Walmart Faces Whistleblower Suit Over Its E-Commerce Business

(AP Photo/Elise Amendola, File)

SAN FRANCISCO (CN) – A former high-level executive in Walmart’s e-commerce division sued the retail giant Thursday, claiming he was fired for pointing out consistent fraud that harmed investors and consumers.

Tri Huynh, who recruited businesses to Walmart’s e-commerce platform, sued the company in federal court claiming he was fired because of his repeated attempts bring attention to potential securities fraud and other corporate malfeasance.

“Walmart sacrificed and betrayed its founder’s key principles of integrity and honesty, pushing those core values aside in its rush to win the e-commerce war at all costs,” Huynh said in a 69-page complaint. “In doing this, it realized it must silence any whistleblower who spoke up against its ‘win at all costs’ approach to e-commerce growth.”

Huynh says Walmart cheated by artificially inflating the number of its third-party sellers in order to convince investors it was keeping pace with Amazon as consumer behavior shifted away from brick-and-mortar retail to online shopping.

“For the first time since it had become the undisputed champion of retail, Walmart faced a serious long-term threat: Amazon,” Huynh says in his complaint.

Huynh says he first became uncomfortable with aspects of Walmart’s approach to e-commerce when he discovered the platform was miscategorizing products from third-party sellers.

On its website, Walmart sells items available through its own supply chain, which it then ships directly to customers. But it also can connect consumers to third-party sellers and get a commission off any sale.

Huynh’s job was to recruit third-party sellers to the platform and manage that division of the business. When he discovered the miscategorization of massive amounts of product – which meant that commissions earned by Walmart often jumped from 8 percent to 15 percent – he pushed his bosses to have the situation addressed, according to the complaint.

But instead of responding quickly to the problems, Huynh says executives at Walmart effectively ignored him. He says they also began to subtly undermine him, though he’d only earned positive reviews regarding his job performance to that point.

But Huynh found further fault with Walmart’s approach to competing with Amazon in the cutthroat world of e-commerce.

Specifically, the retail giant artificially inflated the number of third-party sellers it hosted on its site, an important metric for investors to see how well e-commerce is performing.

“Mr. Huynh became increasingly concerned that the pressure to boost these indirect measures (e.g., total number of sellers, total SKU numbers, etc.) was being met, at least in part, by improperly sacrificing quality by lowering standards for product listings and then failing to properly monitor the “third-party” seller’s performance, and product listings, through a robust control system after the seller went live on Walmart’s Marketplace,” the complaint says.

Part of the reason for doing so, Huynh says, is because Walmart was desperate to show shareholders it was up to competing with Amazon after being slow to embrace the broad consumer shift toward online shopping.

But Huynh says he told his bosses that short-term gains in seller growth would ultimately harm Walmart’s e-commerce business through low-quality third-party sellers that would lead to customer dissatisfaction and poor customer retention.

Furthermore, the sacrifice to quality meant Walmart hosted a slew of offensive material, including mugs that made fun of people with Down syndrome and Halloween costumes that mocked transgender people, Huynh says in his complaint.

He says he brought his concerns to executives – including Marc Lore, Walmart’s e-commerce czar – in 2016 and was again summarily rebuffed, according to the complaint.

Finally, he compiled a 49-page PowerPoint presentation detailing his concerns with the website’s inadequacies and the potential for securities fraud along with faults in its internal financial controls. Shortly after delivering the document to two high-level e-commerce executives, Huynh says he was fired.

He claims Walmart violated whistleblower-protection laws by firing him. He also seeks damages on claims of disability discrimination, retaliation and wrongful termination.

Walmart denied Huynh’s claims in an email to Courthouse News on Thursday afternoon.

“This litigation is based on allegations by a disgruntled former associate, who was let go as part of an overall restructuring,” the company said. “We take allegations like this seriously and looked into them when they were brought to our attention. The investigation found nothing to suggest that the company acted improperly. We intend to vigorously defend the company against these claims.”

Huynh is represented by David deRubertis of Studio City, California.

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