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Two top executives resign from China's largest e-commerce site

Alibaba.com's chief executive and chief operating officer step down after an internal probe found that salespeople had helped crooks set up more than 2,000 fraudulent virtual storefronts.

February 22, 2011|By David Pierson, Los Angeles Times

Reporting from Beijing — Alibaba.com, China's largest e-commerce website, announced the resignation of two of its most senior leaders Monday after an internal investigation found more than 2,000 fraudulent virtual storefronts had been set up with the help of company salespeople.

In a statement, Alibaba.com said Chief Executive David Wei and Chief Operating Officer Elvis Lee were not involved in the scams but wanted to shoulder responsibility for the "systemic breakdown" in Alibaba.com's "culture of integrity."

Wei is being replaced by Jonathan Lu, chief executive of sister company Taobao.com, a hugely popular shopping website. Alibaba.com is the flagship site of Alibaba Group, a multibillion-dollar Internet empire headed by one of China's most charismatic business figures, Jack Ma.

In addition to Taobao, the company owns Yahoo's China operations and Alipay.com, an online payment service. Founded in 1999, Alibaba.com has become one of the world's largest business-to-business platforms in the world, linking sellers of Chinese manufactured goods to millions of wholesalers overseas. Yahoo owns about 40% of the company.

Alibaba.com said it began noticing a surge in fraud claims in late 2009 and launched a probe. It found that about 100 of the company's 5,000 salespeople helped swindlers evade steps to authenticate their businesses so they could pretend to sell electronic goods at attractive terms and prices.

Alibaba.com said it had shut down those storefronts but that the investigation was continuing.

Alibaba.com shares fell 3.5% in trading in Hong Kong on Monday before the announcement.

david.pierson@latimes.com

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