Anti-fakes coalition suspends Alibaba

In this April 29, 2015 photo, staff members hand out brochures to visitors at the Alibaba booth at the Global Mobile Internet Conference in Beijing.
In this April 29, 2015 photo, staff members hand out brochures to visitors at the Alibaba booth at the Global Mobile Internet Conference in Beijing.

SHANGHAI -- An anti-counterfeiting group said Friday that it was suspending Alibaba's membership after complaints from some companies that view the Chinese e-commerce giant as the world's largest marketplace for fakes.

The International Anti-Counterfeiting Coalition told members that it had failed to inform the board of directors about conflicts of interest involving the group's president, Robert Barchiesi.

Earlier Friday, The Associated Press reported that Barchiesi had stock in Alibaba, had close ties to an Alibaba executive and had used family members to help run the coalition.

The coalition, in a letter to members sent after the report came out, said conflicts weren't disclosed to the board "because of a weakness in our corporate governance procedures." It said the failure was not because of "inaction on Bob's part," referring to Barchiesi.

The coalition said that it is hiring an independent firm to review its corporate government policies.

In its letter, the board said that as a result of members' concerns, it was suspending a new class of membership under which Alibaba had recently joined. The move would affect two other companies that signed up under the new rules.

At issue is the independence of a coalition that lobbies U.S. officials and testifies before Congress.

Alibaba's membership could help shape the global fight against counterfeits. Fakes damage companies' bottom lines, can harm consumers who unknowingly buy such products, and feed an underground money-laundering industry that supports criminal syndicates.

In recent weeks Gucci America, Michael Kors and Tiffany have quit the Washington, D.C.-based coalition, which has more than 250 members.

The AP found several ties between the group's president and Alibaba:

Barchiesi has owned Alibaba stock since its 2014 listing in New York. The anti-counterfeiting coalition said in a statement that the holdings represent "a small percentage of his investment portfolio."

Matthew Bassiur, who took over as vice president of global intellectual property enforcement at Alibaba in January, hired Barchiesi's son, Robert Barchiesi II, to work at Apple in 2011. Alibaba said that hire was made on merit. Apple declined to comment.

Bassiur is a founding board member of the ICE Foundation, which supports U.S. Immigration and Customs Enforcement employees. Since 2013, the foundation has been run by Barchiesi's other son, James Barchiesi. That same year, the foundation's board voted to award a contract for "fiscal and operational management" to a private company, also run by James Barchiesi. The foundation has received grants of $10,000 from the anti-counterfeiting coalition every year since 2012, tax filings show.

Jennifer Kuperman, head of international corporate affairs at Alibaba, said Bassiur's expertise would help the company "further instill trust in our marketplaces."

"We are highly confident in his abilities and proud to have him at Alibaba in this critical global role," she said.

Critics feared Alibaba would use coalition membership to gain legitimacy while papering over flaws in how it does business. Gucci and other brands owned by France's Kering Group allege in U.S. court filings that Alibaba knowingly profits from the sale of fakes. Alibaba has dismissed the case as "wasteful litigation."

Robert Barchiesi had also come under fire for his stewardship of the coalition and allegations of conflicts of interest on the move to include Alibaba.

"It's crossed the line ethically," said Deborah Greaves, a partner at Brutzkus Gubner law firm of California and Nevada and a coalition board member from 2011 to 2013. She said she didn't know until Friday that Robert Barchiesi, the chief of the anti-counterfeiting coalition she calls the IACC, had stock in Alibaba. "Really problematic," she said.

"Everything the IACC does that makes Alibaba look better potentially drives up the price of the stock," said Greaves, whose firm is a coalition member. "As a board member, I would never have bought stock in Alibaba."

Michael Kors' general counsel has called Alibaba "our most dangerous and damaging adversary."

The coalition's tax filings show that, in addition to the ties to Alibaba, Robert Barchiesi runs his organization like a family business. The coalition paid companies founded and run by one of Barchiesi's sons nearly $150,000 from 2012 to 2014 for rental costs, accounting, information-technology support and advertising. It employs the son's wife, Kathryn Barchiesi, as a program manager.

Though the coalition attests that its financial statements were reviewed by an independent accountant, tax filings show that the accounting firm was owned by Barchiesi's son.

Business on 05/14/2016

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