimes you can get loans from the company doing your payment processing but only because they're directly involved and can see your cash flow.
(disclaimer: I work for Stripe which had a product that works like that, but not anywhere near that team)
What this person said. You'll almost always have a personal guarantee on a loan. And if it's just you consulting, you don't typically have assets in the LLC to borrow against anyway.
Sure, but this is the exception that proves the rule:
> generally courts have a strong presumption against piercing the corporate veil, and will only do so if there has been serious misconduct. Courts understand the benefits of limited liability... As such, courts typically require corporations to engage in fairly egregious actions in order to justify piercing the corporate veil
LLCs still protect personal assets in the general case.
"forming an LLC will not protect you against personal liability for your own negligence, malpractice, or other personal wrongdoing that you commit related to your business"
That's fair in the general case. But in those cases where execs are using them to commit otherwise illegal activities it should be no surprise that it occurs far more frequently than that.
It would be embezzlement (and not fraud) if the money had first gone to Netflix and then been redirected to Kail (without their knowledge).It's only fraud because the funds never went to Netflix in the first place
Embezzlement: Misappropriation of funds
Fraud (in the inducement): (Specifically wire/mail fraud when talking about contracts): Misrepresentation of contractual terms to induce entering into a contract. (Here the misrepresentation is the amount of money that the vendor was going to charge netflix since technically his kickback would've reduced the expenses to Netflix)
> A lot of people here are saying this is incredibly common which is frankly pretty surprising to me.
As an intern at one place I had to spend hours studying and then taking a test to ensure I complied with anti-bribery rules. I’m sure this didn’t just come up because one person did something bad.
We've already had a thread on the original conviction when this first came out. This business insider article at least added some new angles about how there are degrees of this happening throughout the industry.
I wholeheartedly disagreed until I saw your point (I think). The post still has your name beside it and you disagree with someone changing your words. While I don't find it a big deal with this, I kinda agree in spirit. Maybe the poster name should be changed too. However, folks would then be upset about not getting their sweet, sweet karma.
That you expect HN to work the way you want it to, instead of the way it already worked when you joined. You've been here 8 years, enough time to familiarize yourself with what's in the package. Besides that, a moderator going out of their way to mention that they have made an edit to your post, as well as specifically what edit they made is more than you could reasonably expect, and you already have that. Anything over and beyond that is pure entitlement.
Moderator time is more precious than your time, if you feel that you've been wronged then you could have just said what you thought was wrong rather than to demand a fix to your liking. This is further amplified by the fact that you have a major stake in the property whose link you posted here. Your website, your rules, HN -> HN's rules.
- "you expect"- wrong! - at no point did i express my "expectation". I was voicing my opinion on how I think the UX should work for this use case
- "instead of the way it already worked when you joined." Just because it worked this way does not mean it is right.
- "HN -> HN's rules." Yes, Captain Obvious. this does not mean their rules make sense and certainly does not mean a user voicing an opinion on how the rules should be changed is entitled.
This "captain obvious" stuff isn't helping you; it's just going to get everything you have to say flagged. You sound upset. I don't think I understand why --- having links replaced is totally standard HN practice, happens all the time, and works to the overall benefit of the community. But I don't have to understand why you're upset for you to feel that way. Rather, I'd just say, step away from HN for a bit until you can write with a clearer head.
i do get where they're coming from. right now we rely on dang and other mods (do they even exist?) doing the right thing in terms of making benign and beneficial changes to the linked story and being visible about making those changes. i've certainly seen communities where this trust ended up being abused due to scale or change in moderatorship.
it would be nicer from a transparency perspective to make these kinds of changes easily auditable by adding an "edited by" in the full page or a dedicated audit log. it would strike a balance between letting moderators improve the community while improving transparency at the system level.
HN's UX here is good. Stories are community property; they do not belong to the person who submits them. It's a basic rule of the site, and a very good one.
