Walmart Inc. is being accused of crossing an ethical and a legal line in its push to knock Amazon off its e-commerce pedestal — although the retail giant contends the claims simply come from a disgruntled former employee.
Tri Huynh, until last year Walmart’s director of marketplace business development and before that a head of Amazon’s consumer electronics selling division, told a California federal court on Wednesday that he was fired in retaliation after voicing concerns over “design flaws” between late 2014 and 2017 that worked in Walmart’s favor and went largely unresolved, making him a classic whistleblower.
But Walmart is calling foul. A company spokesman said Huynh’s allegations are those of “a disgruntled former associate, who was let go as part of an overall restructuring.”
“We take allegations like this seriously and looked into them when they were brought to our attention,” the spokesman added. “The investigation found nothing to suggest that the company acted improperly. We intend to vigorously defend the company against these claims.”
One flaw Huynh claims to have noticed and reported to his superiors involved Walmart’s automatic charging of commissions for items sold by third-party sellers on its marketplace platform. He says that a fixable categorization error that charged fees as high as 15 percent, compared to the normal 6 to 8 percent, went unaddressed for months and effectively inflated Walmart’s revenues, because it often had to repay an overcharged seller.
“These failures had a direct impact on financial reporting because, by charging excessive commissions, Walmart was actually overstating its revenue to the extent that it would be later required to pay back the excess commissions,” Huynh wrote in his complaint. “Finally, by listing and stating to sellers that the commission charged be one amount, yet by knowingly continuing to charge a different amount, these acts could constitute mail and/or wire fraud.”
Another alleged flaw involved the processing of returns of third-party products. Huynh claims that a coding error in Walmart’s Pangea system failed to process some return and refund orders between September 2015 and at the earliest March 2016 worth about $7 million, creating an “inflation” in sales for the period.
A Walmart representative could not be reached for comment.
Huynh added that Walmart executives internally admitted the returns problem was a “colossal issue” and questioned whether there would be a need for updated financial disclosures. He said he pressed the company to address these issues, noting then that “its failure to do so could have serious long-term implications for its critically important e-commerce business.”
The company allegedly continued to report “misleadingly optimistic” e-commerce results, which combine first-party and third-party sales, through 2016 and into 2017, when redundant Jet.com sales were allegedly added to reported figures.
“In response, Mr. Huynh was told to stop raising these concerns and not to e-mail at all about them or document any similar concerns, and then he was retaliated against for continuing to press his concerns despite having been warned not to do so,” Huynh wrote.
Nevertheless, he continued to receive positive feedback for his work on the marketplace business and was even offered an incentive-based promotion, but he also continued to bring up his concerns and by 2016 began to be iced out by management, the complaint alleges. Huynh subsequently was given increasingly aggressive targets for growing Walmart’s base of third-party sellers — a met goal of 3,000 additions became a demand of 7,000 additions — and became concerned that the company was lowering its standards for approved sellers, which would compromise the quality of the marketplace.
He eventually “came to conclude that Walmart was intentionally pushing for massive growth of these indirect measures (e.g., sku growth, etc.) as a way to mislead the investing public, because Walmart’s e-commerce leadership knew that these indirect measures did not tell the true picture of the state of Walmart’s e-commerce growth and actually overstated that growth.”
When Walmart bought Jet.com in late 2016 and brought on its founder Marc Lore to head up its e-commerce business, Huynh said executives that had caused and ignored the systematic issues he’d complained of had “additional incentive…to hide or conceal their failures and get rid of anyone who might expose these failures to new management.”
By then, Huynh, who claims to have ADHD, says he was being retaliated against. He was called in to human resources over “manufactured or [exaggerated]” misconduct at two trade shows and was written-up and required to take a course on “emotional intelligence.”
But in January 2017, Huynh said he took his complaints directly to Lore and Michael Bender, chief operations officer, after getting nowhere with a call to Walmart’s Global Ethics Hotline. In an email to both executives, he outlined the issues he’d noticed and attached a 42-page Powerpoint presentation related to his findings and their alleged current and future effects.
Huynh claims he was informed he was being laid off six days later, with Walmart citing a “reduction in force.” He’s suing for unspecified damages, along with lost wages and benefits.
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