Inside the decades-long fight over Yahoo’s misdeeds in China

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Inside the decades-long fight over Yahoo’s misdeeds in China

By Eileen Guo

Originally published by MIT Technology Review on Dec. 12, 2023

The Yahoo Human Rights Fund was intended to support imprisoned Chinese dissidents. Instead, a lawsuit alleges that only a small fraction of the money went to help former prisoners.

When you think of Big Tech these days, Yahoo is probably not top of mind. But for a 62-year-old Chinese dissident named Xu Wanping, the company still looms large—and has for nearly two decades.   

In 2005, Xu was arrested for signing online petitions relating to anti-Japanese protests. He didn’t use his real name, but he did use his Yahoo email address.

At the time, Yahoo was among Silicon Valley’s largest and most influential technology companies. And Yahoo China, its Chinese subsidiary, was busy tapping into the country’s nascent but potentially enormous internet market. It didn’t take long, though, for the company to violate its new users’ trust—providing information on certain email accounts to Chinese law enforcement, which in turn allowed the government to identify and arrest a number of Yahoo users. 

Xu was one of them; he would serve nine years in prison, his third sentence relating to his activism, and emerge with chronic health issues from his time behind bars. 

Now, he and five other Chinese former political prisoners are suing Yahoo and a slate of co-defendants—not because of the company’s information-sharing (which was the focus of an earlier lawsuit filed by other plaintiffs), but rather because of what came after. 

These six men allege that Yahoo and its representatives breached their fiduciary duty when a fund, originally set up by the company to benefit cyber dissidents, was largely squandered by the individual Yahoo chose to oversee it. The suit argues that money meant to help people who had been imprisoned, in some cases for a decade or more, instead went to line the pockets of the fund’s executor—all with the tech company’s knowledge and approval. The plaintiffs, though, face myriad challenges complicated by corporate reshufflings, organizational turnover, and the creation of new legal entities in the hollow shell of what were once a tech industry behemoth and its respected nonprofit partner. Of all the ways Yahoo failed over the years—from the perspective of business, cultural relevance, simple technology—perhaps none has had a greater human toll than how it failed these Chinese users of its popular email service. 

At the heart of the suit is the Yahoo Human Rights Fund (YHRF). Launched in 2008, to settle a high-profile 2007 lawsuit on behalf of the first two known Chinese Yahoo email users to go to prison, YHRF served to quell a public relations disaster and potential regulatory nightmare. Exclusively funded by the tech company, the fund aimed “to provide humanitarian and legal aid to dissidents who have been imprisoned for expressing their views online,” as a press release put it, and to ensure that “our actions match our values,” as Yahoo CEO Jerry Yang said in the release.

To manage the fund, Yahoo partnered with Harry Wu—a noted Chinese dissident turned powerful anti-China activist—and his nonprofit, the Laogai Research Foundation. But Wu grossly mismanaged YHRF, spending less than $650,000—or 4%—of the fund’s total $17.3 million on support for online dissidents, according to the current lawsuit. One year, YHRF allegedly spent $0 on what was meant to be its primary purpose. (Some defendants contest these calculations.) 

The lawsuit alleges that Yahoo knew about this mismanagement and failed to prevent it. 

Indeed, emails, meeting minutes, and depositions produced during the lawsuit’s discovery reveal Yahoo executives’ private frustrations with how the fund’s money was being spent. In April 2013, for instance, Yahoo’s representative on the YHRF board emailed another board member to coordinate efforts to block Wu’s latest request for more money and more leeway about how to spend it. 

“I think what we really need is an intervention,” the board member wrote. 

Yahoo’s representative responded, “LOL. That, and a strong drink perhaps.”

The “most shocking thing” is that among people “inside the fund’s affairs,” says Times Wang, the plaintiffs’ lawyer, “there was very little disagreement that more should be done for the dissidents, that the fund’s spending was way imbalanced. But nobody had the backbone to do anything about it.”

“They were worried about generating bad publicity,” Wang adds. 

