Executives resign over Alibaba frauds scandal
By Ding Yining |
February 22, 2011, Tuesday
|
Print Edition
Print Edition
Two executives with Chinese e-commerce giant Alibaba have resigned after an investigation revealed that more than 2,000 suppliers defrauded customers, sometimes with the alleged collusion of sales staff.
In a notice to the Hong Kong Stock Exchange yesterday, Alibaba said Chief Executive Officer Wei Zhe and Chief Operating Officer Lee Shi-Huei, who were not implicated by the investigation, were resigning to take responsibility for the company's "breakdown in integrity."
The company said it had noted an increase in fraud claims by buyers against certain suppliers on its business-to-business platforms between late 2009 and much of 2010. Citing internal investigations, the company identified 2,326 "Gold Supplier" customers involved in fraud from 2009 to 2010.
It said 100 sales representatives allegedly involved in defrauding customers had been fired.
Some supervisors and sales managers had either intentionally or negligently allowed the creation of fraudulent "storefronts" by letting the suppliers evade authentication and verification measures, the company said.
Most purchases involved popular consumer electronics at bargain prices with low required minimum orders.
The average amount of fraud involved in the cases was less than US$1,200, the company said. It didn't specify the total amount involved.
But spokeswoman Linda Kozlowski told the Associated Press that the company had paid out US$1.7 million since 2009 from a fund set up to redistribute to buyers any revenue from companies found to be engaged in fraud.
"The investigation concluded that the pursuit of short-term financial gain at all cost had tainted parts of our sales organization, risking serious damage to our company's core values," the company said.
"One of our most important values is integrity and we must send a strong message that it is unacceptable to compromise our culture and values," Alibaba Group Chairman Jack Ma said in the statement.
"Only the resignation of the two executives at Alibaba will make people believe in the company again and Ma has had the courage to insist on the company's core values," said Lu Bowang, president of China IntelliConsulting Corp, a Beijing-based Internet consultancy.
Based in the eastern Chinese city of Hangzhou, Alibaba claims more than 56 million registered users in more than 240 countries and regions.
The company, whose shares are traded in Hong Kong, said the case would not have an impact on its overall finances.
Lu Zhaoxi, chief executive officer of Taobao.com, Alibaba Group's retail shopping platform, has been appointed the new head of Alibaba.com.
In a notice to the Hong Kong Stock Exchange yesterday, Alibaba said Chief Executive Officer Wei Zhe and Chief Operating Officer Lee Shi-Huei, who were not implicated by the investigation, were resigning to take responsibility for the company's "breakdown in integrity."
The company said it had noted an increase in fraud claims by buyers against certain suppliers on its business-to-business platforms between late 2009 and much of 2010. Citing internal investigations, the company identified 2,326 "Gold Supplier" customers involved in fraud from 2009 to 2010.
It said 100 sales representatives allegedly involved in defrauding customers had been fired.
Some supervisors and sales managers had either intentionally or negligently allowed the creation of fraudulent "storefronts" by letting the suppliers evade authentication and verification measures, the company said.
Most purchases involved popular consumer electronics at bargain prices with low required minimum orders.
The average amount of fraud involved in the cases was less than US$1,200, the company said. It didn't specify the total amount involved.
But spokeswoman Linda Kozlowski told the Associated Press that the company had paid out US$1.7 million since 2009 from a fund set up to redistribute to buyers any revenue from companies found to be engaged in fraud.
"The investigation concluded that the pursuit of short-term financial gain at all cost had tainted parts of our sales organization, risking serious damage to our company's core values," the company said.
"One of our most important values is integrity and we must send a strong message that it is unacceptable to compromise our culture and values," Alibaba Group Chairman Jack Ma said in the statement.
"Only the resignation of the two executives at Alibaba will make people believe in the company again and Ma has had the courage to insist on the company's core values," said Lu Bowang, president of China IntelliConsulting Corp, a Beijing-based Internet consultancy.
Based in the eastern Chinese city of Hangzhou, Alibaba claims more than 56 million registered users in more than 240 countries and regions.
The company, whose shares are traded in Hong Kong, said the case would not have an impact on its overall finances.
Lu Zhaoxi, chief executive officer of Taobao.com, Alibaba Group's retail shopping platform, has been appointed the new head of Alibaba.com.
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