Wal-mart has hundreds of buyers. These buyers make most of their buying decisions based on cost and expected profit margin, and they exert tremendous pressure on sellers to hold down manufacturing costs. They don't care about quality as much as they do about cost.
When a seller comes to WM with a product that they're pitching, a WM buying committee judges demand and potential profit margin on the product. They might, and often do, send the seller back to the drawing boards to see if they can produce it at lower cost.
Usually this means that sellers either improve their manufacturing processes or have the goods manufactured in a cheaper facility someplace. Often it means that the seller finds ways to use cheaper, lower quality base goods in the manufacture of their product.
Once in awhile, sellers just say NO to WM's pricing pressure, and decide not to sell to WM because it would mean lowering the quality, and therefore the brand value, of their goods too much. This is why you sometimes see really good products appear on WM shelves, then after a short time disappear.
In this case, do I think WM bought and sold knockoff goods?
Yes. The evidence here is pretty convincing. I don't think that the designer would make this claim publicly without checking with Moda first. If Moda sold seconds or mis-prints to WM, then it's on their heads, but I really think that these are knockoffs made by some third party.
Do I think WM did it intentionally?
No. I don't think they're that stupid, but no one says a company with ethics standards can't, and occasionally do, employ unethical buyers.
Do I think the WM fabric buyer had a responsibility to perform due diligence to see if the fabric was indeed a cheap knockoff?
Yes, and I think that if this get escalated far enough, the buyer responsible will probably "pay" in some way for this mistake, or, if there was no due diligence policy, one will be created.