(Sona Moon, Yahoo’s chief communications officer, did not respond to specific questions about the public relations value of YHRF but wrote in an emailed statement that the lawsuit “does not allege any claims for human rights abuses by Yahoo. The case is wholly unrelated to Yahoo’s current business or ownership. We take seriously our duty to respect and uphold human rights everywhere we operate.”)

While the lawsuit is largely focused on what happened in the past, the plaintiffs are also concerned about the future of people like them; they’re asking the court to force Yahoo to set up a new humanitarian fund with the same general purpose as YHRF, but made explicit and ironclad: to provide financial support specifically for Chinese dissidents imprisoned for online speech. 

The need for such assistance couldn’t be more urgent; the country has had the “worst conditions for internet freedom” for nine years in a row, according to the nonprofit Freedom House. And the publicly known violations grossly underrepresent the true situation, according  to Yaqiu Wang, Freedom House’s research director for China, Hong Kong, and Taiwan, given the increasing opacity of the country’s court system and the high levels of self-censorship there. 

This all makes the story much bigger than what happened with Yahoo and its human rights fund. It’s about the choices that tech companies make when individual users’ interests conflict with those of the business, and the actions they take when confronted with the consequences—either to make a real difference or simply to appease the court of public opinion. 

In many ways, the situation Yahoo found itself in 20 years ago is the same one today’s biggest tech giants still deal with when they operate in authoritarian regimes. In July, for instance, a judge in California ruled that a long-running lawsuit against Cisco can move forward and determine the company’s responsibility in building China’s internet surveillance apparatus—work that allegedly led to the arrest, detention, and torture of the plaintiffs and their family members. 

At the very least, says William Nee, the research and advocacy coordinator at Chinese Human Rights Defenders, this case “helps remind companies that want to do business in China that their decisions can have real, tangible consequences on human lives.”

Image rehab

When Yahoo entered China in 1998, was the internet’s most popular web portal, visited by over 95 million users daily. But operating there meant Yahoo China had to make a choice: whether to cooperate with requests from the Chinese state security apparatus, or to protect the privacy—and, in turn, safety—of its users. 

In 2002, Yahoo, whose CEO was then Terry Semel, made its decision to share user information with Chinese law enforcement. This led to the arrest that September of the dissident Wang Xiaoning, who called in a Yahoo email group for the end of one-party rule. (Semel is not named in the lawsuit, and no public evidence ties him directly to these company actions.) 

Then, in 2005, another Yahoo user, a journalist named Shi Tao, was arrested for the “suspected illegal provision of state secrets to foreign entities,” an oft-used code phrase for political speech that the Chinese Communist Party disagrees with. Shi’s was the first known case to come to light, and the public outcry and subsequent business repercussions for Yahoo were harsh and swift. There were “a series of Congressional hearings targeting Yahoo’s senior leadership, lawsuits, a 5% drop in share price (on the day of the hearing), calls for boycotts … and negative publicity around the world,” David Hantman, the company’s vice president of global public policy, summarized in an internal email to the Yahoo board in 2012. 

Jerry Yang, CEO of Yahoo, left, waits for the start of a hearing with the House Committee on Foreign Affairs, after Shi Tao, a Chinese journalist, was imprisoned by the Chinese government based on information provided by Yahoo. Directly after this hearing, Yang had a private meeting with Harry Wu and others, which led to the creation of the Yahoo Human Rights Fund.

At a congressional hearing in 2007, Representative Tom Lantos, chairman of the House Foreign Affairs Committee, memorably scolded Yahoo’s founder, Jerry Yang (then serving as interim CEO), along with the company’s general counsel, Michael Callahan: “While financially and technologically you are giants, morally you are pygmies.” 

To resolve the mounting crisis and to settle a highly publicized lawsuit brought by Shi Tao’s mother and Wang Xiaoning’s wife, the company promised to conduct human rights impact assessments before entering international markets and to fund internet freedom fellowships at Georgetown and Stanford Universities, among other actions.

But Yahoo’s most celebrated response was creating the Yahoo Human Rights Fund to offer assistance to online dissidents, with “the highest priority given” to “[i]ndividuals who used Yahoo’s services to express themselves,” according to one 2008 press statement. 

