Former Walmart exec claims retail giant issued misleading e-commerce results in battle against Amazon

Key Points
  • Tri Huynh, a former executive at Walmart, says he was terminated by the company under false pretenses.
  • Huynh alleges Walmart has been mislabeling products so that third-party vendors were paid lower commissions, among other "violations of the law."
  • He says the company "sacrificed and betrayed its Founder's key principles of integrity and honesty" to compete with Amazon.
Walmart drops on whistleblower lawsuit
Walmart drops on whistleblower lawsuit

Walmart shares fell more than 1 percent Thursday after a former executive filed a federal court lawsuit claiming the retailer issued misleading e-commerce results.

Tri Huynh, a former director of business development at Walmart, who had also worked at Amazon, says in the suit filed in San Francisco that he was terminated by the company under false pretenses in 2017.

Huynh said he tried to raise concerns about Walmart's "overly aggressive push to show meteoric growth in its e-commerce business by any means possible — even, illegitimate ones."

He accuses Walmart of acting in ways that were "violations of the law" in a race to keep up with Amazon, prompting him to speak out.

Bloomberg first reported on the news.

Walmart in a statement to CNBC said that it intends to "vigorously defend" itself against these claims.

"This litigation is based on allegations by a disgruntled former associate, who was let go as part of an overall restructuring," Walmart 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."

Huynh claims the retailer mislabeled items on its website so that third-party vendors were paid lower commissions, sent customers the wrong orders, and forced merchants to deal with greater returns.

Walmart also overlooked basic internal controls, according to his suit, which was reviewed by CNBC.

Walmart's e-commerce growth has skyrocketed ever since the company acquired a little more than a year ago.

In the first quarter of fiscal 2018, the company's online sales jumped more than 60 percent.

However, in the most recent quarter, e-commerce sales were only up about 23 percent, igniting fears that investments had cooled.

Huynh claims he saw "more and more troubling information" at Walmart following the Jet acquisition.

"A high percentage of the product sale lists between and overlapped – that is, they contained redundant SKUs," the lawsuit says.

"Yet Wal-Mart was reporting the redundant SKU numbers as if they were separate, non-redundant, thereby misrepresenting and artificially and falsely inflating SKU growth numbers."

— CNBC's Courtney Reagan contributed to this report.

WATCH: Walmart responds to whistleblower lawsuit

Walmart responds to whistleblower lawsuit
Walmart responds to whistleblower lawsuit