Dive Brief:

• A former Walmart e-commerce executive on Thursday filed a lawsuit in the U.S. District Court, Northern District of California alleging that he was fired after trying several times to warn the retail giant that some practices designed to beef up digital sales were improper and in some cases possibly illegal.

• In a statement to Retail Dive, Walmart said it followed up with claims made by Tri Huynh, a former director of business development, and that he was laid off along with many others. "This litigation is based on allegations by a disgruntled former associate, who was let go as part of an overall restructuring," according to Walmart’s statement. "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."

• Before joining Walmart’s e-commerce division in 2014, Huynh worked at several companies in data analytics and e-commerce, including at Amazon, where for three years he worked in Amazon’s Marketplace consumer electronics business, managing and leading "seller acquisition and scaling, selection expansion, catalog data quality and other similar duties," according to court documents.

Dive Insight:

Walmart spent years in the e-commerce doldrums, until the $3.3 billion acquisition of Amazon agitator Jet.com in 2016, which was followed by a string of smaller e-retail acquisitions. Since then, the retail giant has also pumped up its marketplace, which has added significantly to the online assortment. In his lawsuit, Huynh posits that Walmart’s belated response to Amazon’s dominance online led it to cut corners, writing, "By July 2015, Walmart’s world was rocked when Amazon’s market capitalization exceeded Walmart’s."

In the 70-page filing, Huynh also provides several concrete claims that the company violated its own internal controls and accounting principles. He alleges the company took actions that amounted to securities fraud, mail and/or wire fraud and ignored or slow-walked customer returns and remediation of marketplace glitches (including offensive items, like mugs with racist slogans, and mischaracterized third-party transactions).

In addition to overblowing digital sales, Huynh also said Walmart’s practices helped inflate the size of its online assortment, which has been dwarfed by Amazon's for years.

But since the hire of Jet founder Marc Lore as its U.S. e-commerce chief, the company has made more investments than ever in digital operations. By the first quarter of 2017, Walmart’s e-commerce sales ballooned 63% with an attendant 69% rise in digital gross merchandise volume, as same-store sales increased 1.4% and traffic to stores rose 1.5%. Its merchandise assortment, meanwhile, rose from 10 million to 50 million in about a year, Walmart said. That continued apace in the second quarter, as Walmart U.S. net e-commerce sales rose 60% and GMV grew 67%, thanks in part to an expanded assortment of more than 67 million SKUs. 

Huynh said he received glowing performance reviews as he exceeded goals at Walmart, but that changed after it was clear that he would continue to flag what he said were improprieties that were misleading to shareholders, marketplace sellers and customers. He is suing under the Sarbanes-Oxley Act, which protects corporate whistleblowers who speak up about fraud or other securities law violations from damages like reputational harm and thwarted professional prospects.