Wu, the high-profile Chinese dissident, seemed like an obvious choice to lead YHRF.  He was well known in Washington, DC, which was part of his appeal: he had famously survived 19 years in China’s prison camps for “reform through hard labor,” known as laogai, before joining UC Berkeley as a visiting scholar in 1985. He returned to China several times, including a trip with 60 Minutes in 1991, when he posed as a businessman to expose Chinese factories’ use of prison labor. The next year, he cofounded the nonprofit Laogai Research Foundation to expose China’s system of forced labor and other human rights abuses. 

Wu later served as a guide on Capitol Hill for the families of the imprisoned Yahoo users. He also helped facilitate an emotional private meeting between the families and Yang directly after the 2007 congressional hearing, during which plans for YHRF began to take shape. 

“We saw Harry as an expert at human rights,” Yang testified in a 2021 deposition. “We wanted to partner with him because … [that] would be something that the Congresspeople saw as a good resolution.” 

YHRF quickly proved a PR coup. “Human-rights groups that once criticized Yahoo! for complying with Chinese authorities’ efforts to clamp down on political discourse are now praising its new, public stance on the issue,” the Dow Jones News Service wrote in 2008. The article was shared—with this sentence highlighted—in emails between Yahoo executives.

A mess from the start 

Yahoo seemed to hope that starting YHRF with Wu at its helm would finally end the chapter of its misadventures in China. 

But the partnership threatened to undermine that very mission—which was not lost on company leadership. The arrangement carried “some risks,” Hantman, the vice president of global public policy, admitted in a 2012 email, because “Wu resists transparency and governance in his organization.” But, Hantman added, “the partnership has garnered us good will.”

The fund’s operations were, in a word, opaque. Even the total figure endowed to the trust—$17.3 million—was kept secret from the public. (It was only revealed in an investigation by Foreign Policy in 2016.)

Even today, it remains impossible to see a full annual accounting of the fund or confirm exactly how much unspent money is left; though those details are included in the legal complaint, they have been redacted at the request of some defendants. 

But the lawsuit alleges that under Wu’s eight years of leadership, $14 million of the fund’s cash went to benefit Wu and his Laogai Research Foundation (LRF). (The organization is another defendant in the lawsuit; its lawyers did not respond to multiple requests for comment.) An additional $3.5 million was quietly set aside to protect Yahoo, which had put money from YHRF into a sub-trust to settle future lawsuits from other imprisoned dissidents. The existence of this sub-trust benefiting Yahoo was revealed as a result of the lawsuit and has never been previously reported. 

The lawsuit claims that only a fraction of these sums—less than $650,000—went to dissidents. The plaintiffs allege that they were eligible for (and some even received) YHRF funding, but that they and many others received less than they should have. Wang, the plaintiffs’ lawyer, estimates that 800 to 1,200 individuals imprisoned in China for online speech may have qualified for YHRF funding (a calculation he made using the Congressional Executive Committee on China’s Political Prisoner Database). YHRF has helped a far smaller number, many of whom did not fall into the category of internet dissidents—though exact figures have not been made available publicly, or even internally, at least since 2011, according to one board member.

The fund “had the financial means to help more people, if only they chose to,” Xu says. “That’s why I decided to participate in the lawsuit.”

In August 1995, after one of his many return trips to China to expose forced labor conditions, Harry Wu was sentenced by a Chinese court to 15 years in prison on the charge of spying.
Despite the court’s sentence, diplomatic negotiations secured Wu’s release. He was then expelled from China and returned to the US, his wife by his side.
Despite the court’s sentence, diplomatic negotiations secured Wu’s release. He was then expelled from China and returned to the US, his wife by his side.
As Chinese President Hu Jintao started his state visit with President Barack Obama, in January 2011, Wu spoke at a congressional event hosted by Representative Chris Smith to draw attention to human rights violations in China.

