Yahoo’s already turbulent trip in its planned asset sale to Verizon just became a little bumpier: A group of Chinese dissidents sued the internet company today, charging that just 4% of the $17.3 million in the Yahoo Human Rights Trust went to the free speech advocates who were supposed to benefit.
Yahoo created the trust in 2007 to settle a suit by families of dissidents who had been imprisoned after the company gave the Chinese Communist Party information about them and their criticisms of the country’s leadership.
The Trust was supposed to assist the dissidents and their families.
But today’s suit, at the U.S. District Court in Washington, D.C., says that more than $13 million of the funds were “systematically and unlawfully depleted in less than 10 years on expenditures having nothing to do with providing humanitarian assistance to imprisoned Chinese
For example, it says that $2.55 million paid for a Washington D.C. townhouse.
The defendants include Yahoo, and trustees led by former General Counsels Michael Callahan and Ronald Bell. It also cites the estate of Harry Wu, a political activist who died a year ago but ran the trust’s day-to-day operations along with the Laogai Research Foundation and Laogai Human Rights Organization.
The plaintiffs want the court to award damages as well as a restoration of the trust’s assets.
“In standing idly by while it knew the Yahoo Human Rights Trust was being squandered, Yahoo abandoned its responsibilities to Trust beneficiaries, who have risked their lives by speaking out for political reform in China,” says the plaintiffs’ lawyer, Times Wang of Cohen Milstein Sellers & Toll. “We hope this lawsuit creates an opportunity for Yahoo to replenish the fund and make good on its commitment to support basic freedoms as a responsible corporate citizen.”
A Yahoo spokesperson says the company doesn’t comment on litigation.
The suit says that Wu paid himself and his wife more than $1 million. In addition, Wu and his research foundation allegedly used trust funds to buy a $1.45 million property in Washington, plus $2.55 million townhouse.
The suit says he used the sites to create a museum about Chinese prison labor camps, not to help dissidents and their families.
Yahoo, it adds, “stood idly by, willfully ignoring the mountain of evidence that these expenditures were improper, doing nothing to prevent the systematic unlawful depletion of Yahoo Trust assets, all the while advertising the Yahoo Trust as evidence of its commitment to human rights.”
Today’s lawsuit follows Yahoo’s agreement in February to reduce the value of its asset sale to Verizon by $350 million, to $4.48 billion. The telco insisted on a lower price for the deal cut last year after discovering that more than 1 billion Yahoo accounts had been hacked in 2013 and 500 million in 2014.
Last month the Justice Department indicted two Russian spies, along with two criminal hackers, for the 2014 attacks.