Netflix Accuses Yahoo CIO, its Former VP of IT Ops, of Fraud

Netflix has filed a civil lawsuit against Yahoo CIO Michael Kail and his company Unix Mercenary, accusing him of taking kickbacks from two IT contractors during the three years he worked as vice president of IT operations for the online video streaming and DVD rental company.

Relying on copies of emails between Kail and the contractors Netflix has obtained, the company is alleging Kail had collected between 12 percent and 15 percent kickbacks on the invoices Netflix paid to the contractors. The “commissions” were paid to Unix Mercenary.

Kail was appointed as Yahoo CIO in August of this year, the same month he left Netflix, where he worked since June 2011. When he joined Yahoo, he told the Wall Street Journal that his first priority would be to streamline the company’s data center infrastructure to better support its online video initiatives and multi-device services.

Alleged Kickbacks on $3.7M in Payments

The two IT services companies named in the lawsuit (first reported by Re/Code) are Vistara and NetEnrich. The companies are related, both founded by Raju Chekuri. Chekuri is chairman for both firms, and a spokesperson for both told Re/Code that NetEnrich was spun out of Vistara.

Kail’s emails with the contractors revealed that NetEnrich often invoiced Netflix on behalf of Vistara, according to Netflix. The suit estimates that the company has paid about $1.44 million to Vistara since 2012, and about $2.3 million to NetEnrich during the same period.

Netflix’s evidence includes texts of the emails as well as copies of invoices exchanged, including Unix Mercenary invoices to the service providers.

Part of Kail’s job was negotiating and executing IT products and services contracts for Netflix. He was also responsible for approving service provider invoices to Netflix.

Missing Corporate DocuSign Account

Netflix uses DocuSign as a third-party service to handle contract paperwork. When the company tried to locate documents related to Kail’s dealings with NetEnrich and Vistara, it could not find Kail’s corporate DocuSign account.

According to the documents filed in court, Netflix later learned that Kail had asked a senior DocuSign employee to transfer his corporate Netflix account to a personal one and to remove his corporate account records.