Part of the problem was foundational. YHRF had the publicly touted goal of helping Chinese internet dissidents, but there were two additional, less publicized objectives that often came into conflict with its humanitarian purpose. As laid out in the fund’s official mission and operational guidelines, YHRF was meant to “resolve claims” against Yahoo from people “threatened with prosecution or imprisonment,” a provision that was never discussed publicly and later enabled the creation of the secret sub-trust. The second was to support Wu’s LRF, which held and administered the full $17.3 million in trust; LRF could use up to $1 million annually for its own operating expenses. 

But the main issue was that there were few requirements about how the fund should spend its millions. Even the goal of prioritizing imprisoned Chinese individuals was more of a “gentleman’s agreement” than a “quantitative requirement,” according to Ming Xia, the current president of LRF. Instead, decision-making fell to the fund’s five-member advisory board, which included Wu, a trusted LRF employee named Tienchi Martin-Liao, and seats for a rotating representative from Yahoo and two outside human rights experts. 

From the start, Wu often appeared more interested in other projects. In January 2008, the first full month of the fund’s operation, he made his first big expenditure with YHRF money: purchasing a $1.5 million row house in Washington, DC, to serve as LRF’s new office and eventual laogai museum. 

A review of a partial set of meeting minutes from 2008 to 2015 shows that YHRF’s board spent much of its time discussing other plans—books, exhibits, Wu’s travel, and progress on the museum—rather than its humanitarian purpose. 

During the advisory board’s second meeting in April 2008, for example, Wu said that “funds were now being spent primarily on the publication of the Laogai photojournalism book … as well as the Foundation and Museum’s new website,” the notes recount. By 2009, the fund’s second year of operation, LRF was spending significantly more on itself than the allotted $1 million; it went over budget by some $700,000.

Yahoo, meanwhile, was interested in using the fund to limit its financial liabilities. 

In April 2009, when discussing whether to financially support two additional imprisoned Yahoo users, the company representative on the board “clarified that they have to agree not to sue” in exchange for YHRF money, according to the official meeting minutes. 

For his part, Wu did not want to include such a stipulation. An LRF lawyer was also opposed, saying that it could make YHRF “a ‘donor advised fund’ improperly utilized” to benefit Yahoo. This in turn would have threatened LRF’s nonprofit status.

At this point, things started to get even more complicated—and even less transparent. In June 2009, Yahoo and LRF established yet another organization, the Laogai Human Rights Organization (LHRO), in an effort to remove the legal liability from LRF and address growing concerns about how Wu was spending Yahoo’s money. LHRO was a sort of intermediary nonprofit set up expressly to “review and provide oversight as well as financial support to the LRF” over a five-year period, according to its founding documents. So now Yahoo’s money would have to go first to LHRO, which would have to approve any money being sent onward. 

This was also when the previously unreported Yahoo Irrevocable Human Rights Trust was established. If its $3.5 million was not used within five years—the period in which Yahoo’s lawyers guessed that it would most likely be sued—the money would revert to the original terms of the agreement between Yahoo and LRF, according to the amendment that set it up. (In the end, there were no other lawsuits in this time period, and this particular pot of money was not spent.)

“I had no idea that the Yahoo Irrevocable Human Rights Trust even existed until Yahoo publicly disclosed its existence in response to this lawsuit,” Wang, the plaintiffs’ lawyer, says. “Yahoo used [YHRF] publicly as evidence that it had learned from its mistakes. All the while it knew that [it] was being abused.” 

A “very arbitrary” leader

Throughout this time, there was little clarity on whom, exactly, the fund was supporting. In February 2009, and only after repeated requests by the board, Wu sent a spreadsheet to Yahoo executives detailing the 42 individuals that YHRF had supported in its first year. But a YHRF board member, Miles Yu, testified in a January 2023 deposition that he couldn’t recall seeing any similar lists after 2011. 

The board would “definitely want to know” whom the fund was helping, Yu said, but “on the other hand, we also understand the extreme difficulty and risk involved in this”—meaning he believed more transparency would put dissidents who were still in China in danger. The board, Yu testified, had to “give [Wu] the benefit of the doubt.” 