> Further, though Mr. Kail complained of problems with Sumologic (as one would see with any new startup), the product itself was “useful,” according to Ashi Sheth. (R.T. Vol. 8, p. 1670-71). As described below, at the time, Sumologic saved Netflix from paying for a far more expensive and inferior product called Splunk.
Wow! I was evaluating SumoLogic and Splunk in Netflix back then. Neither of them was suitable for our use cases. We ended up rolling out our own solutions. As far as I recall, the eng org didn't use Splunk or SumoLogic. Kail headed the IT department, though. Maybe they used SumoLogic.
Half a mill here, half a mill there, soon you're talking serious money...?
It is possible that your perceptions of how easy it is to extract millions-scale dollars from the business world is skewed. Google suggests 1.7M is the median lifetime earnings in the US, 2.7 is the average. Getting that in a handful of deals could tempt all sorts of people.
I think your parent's point is that this guy wasn't earning an average salary, but a Netflix executive one. In that case, 500k definitely doesn't seem worth risking so much for.
There’s a lot of ways to tie yourself up in various obligations and burn money. It’s easy to waste seven figures with houses, cars, boats, philanthropy, bottle service, gambling, divorce, etc…
Those stock options could be worth millions, one of the companies he received xx,xxx options for was acquired by mega corp I think was mentioned for example. This is on top of the money he brazenly funneled into his sham LLCs
If there are no repercussions for paying a bribe, then the optimal play is to indiscriminately offer bribes to get what you want while taking on none of the criminal liability.
> All of this apparently happened back in 2014 (the conviction is recent). If you're wondering what Netflix thought of all this, Kail apparently left Netflix for a job at Yahoo, from which he was fired after Netflix found out about his scheme and told Yahoo.
I was at Yahoo around the time this was revealed, and I don't think he was fired immediately after Netflix making the claims public. He was still CISO/CIO/some shit and used to participate in mailing lists, iirc.
I wonder how much he got in severance from yahoo, to round out the list of chutzpah-s
That's amazing. Kail was a star in Netflix. He got promoted to VP only a few months after he joined Netflix as a director. I don't get what the point is of committing such crimes.
How do you prove your value to get promoted like this after a measly few months on the job? Play golf with the CEO? I’m seriously wage slaving to make senior leadership at my org Rich, just for the promise of not being fired and not being promoted.
And an indirect victim is all of the competitors to the companies that were complicit in this scheme; presumably their services were displaced by those who paid-to-play.
It’s incredible to me that the one being bribed gets a conviction but the corporation doing the bribing gets absolutely no punishment, other than people reading on here knowing Sumo and Netskope have questionable business practices and we’re willing to wire a percentage of netflix’s fees to a shell Corp.
Or maybe he was just that good about hiding it, IE only soliciting via the business entity which then took a “commission”?
It is entirely possible the 'briber' did not know. Companies, particularly startups, tend to assume that the other party will 'do the right thing' and quite literally may not know any better. Ignorance isn't a defense, but assuming that the other party will properly disclose the conflict of interest is not an unfair assumption; that Kail didn't is, frankly, the main problem here, at least with regard to shares.
With regard to kickbacks, I have no idea how it was 'sold' to the startup; for all I know it was sold as a separate entity that Netflix buys from which they have premade contracts for, etc. I wasn't there, but I wouldn't assume Sumo or Netskope are running around offering people bribes. My guess is it went the other way.
They arranged to pay him a percentage of their billings. It strains credulity to think they might have believed it was innocent, or sanctioned by Netflix. We should all be looking at these companies differently now.
My understanding from reading it (perhaps incorrect) was that they arranged to use a third-party reseller that was actually owned by him; the startups may not have known that fact. Basically, that the percentage of revenue was going directly to Kail may have been known only to Kail; that's how I read it.
Is there any gray here? Example: you continue a contract with NewRelic and they buy you a fancy dinner at a michelin restaurant. You go with Splunk and they buy you a vacation in Hawaii to talk things 'over'. Seems like if you aren't taking cash - things can get gray real fast.
