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Business litigation alleges former Netflix exec took secret fees

| Nov 27, 2014 | Business Contracts & Disputes |

Business litigation in North Carolina often involves disputes between a company and its former CEO or high executives. Self-dealing by top executives is sometimes discovered by the company, which may lead to business litigation, depending on the apparent severity of the former executive’s actions. In one case, Netflix sued a former top IT executive for allegedly setting up a scheme that gave him unauthorized commissions and “referral fees.”

In its complaint, Netflix claims that the defendant was charging suppliers secretive fees and funneling them through a company in his name so as to pocket the funds. Netflix alleges that the activity was unauthorized and unknown to it. The lawsuit refers to the allegedly secretive commissions as “kickbacks,” and claims that the defendant got 12 to 15 percent of each transaction.

In other instances, companies supplying services or goods to Netflix allegedly paid the defendant stock and gift cards. Netflix says that it has traced the payments back to a company with the telling name of Unix Mercenary, which is allegedly owned by the defendant. The defendant has been the CIO of Yahoo since August. That move started the investigation by Netflix when suspicions were raised about the defendant’s dealing with outside companies.

When trying to examine the electronic records of the defendant’s transactions, it was discovered that the defendant had locked Netflix out from access. It was reportedly easy enough for Netflix, however, to connect the dots and tie the defendant in with the outside payments. In North Carolina and other jurisdictions, employees and high-ranking executives are generally prohibited from competing with the company or double-dealing on the side. Such secretive activities are usually in direct conflict with the contract between the parties or with other provisions, such as those appearing in the company’s manuals, and can result in likely business litigation.

Source: ktuu.com, “Netflix sues former executive for kickbacks“, Jose Pagliery, Nov. 26, 2014

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