DOJ charges six people in scheme to bribe Amazon employees to 'gain upper hand' on marketplace

Key Points
  • The U.S. Department of Justice on Friday charged six individuals who allegedly bribed Amazon employees and contractors, giving some third-party sellers an unfair competitive advantage on the company's marketplace.
  • It's unclear whether Amazon has fired the employees alleged to be connected to the scheme.
  • The indictment describes a complex, coordinated effort by outside consultants to allegedly receive privileged information and benefits from Amazon employees, like reinstating suspended products and accounts.
A worker assembles a box for delivery at the Amazon fulfillment center in Baltimore, Maryland, U.S., April 30, 2019.
Clodagh Kilcoyne | Reuters

The U.S. Department of Justice on Friday accused six individuals of participating in a scheme to bribe Amazon employees and contractors to gain "an unfair advantage" on the company's online marketplace.

Federal prosecutors allege that, since at least 2017, the individuals used bribery and fraud to benefit third-party merchants selling goods on Amazon's marketplace. In some cases, individuals worked with Amazon employees to reinstate suspended products that had been flagged as unsafe, according to the indictment.

It describes a complex, coordinated effort by outside consultants to allegedly bribe Amazon employees for valuable data on third-party sellers' competitors, as well as privileged access to information about Amazon's internal algorithms. They also bribed Amazon employees for access to benefits that violate Amazon's own rules, like selling products in restricted categories.

The individuals allegedly served as consultants for third-party sellers who sold a range of goods including household items, consumer electronics and dietary supplements. Several of the individuals not only served as consultants, but also sold products as third-party sellers on Amazon.  

As a result of the alleged conspiracy, the individuals secured unfair competitive benefits for third-party seller accounts that are worth more than $100 million, according to the DOJ.

Amazon's sprawling marketplace, which hosts millions of third-party sellers, now accounts for approximately 60% of the company's e-commerce sales. While the marketplace has helped Amazon bring in record revenue, it also hosts counterfeitunsafe and even expired goods. The company has said it invests hundreds of millions of dollars per year to ensure products are safe and compliant.

Amazon told CNBC in a statement that "there is no place for fraud at Amazon." The company added that it has systems in place to detect suspicious behavior by sellers or employees, and teams that investigate and stop prohibited activity. 

It's unclear whether Amazon has fired the employees allegedly involved in the bribery scheme.

"We are especially disappointed by the actions of this limited group of now former employees, and appreciate the collaboration and support from law enforcement to bring them and the bad actors they were entwined with to justice," Amazon added.

The six individuals charged by the DOJ are Ephraim Rosenberg, 45, a resident of Brooklyn, New York; Joseph Nilsen, 31, and Kristen Leccese, 32, of New York, New York; Hadis Nuhanovic, 30, of Acworth, Georgia; Rohit Kadimessty, 27, of Northridge, California; and Nishad Kunju, 31, of Hyderabad, India.

They're each charged with conspiracy to use a communication facility to commit commercial bribery, conspiracy to access a protected computer without authorization, conspiracy to commit wire fraud and wire fraud.

Conspiracy to use a communication facility to commit commercial bribery and to gain access to a protected computer carry a maximum sentence of five years in prison, while conspiracy to commit wire fraud and wire fraud carry a maximum sentence of 20 years in prison.

Bribes to bring back suspended accounts, products

The individuals allegedly paid bribes to at least 10 different Amazon employees and contractors, including Kunju, who worked as a seller support associate in Hyderabad, where Amazon has a sprawling corporate campus. After allegedly accepting bribes while he was employed at Amazon, Kunju became an outside consultant for third-party sellers, during which he "recruited and paid bribes to his former colleagues," the DOJ said. 

In exchange for those bribes, "corrupted" employees and contractors allegedly helped to reinstate suspended third-party seller accounts and product listings on Amazon's marketplace, including dietary supplements suspended due to consumer safety complaints, household electronics that had been identified as flammable and consumer goods flagged for intellectual property violations. 

Amazon employees manually reinstated the suspended accounts and product listings, and approved "baseless and fraudulent" appeals submitted by merchants and, in some cases, drafted by the employees themselves, according to the indictment.

The employees also "facilitated attacks" against third-party sellers' competitors by suspending their accounts, and by sharing information about their revenues, customers suppliers and ad campaigns. They also provided information about Amazon's internal algorithms, enabling consultants to "flood competitors' product listings with fictitious negative product reviews," the DOJ said.

The individuals allegedly bribed Amazon employees for access to benefits, breaking Amazon's third-party seller rules. Employees increased third-party sellers' storage limits in Amazon warehouses, enabled them to offer products in restricted categories and provided sellers with "inside knowledge" about the most successful ad campaigns and profitable products, the DOJ alleges.

Amazon has previously faced issues with internal corruption among employees. In 2018, The Wall Street Journal reported that Amazon was investigating suspected data leaks and bribes by Amazon employees, who offered internal data to third-party merchants to help them compete on the marketplace.

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