Alibaba bosses step down

E-commerce giant Alibaba said yesterday its chief executive and head of operations had resigned after a probe found fraudulent suppliers had used the site to cheat buyers.
David Wei and Elvis Lee resigned as chief executive officer and chief operating officer respectively, accepting responsibility for "systemic breakdowns" that allowed the fraud to happen, the company said in a statement.
The investigation confirmed that Wei and Lee were not involved in any of the activities ... however, the board asked them to take responsibility for the breakdown, the statement to the Hong Kong Stock Exchange said.
"One of our most important values is integrity," founder and non-executive chairman Jack Ma said. "That means integrity of our employees and integrity of our online marketplaces as trusted and safe places for our small business customers."
Jonathan Lu, 41, will take over as chief executive of Alibaba.com Limited, which is listed in Hong Kong.
Lu has worked for the company's unlisted parent group since 2000 and will continue his role as chief executive of Taobao, the group's retail e-commerce site, the company said.
Alibaba shares closed down 3.47 percent in Hong Kong yesterday at HK$16.68 ($2.14) before the statement was released.
Alibaba.com, a global sourcing website based in the eastern city of Hangzhou, grew into one of China's largest Internet companies by matching mainland manufacturers and buyers around the world.
However, in late 2009 and throughout 2010, senior management noticed an increase in fraud claims from buyers against "China Gold Suppliers," who were certified as trusted suppliers by Alibaba.
An internal investigation presented to the board yesterday revealed about 100 salespeople, as well as several supervisors and managers, had helped thousands of fake "Gold Suppliers" evade verification procedures, Alibaba said.
"The investigation concluded that the pursuit of short-term financial gain at all cost had tainted parts of our sales organisation," the statement said.
Alibaba said it had shut down 2,326 "Gold Suppliers" found to have used the site to defraud buyers, adding they represented only a fraction of the overall total with the "gold" rating – 1.1 percent in 2009.
Although directors agreed Wei and other top executives took steps to contain the fraud, the board decided they failed to act decisively to prevent erosion of the company's ethical standards, it said in a news article on its website.