Netflix sues former executive for kickbacks

Netflix has sued a former executive -- now Yahoo's chief information officer -- saying he abused his power by taking kickbacks.

Mike Kail was a top IT guy at Netflix (NFLX) for three years, where his job was to buy computer gear or services from outside companies. In a lawsuit filed Monday, Netflix said it discovered that Kail was secretly making himself a middleman and charging "referral fees" to suppliers.

According to the lawsuit, Netflix would order tech services without realizing that suppliers were actually paying an extra fee to a company Kail kept on the side: Unix Mercenary. Then Kail himself would sign off on the invoices.

Kail's alleged "consulting fees" were worth anywhere from 12% to 15% of every invoice.

In the lawsuit, Netflix points to several invoices it paid to outside software companies Vistara and NetEnrich. For instance, when Vistara charged Netflix $105,000 for a month of work in December, it allegedly paid Kail's side firm $15,750. Both firms are led by the same executive: Raju Chekuri.

mike kail

Netflix said it paid both firms $3.7 million, which would put Kail's supposed kickbacks at $490,000.

The lawsuit also mentions secret deals with other outside companies that allegedly gave Kail stock and gift cards.

Netflix declined to comment on the lawsuit.

But the lawsuit itself says the entire investigation began when Kail left Netflix to join Yahoo (YHOO) as its CIO in August. Some inside Netflix began to question its contracts with outside firms. When Netflix tried to review the contracts signed by Kail in its DigiSign electronic records account, Netflix says it found that Kail had locked Netflix out of his account and made it personal.

The lawsuit said Netflix discovered the rest by going through Kail's corporate emails.

Yahoo declined to comment on whether this news would affect Kail's prominent position at the company.

NetEnrich and Vistara said it would not speak about pending litigation.

Kail did not respond to requests for comment on Wednesday.

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Kail has worked his way up the corporate ladder doing IT at several technology companies over the last 20 years. He sits on the boards of several several startups, including virtual reality headset maker Avegant and cloud provider ElasticBox.

He lists them all on his public LinkedIn page, but one is missing: his consulting firm, Unix Mercenary.

Few records of that firm exist, but until at least 2011, the website directed visitors to an email address for Kail. That has since been taken down, but an archived version remains, thanks to the Internet Archive.

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