At least two people weren’t able to do so and found it impossible to work with him. LRF director and cofounder Jeffrey Fiedler stepped down from the organization in 2009, writing to Wu that he was managing LRF “more as a personal fiefdom than a professional organization.” He added, “as you worsen an already bad situation, I have no choice but to resign.” And in 2010, Tienchi Martin-Liao, the YHRF board member and longtime LRF employee, was forced out after repeatedly trying to raise the alarm about Wu’s conduct. 

“I think what we really need is an intervention,” the board member wrote. Yahoo’s representative responded, “LOL. That, and a strong drink perhaps.”

Board members that remained had to contend with a leader who, Yu admitted in his deposition, could “sometimes” be “very arbitrary” in how he treated dissidents.

None of this is a surprise to He Depu. He is the lead plaintiff in the lawsuit—a dissident who was sentenced in 2003 to eight years in a Chinese prison for “inciting subversion of state power.” Back when he was in prison, his wife had applied for $30,000 on his behalf. YHRF later awarded him just a third of that, with no explanation. It was a common experience, he says: “Many friends applied; one was ignored, another given very little. One was promised 2,000 [RMB] but in the end got nothing. Others were promised 4,000 [RMB] but finally received only 2,000.” 

In another particularly egregious incident from 2011, Yu Ling, the wife of one of the original dissidents who had sued Yahoo, filed a new suit, this time against Wu. She alleged that he pressured her and the other plaintiff in the initial Yahoo suit to “donate” $1 million of their $3.2 million settlement payouts to LRF—payouts that Wu had helped them secure in the first place. Wu then used her money to purchase an annuity under his own name, falsely claiming that she was his cousin. (Later, the YHRF board forced him to return the money, Yu testified in his deposition.) 

While this was happening, Yahoo both shirked responsibility for the fund’s activities and held it up as an example of its commitment to human rights. In 2008, 2011, 2014, and 2015, Yahoo shareholders either brought up growing concerns about the fund or pushed the company to do more on human rights globally. In response, executives claimed that the company “ha[d] no ownership interest in Yahoo! Human Rights Fund” and that it was “misleading” to suggest that either it or its board of directors could even “require disclosure of information” regarding the fund, even though it always had a member on the fund’s board. 

The company did, however, highlight YHRF as evidence of its already “extensive policies and practices in place” with respect to human rights. 

An untimely demise

By 2015, Wu’s behavior was catching up with him. 

LHRO’s board members were increasingly pushing back on Wu’s budgetary whims—particularly his request for an additional sum from Yahoo to purchase an even more expensive property and, later, his plans to lease a separate $22,000-per-month property that then sat empty for years. According to Wang, Wu was also using some fund money to defend himself in a number of lawsuits—involving allegations of employment retaliation, sexual harassment, and financial mismanagement. 

Also that year, the five-year term of Yahoo’s secret sub-trust ended, prompting the company to quietly stop its work with YHRF altogether—without issuing any public statements. 

It was around this time that Xu Wanping—the dissident who was jailed for signing anti-Japan materials and is a plaintiff in the current lawsuit—wrote to Wu, desperate for some kind of financial support. Xu, then 54, had been out of prison for almost two years and was in the middle of a state-mandated period during which he would experience a “deprivation of political rights,” including his right to free speech, publication, and association. 

For a while after his release, Xu had worked as a security guard for 2,000 RMB a month. But his health, which had declined in prison, made such a job unsustainable. “As a last resort,” Xu says, “I went to Mr. Wu … hoping to find financial help there. I am not the kind of person who seeks help easily.”

The initial response, from a general LRF email address, asked Xu to fill out an application and provide more details about his imprisonment because, as the current lawsuit alleges, LRF claimed “[that YHRF] was funded by US taxpayers, and that because of that, a lengthy process was required before it could make any disbursements.” (YHRF was not, of course, funded by US taxpayers, but exclusively by Yahoo.) 

Xu filled in the form and received no response. Then, in March 2016, faced with a medical emergency, he sent a series of emails directly to Wu with the subject line “Urgent! Urgent! Urgent!” 

“I am currently vomiting blood severely, and the hospital wants me to be hospitalized immediately. They say it will cost about 7,000 yuan [roughly $1,050]. Currently, my wife doesn’t have a job, and my kids are studying. How can I afford it? Therefore, I have yet to go to the hospital for treatment … I urgently turn to you for help!!”

