The chief executive of e-commerce group Alibaba.com – one of China's biggest online successes – has resigned after an internal investigation showed sales staff "intentionally or negligently" allowed more than 2,300 fraudsters to set up verified stores. David Wei and chief operating officer Elvis Lee departed amid what the firm described as "systemic breakdown in our company's culture of integrity". Its statement to the Hong Kong Stock Exchange stressed that Wei and Lee were not implicated in wrongdoing. But it revealed it took senior management at the online marketplace at least nine months to take action after a noticeable increase in fraud claims against verified vendors by foreign buyers from 2009. It added: "Although management of our company began to terminate the China Gold Supplier customers [verified vendors] involved and to take other steps to address the problem beginning in the third quarter of 2010 … our board considered that the systemic nature of the problem required a recommitment to our company's core values".
It said more than 2,300 Gold Suppliers who signed up in 2009 and 2010 had engaged in fraud. All their storefronts have now been closed. The platform had about 140,000 Gold Suppliers as of December 2010. The statement said: "The methods of the perpetrators suggest that they have engineered an organised and systemic attack on the integrity of the Alibaba.com platform for illegal gains. In general, the sites offered high-demand consumer electronics at very attractive prices, a low minimum order quantity and less reliable payment transfer methods. The average value per claim by buyers against fraudulent suppliers was less than $1,200 (£740).
"About 100 sales people, out of a field sales force of about 5,000, as well as a number of supervisors and sales managers, are directly responsible in either intentionally or negligently allowing the fraudsters to evade our company's authentication and verification measures and systematically establish fraudulent storefronts on the international marketplace. The investigation concluded that the pursuit of short-term financial gain at all cost had tainted parts of our sales organisation, risking serious damage to our company's core values."
Linda Kozlowski, spokeswoman for Alibaba.com, said the company had reimbursed a total of $1.7m to buyers Jonathan Lu, chief executive of the unlisted sister company TaoBao, will take on Wei's position in addition to his current duties."One of our most important values is integrity. That means integrity of our employees and integrity of our online marketplaces as trusted and safe places for our small business customers," said Jack Ma, founder and non-executive chairman of Alibaba.
"We must send a strong message that it is unacceptable to compromise our culture and values. It saddens me to see talented people leave the company, but David and Elvis are doing the honourable thing to accept full responsibility for this, and I want to thank them for their tireless service to the company."
Tania Brannigan Beijing