Former Netflix VP Charged With Fraud, Money Laundering
SAN JOSE (CBS SF) -- A lawyer for a former Netflix executive indicted in federal court in San Jose on charges of taking an alleged $690,000 in kickbacks said Wednesday his client "vigorously disputes the allegations of the indictment."
Michael Kail "looks forward to vindication at trial where these allegations will be proven untrue," said defense attorney Joseph Ainley.
Kail, 49, of Los Gatos, was vice president in charge of internet technology at the Los Gatos-based video streaming company from 2011 to 2014. His position gave him the authority to enter into contracts with outside technology companies providing services to Netflix.
He was indicted by a federal grand jury in San Jose on April 26 on 29 counts of fraud and money laundering in connection with his alleged receipt of kickbacks in cash and stock options from nine technology companies that had contracts with Netflix.
The indictment was issued under seal and was unsealed after Kail was arraigned before a federal magistrate in San Jose Tuesday and pleaded not guilty to the charges.
U.S. Magistrate Nathanael Cousins allowed Kail to remain free on a $200,000 property bond while awaiting trial.
Kail's next court appearance is a status conference on July 10 before U.S. District Judge Beth Labson Freeman, the trial judge assigned to the case.
The indictment alleges Kail's total gain from the kickbacks was $690,000.
The charges include 19 counts of wire fraud for documents sent electronically to and from the outside companies in 2013 and 2014, three counts of mail fraud for documents sent by postal mail and Federal Express, and seven counts of money laundering of alleged profits.
The fraud counts each carry a maximum sentence of 20 years in prison and the money laundering counts 10 years, if Kail is convicted.
He could also be fined twice the amount of his gross gain from fraud.
The indictment additionally seeks forfeiture of any property Kail bought with the alleged proceeds, including his Los Gatos house.
The Los Gatos house served as the address of a one-person consulting company Kail set up called Unix Mercenary LLC. The indictment alleges Kail created the company for the purpose of having the kickbacks sent to its bank account. He allegedly then transferred the payments to his personal accounts.
Ainley said in his statement, "As a known technology leader in Silicon Valley, Mr. Kail frequently advises cutting edge startups on next generation technology.
"This indictment is unfounded and takes direct aim at the spirit of innovation and entrepreneurship that makes the valley such a vital part of the economy," Ainley said.
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.
Netflix's lawsuit included claims of fraud, unjust enrichment, fraudulent concealment and breach of fiduciary duty. It alleged that Kail fraudently took so-called "commissions" of 12 to 15 percent on the contracts he approved. The lawsuit was settled on a confidential basis in 2015.
After leaving Yahoo, Kail co-founded a Boston-based cyber security company called Cybric.
