Yahoo sued over its fund for Chinese dissidents
A group of Chinese political activists filed a lawsuit in federal court against Yahoo on Tuesday, saying the Sunnyvale company failed to properly oversee a $17 million fund it created a decade ago to help Chinese writers, democracy advocates and human rights lawyers persecuted for standing up to the country’s government.
The lawsuit, filed in U.S. District Court in Washington, accuses Yahoo senior executives of turning a blind eye as the fund’s manager, Harry Wu, illegally spent millions of dollars on high-end real estate, inflated staff salaries and a museum documenting the history of forced labor camps in China.
According to the lawsuit, Wu, a veteran Chinese dissident who died a year ago, spent less than 4 percent of the money on humanitarian aid.
The lawsuit demands that Yahoo replenish the trust, which has been significantly depleted.
Suzanne Philion, a spokeswoman for Yahoo, declined to comment, saying the company does not discuss litigation.
The legal action arrives at an awkward time for Yahoo, which is in the final stages of merger negotiations with Verizon Communications. The discussions have been buffeted by revelations that Yahoo delayed disclosures of huge hacking intrusions that compromised its computer network.
The lawsuit is also a reminder of one of the more ignominious episodes in Yahoo’s history. In 2007, the company belatedly acknowledged that it had provided Chinese authorities with the identities of subscribers in China whose emails had angered the government. The disclosures led to the jailing of two activists who were given 10year sentences.
In a public rebuke, a congressional panel criticized Yahoo’s CEO at the time, Jerry Yang, and accused him of lying about the company’s cooperation with Chinese security officials.
“While technologically and financially you are giants, morally you are pygmies,” Rep. Tom Lantos, D-San Mateo, said during a televised hearing in 2007.
To settle litigation against the company, Yang subsequently gave $3.2 million to relatives of each of the two jailed dissidents. And in an unusual move, the company provided more than $17 million for the creation of a humanitarian fund dedicated to helping Chinese activists and their families.
To administer the money, Yahoo turned to Wu, a politically connected rights advocate who had spent 19 years in Chinese labor camps before gaining asylum in the United States.
An irascible, strongwilled figure, Wu ended up spending much of that money on his organization, the Laogai Research Foundation, which had worked to expose China’s exploitative use of prison labor, especially those jailed for political crimes.
The expenditures included a $2.5 million town house in Washington’s Dupont Circle neighborhood, a $60,000 pay raise for Wu and what the lawsuit contends was a no-show job for his wife. Wu, the documents show, also spent $800,000 from the fund to defend himself against a number of lawsuits accusing him of sexual harassment or the misuse of federal grants.
According to the foundation’s filings, only $700,000 was distributed to Chinese dissidents or their families, many of whom were forced into poverty by the government in its effort to dissuade others from publicly criticizing the ruling Communist Party.
Of the original $17.3 million, less than $3 million is thought to remain.
Wu died last year at age 79 while on vacation in Honduras. In an interview with The New York Times shortly before his death, he defended his decision to pull back from the fund’s original mission, saying that the intended recipients were too demanding and could not be trusted.
Board members of his organization could not immediately be reached for comment. The museum he created in Dupont Circle was closed shortly after his death, and several people involved with the foundation said it has been crippled by internecine fighting and litigation.
The lawsuit was filed on behalf of eight dissidents in China who said that the Yahoo executives who sat on the board of the humanitarian fund did not do enough to rein in Wu’s inappropriate and profligate spending. The suit was filed by Cohen Milstein Sellers & Toll, a Washington firm that specializes in litigating allegations of human rights abuse.
“In standing idly by while it knew the money was being squandered, Yahoo abandoned its responsibilities to the fund’s beneficiaries, who have risked their lives speaking out for political reform in China,” said Times Wang, a lawyer with the firm.
In a phone interview, He Depu, one of the plaintiffs, said he hoped the lawsuit would compel Yahoo to replenish the fund and ensure that the money is properly administered. “We hope Yahoo will seize this opportunity and do the right thing,” said He, a democracy advocate who has written about the torture he endured during eight years of incarceration. “Actually, for them, either morally or financially, this is not a difficult thing to do.”
Cao Yaxue, a Chinese activist in the United States, said the money is desperately needed. A government crackdown on dissent has intensified in recent years, and even modest crowdfunding efforts in China that seek to help dissidents or their families have been quashed by the authorities.
The police often target the relatives of those jailed, forcing them out of their homes and pressuring employers to fire them. Their health and spirits broken after enduring torture, many of those released from prison struggle to survive.
“Even after they are free, they need support to get on with their lives,” Cao said. “If we had this kind of money and it was properly managed and disbursed, we could make a huge difference.”