Every company I've worked for (all US based) has had corporate policies on just this subject, because they are aware that this is a major danger for them, either giving or receiving. When I worked for a government contractor we weren't even allowed to give rides to government employees in our rental cars when we were all together on a business trip, to make sure that even a line that trivial was not crossed.
Generally, the company will have a limit (somewhere in the $25-$50 range) on gifts you could give or receive without prior authorization. So maybe I can take you to a bar or coffee shop and get you a drink or two while we talk. But not a dinner at a high end restaurant, or a sporting event or a vacation in Hawaii, because the risk of being corrupted (on the receiving end) or reputational risk from being seen as corrupt, was too great.
This is particularly potent issue for American companies because of the Foreign Corrupt Practices Act. The FCPA means that US companies (and their subsidiaries, contractors, etc.) have to draw these sorts of lines over the entire world, or be subject to heavy penalties, even in countries where it might be more common and legal.
I work for a finance company in the UK and the training we get is exactly the same as you described (Even the price of gifts we're supposed to report is in the same range).
It depends on you and your company's ethical take. Personally, if a vendor is providing anything of value to me, I might as well be taking cash from them. This includes sporting events or concerts, meals, golf, xmas gifts, whatever. If you work for a company that the vendor wants badly for the money or the credential, vendors are going to throw all of these things your way. I keep it simple: if we need to do business, I have a perfectly good conference room and we can do it there.
One area that's more fuzzy is free passes to user events, i.e., a DreamForce or Oracle World. We clear these per our process and are fine to accept them because we were going to spend money on sending someone anyway. We saved the company money. Also: it was never indirect between individuals, it was company to company.
You mean the fraud that's been uncovered and successfully prosecuted? Unfortunately the article and press release don't disclose how this came to light, unless you know something more?
Netflix identified the issue and filed a civil suit against him alleging fraud before criminal charges were brought by the DOJ. It’s very likely Netflix tipped them off.
Very little in SOX scope is going to detect transactions outside of the company such as these. SOX is primarily about having effective mechanisms to assure that the financial information you report is accurate and complete, and then those mechanisms are inspected internally and audited externally. SOX is about what happens inside a company and with a companies resources -- you might have different means of preventing an employee from exfiltrating the company's money, and those are SOX-scoped.
Being able to detect whether a given employee has taken a bribe from a vendor might trip over SOX-relevant things incidentally but not directly. For example, you might need to certify that every employee has taken anti-bribery training every year, and that's your preventative mechanism so at least employees know what is permissible and what the consequences are.
The prosecution serves as a warning to those thinking they can do the same thing. Had these compliance laws not existed, there would be no incentive to _not_ commit fraud.
Unless you think nobody is going to look at this and go “these are consequences that could apply to me”?
SOX compliance builds a paper trail so crimes like this are recorded and uncovered.
https://www.justice.gov/usao-ndca/pr/former-netflix-executiv...
Some fun details:
Kail did his criming through a shell LLC he set up called "Unix Mercenary".
He took between 10-15% of the total billings for each of the companies he hooked up with this scheme. None of those companies were charged (more's the pity).
They got him on mail fraud, wire fraud, honest services fraud, and money laundering. The victim of the fraud was, of course, Netflix itself.
Additional fun facts from PACER:
He's seeking to exclude his shares in Sumo Logic and Netskope from forfeiture, arguing that they were largely the result of his own hard work, which takes some serious chutzpah.
All of this apparently happened back in 2014 (the conviction is recent). If you're wondering what Netflix thought of all this, Kail apparently left Netflix for a job at Yahoo, from which he was fired after Netflix found out about his scheme and told Yahoo.
Kail's sentencing memorandum is a fun read (again: chutzpah). For instance, this gem:
Further, though Mr. Kail complained of problems with Sumologic (as one would see with any new startup), the product itself was “useful,” according to Ashi Sheth. (R.T. Vol. 8, p. 1670-71). As described below, at the time, Sumologic saved Netflix from paying for a far more expensive and inferior product called Splunk.