Alibaba Shake-Up Boosts China Anti-Fraud Image
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Alibaba.com, one of China’s most successful Internet start-ups, shook up its top management yesterday
after an internal investigation revealed on-going fraud at the company.
The fast-growing Chinese e-commerce site, partly owned by Yahoo, said its long-time CEO, David Wei, and COO, Elvis Lee, had resigned.
In a statement released late Monday, Alibaba said they had not been involved in the fraud,
but had resigned after accepting responsibility for failing to stop it.
Alibaba.com, one of China’s most successful Internet start-ups, shook up its top management yesterday
after an internal investigation revealed on-going fraud at the company.
The fast-growing Chinese e-commerce site, partly owned by Yahoo, said its long-time CEO, David Wei, and COO, Elvis Lee, had resigned.
In a statement released late Monday, Alibaba said they had not been involved in the fraud,
but had resigned after accepting responsibility for failing to stop it.
One of China’s biggest success stories, it is part of China’s much bigger Alibaba Group.
Alibaba.com, the group’s flagship property, has 57 million registered users worldwide,
including 14 million on its English-language Web site.
The announcement stunned the technology community in China because
Wei was one of the country’s most prominent chief executives and Alibaba is one of its highest flyers.
In addition to the resignations of Mr. Wei and Mr. Lee, the head of human resources for the Alibaba Group, Deng Kangming, was demoted.
Jonathan Lu, the 41-year-old head of Alibaba.com’s sister company, Taobao,
was appointed by the Alibaba board to become chief executive of Alibaba.com.
He will continue to lead Taobao.
Alibaba.com — which essentially matches buyers and sellers around the world — was founded in the 1990s
by a group led by Jack Ma, a former English teacher who is one of China’s best- known Internet entrepreneurs.
The company said the fraud had been small and would not affect its financial performance.
According to its statement, 100 sales officers at Alibaba had helped perpetrate the fraud
by allowing phony companies in China to register and sell products on Alibaba’s international Web site as “Gold Suppliers,”
which suggested that they were among the more trustworthy.
The sales team members often helped the companies avoid detection by internal investigators, the company said.
According to the company’s investigation, phony companies listed on Alibaba.com often lured overseas customers, including some from the United States,
into paying for consumer electronics, like laptops and televisions.
Most of the transactions were for less than $1,200, Alibaba said,
but after the payments arrived in China, no goods were delivered.
This is not the first time the Alibaba Group has had to deal with accusations of fraud.
There have been persistent reports over the years of Alibaba selling counterfeit or fake goods or allowing sellers to defraud buyers.
The company has tried to create systems to ensure and authenticate the sellers, analysts say,
a challenge when Alibaba.com and Taobao, the group’s online shopping malls,
engage in billions of dollars worth of transactions every month.
Through the first three quarters of last year, the Web site had revenue of close to $600 million —
all from registered users seeking to sell goods online.
Mr. Ma — who is chairman of the Alibaba Group — said about 2,300 companies that registered as Gold Suppliers in 2009 and 2010 had committed fraud on the site.
“Our company has determined that the vast majority of these storefronts were set up to intentionally defraud global buyers,” Ma wrote.
“The methods of the perpetrators suggest that they have engineered an organized and systemic attack on the integrity of the Alibaba.com platform for illegal gains.”
A spokesman for Alibaba, John Spelich, said that the company was working to compensate victims
and that technology had been created to help better detect fraud on the site.
Many of the workers were dismissed, and the company said the inquiry was continuing.
In his statement, Mr. Ma said registered companies engaged in fraud were only about 1 percent of the Gold Suppliers on Alibaba.com
and the company would do everything possible to protect its customers, according to the New York Times.
“We must send a strong message that it is unacceptable to compromise our culture and values,” he wrote.