Wu took 10 days to respond. When he finally did, he first explained that the fund had ceased providing financial support for Chinese cyber dissidents altogether. Then he complained about unspecified slights from previous dissidents that YHRF had helped.

However, Wu added, he wouldn’t abandon Xu. He promised to personally send $500—half of what Xu was requesting—as “my own little expression of goodwill,” Wu wrote. 

Then, suddenly, all the tension came to an unexpected head. In April 2016, the 79-year-old Wu died while on vacation in Honduras. Few details have been released about his death, but in DC, his passing kicked off a scramble to determine what should become of the millions that still remained from Yahoo. 

Human rights activists stand in Hong Kong next to a banner with images of jailed Chinese dissidents in March 2004. The activists demanded that the mainland release the dissidents, including He Depu, the lead plaintiff in the current lawsuit against Yahoo, who was then serving an eight-year sentence for subversion. The banner reads: “Release He Depu, Du Daobin and other dissidents.”

As the remembrances rolled in, seven former political prisoners, including the current lawsuit’s lead plaintiff, He Depu, published an open letter that they believed was necessary to clarify Wu’s legacy. They detailed the “gross irregularities” they had experienced when they requested money from YHRF and said the fund’s cash “has been abused, misused, and even embezzled.” That fact, they wrote, “is not only shocking, but inflicts direct damage on the Chinese dissident community.” This led to separate investigations by Foreign Policy and the New York Times, which ultimately brought more attention to the failures of Wu and of Yahoo to make good on their promises.

The next year, several of the letter’s authors—joined by others, like Xu Wanping—filed their lawsuit against Yahoo (now officially Oath Holdings) and LRF, as well as other YHRF trustees and groups that allegedly improperly benefited financially from YHRF. (Besides Yahoo and LRF, additional defendants and their representatives did not respond to multiple requests for comment.) 

What accountability looks like 

Six years after they first filed suit against the corporate parent of what was once the most powerful internet company in the world, He Depu v. Oath Holdings is finally inching toward trial. This forward movement, according to Wang, the plaintiffs’ lawyer, is happening despite the best efforts of “some of the largest and most expensive law firms on the planet … us[ing] every trick in the book to delay accountability, including making absurd claims of confidentiality.” 

But far from the Washington, DC, courtroom where the trial is set to take place, Xu lives in low-income housing in his hometown of Chongqing, in western China. He, his wife, and an adult son survive primarily on a small monthly hardship allowance of 1,500 RMB ($210) provided by the local government as collateral to ensure that he keeps his opinions to himself. But he knows that even if he is silent, this money could disappear at any point. 

Whether they win their case or not, it’s unclear if Xu and the other plaintiffs—all, like him, elderly now—will receive anything for the years they have spent investigating the fund.

But they’re all motivated by the bigger picture: the millions that they allege were squandered but hope can be restored, with interest, to a new fund to finally help people like them. 

“This money’s not going to be able to get them [the imprisoned dissidents] out of prison,” says Wang, “but it should let them know that they’re not alone.”

The plaintiffs are adamant that the new fund should not involve LRF, which sputters on without Wu and still provides limited grants to Chinese dissidents, though without a focus on individuals imprisoned for online speech. But they do want Yahoo to again foot much of the bill. 

After a fall from grace that had nothing to do with its actions in China, but rather with a series of poor business decisions that are now ancient history, the former tech giant may even be on the upswing. Under private equity owner Apollo, the company is now “very profitable,” according to its current CEO, Jim Lanzone, who told the Financial Times earlier this summer that Yahoo had plans to go public again. (Apollo did not respond to a request for comment.)

If Yahoo does, it will be further proof of how unequal technology’s consequences are for its creators in Silicon Valley and its end users around the world, particularly in authoritarian regimes where so many companies continue to operate and profit. For the privileged elite, the tech sector remains a great place for reinvention. But for those who simply believed in its ideals of free speech—like Xu Wanping and the others fighting for accountability—that belief can be a life sentence. 

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