Netflix is taking legal action against a former executive, who is now Yahoo's chief information officer, claiming he signed off on deals that illegally benefited his tech consultancy.
Michael Kail was once responsible for negotiating and finalizing contracts on Netflix' behalf. Specifically, the contracts focused on IT products and services.
He is accused of using Unix Mercenary LLC, his consulting firm, to connect clients with Netflix and then signing off on deals and netting some nice fees.
Netflix alleges Kail took a 12 percent to 15 percent commission for each company he connected to the streaming media company. Netflix states in the lawsuit that it believes Kail may have been receiving other kickbacks in the forms of stock in Vistara and NetEnrich, among other perks.
Netflix's lawsuit charges Kail with breach of fiduciary duty and duty of loyalty; fraudulent concealment; fraud; and constructive fraud. The lawsuit charges all defendants are being charged with conversion, unjust enrichment, unlawful conduct and unfair competition under California Business and Professions Code Section 17200.
"In light of such findings, Netflix brings this lawsuit to obtain compensation and restitution for damages and harm inflicted on Netflix as a result of such actions," stated the lawsuit (PDF via Business Insider).
Netflix paid a combined total of $3.7 million to Vistara and NetEnrich, two companies it was connected with via Kail's Unix Mercenary, the streaming media company says in its lawsuit. Kail's cut of the deals would have netted him somewhere around $500,000.
The streaming media company says it is basing its allegations on invoices and emails related to Kail and Netflix' dealings with Vistara and NetEnrich.
Netflix points to an October 2013 email exchange between Kail and a NetEnrich employee, in which the two discussed invoicing issues. The NetEnrich employee directed Kail to speak with another individual, according to Netflix's suit.
"Does [the NetEnrich employee]" know the context of my/our arrangement," Netflix quotes Kail as stating in an email to the NetEnrich employee.
In a related email, Kail states "[I] approved the NetEnrich invoices last week, so would be good to understand who to work with on getting my portion paid," according to the lawsuit.
After he received a check from NetEnrich on March 3, 2014, Netflix says Kail responded with an email stating the following:
"Received, but it was sent to Netflix, not my home address. Please always use the latter," Kail is quoted as saying in the email.
Yahoo CEO Marissa Mayer welcomed Kail to her company on Aug. 6, 2014. She said Kail would bring the perfect mix of experience and vision to push forward the company's IT and infrastructure.
"I'm looking forward to leading Yahoo's world-class infrastructure teams, which will continue to provide the web scale architecture that enables the many outstanding products of the company," stated Kail back in August.
