Fraud Forces Out Alibaba Execs, Yahoo Still Confident in its Board
Alibaba’s CEO and COO took immediate resignations today. The fire that forced Chief Executive David Wei and Chief Operating Officer Elvis Lee out of the company– fraudulent activities that they were not even involved as initial reports cited. While the internal investigation is in progress, the two executives opted to step down to take full ownership in what could be the biggest scandal that the organization has had to face. Amidst this misfortune, Yahoo, which owns around a 40% stake of Alibaba, is still not shaken by the exit of senior leaders, and it is not even in a rush to replace board members.
Around a hundred active sales representatives are suspected in abetting the fraud intentionally. Alibaba.com has an estimated 14,000 employees, 5,000 are in sales- the cove of the alleged hoax. The tip-off came from management when they discovered more 2,326 suppliers had defrauded online customers.
A portion of the official statement written by Chairman and CEO, Lu of the Alibaba Group says: “Our company has determined that the vast majority of these storefronts were set up to intentionally defraud global buyers. 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.”
The news came at such an odd time when everyone is talking about growth, expansion, acquisition and forward-moving plans. It posted a historical 55% net profit augmentation in Q3 of 2010– a feat that almost equipped them buy Yahoo. Just last week, Alibaba.com purchased a quarter of stake in Sinosoft, a Chinese Software Maker company. It was also named as one of the retailers that is expanding logistics and distribution to penetrate new businesses, along with Dangdang.com and Amazon China. In fact, it made a pact that it will invest a whopping $ 4.5 billion to transform the country’s logistics business within the next decade.
Sadly, but expected, Alibaba.com shares plummeted 3.5% in trading in Hong Kong on Monday prior to the announcement. Alibaba is one of the fastest growing Chinese electronic e-Commerce websites.
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