BOSTON – Online furniture retail giant Wayfair has sued three of its furniture suppliers, alleging the companies engaged in a complex scheme to cheat Wayfair out of extra payments.
On Nov. 23, Wayfair filed a complaint against Rosevera Corp., Mulhouse Furniture, Fully Wind Co., former Rosevera CEO and Fully Wind vice president Ping Hua “Eric” Hsu, and Mulhouse employee Tzu Ju “Jennifer” Huang.
“This is more than a simple breach-of-contract action,” the complaint states. “This case is also about a sophisticated fraudulent scheme defendants concocted and effectuated to defraud Wayfair.”
According to court documents, Wayfair alleges the defendants “intermittently fabricated fraudulent shipping labels by incorrectly entering all but the customer’s ZIP code. Then, defendants placed the label on an empty package so that Wayfair’s carrier still proceeded to deliver the empty package to the location (whether that location was real or fake).
“Wayfair did not suspect Defendants’ scheme because once the package was in transit, the tracking information appeared legitimate in the carrier’s system. Once the customer learned that their parcel was missing from their doorstep, the customer escalated the issue to Wayfair, thus triggering a ‘lost in transit’ claim. Wayfair then requested defendants to send a replacement unit to the customer, and defendants consequently received a second (and sometimes third) payment for a single unit.”
In another scheme, Wayfair alleges the defendants defrauded Wayfair by using Wayfair purchase orders to generate shipping labels for their sales through other retailers, such that Wayfair’s carrier accounts were charged the shipping costs associated with defendants’ sales through other retailers and marketplaces.
“Unbeknownst to Wayfair, defendants also fabricated documents, including fake photographs of broken furniture, to fraudulently dispute buyer’s remorse returns credits on their payment account.”
Wayfair says it has overpaid at least $1.5 million. It’s requesting that money back, plus compensatory damages.
Rosevera, Mulhouse and Fully Wind have not responded to Furniture Today’s requests for comment.