Yahoo, former execs face lawsuit over Chinese dissidents fund

Cheryl Sanders
April 12, 2017

Times Wang, a lawyer in the law firm representing the Chinese dissidents, said Yahoo "abandoned its responsibilities to Trust beneficiaries" by standing idly while aware that its humanitarian trust fund was being squandered. LHRO, according to the lawsuit, transferred funds received by Yahoo Trust to Laogai Research Foundation, another organisation without a website or working phone number, and one also run by Harry Wu.

According to the lawsuit, Wu only used $700,000 of $17.3 million worth of humanitarian funds for their original objective - financing families of Chinese dissidents. Bell, who left Yahoo in March, could not be reached for comment.

The dissidents said Yahoo ignored "numerous red flags" including repeated direct warnings from former LRF board member and employee Liao Tienchi and concerns from a shareholder, the lawsuit notes. When news about the breaches surfaced recently, it resulted in delaying the deal's closing - now expected in June - and forced a 7 percent purchase price reduction, to $4.48 billion. The telco insisted on a lower price for the deal cut past year after discovering that more than 1 billion Yahoo accounts had been hacked in 2013 and 500 million in 2014. When Yahoo is folded into Verizon's AOL internet service, the combined entity will be called Oath.

Yahoo! declined to comment on the matter.

A massive Yahoo network breach that compromised up to 500 million accounts has ties to Russian Federation, and four suspects have now been charged.

In 2007, Yahoo admitted to providing Chinese authorities with the identities of several of its users. In 2007, Yahoo's then-chief executive, Jerry Yang, was grilled before a US congressional committee for surrendering the information.

The complaint alleges that Yahoo allowed Harry Wu, a now-deceased dissident from China, to spend about $13 million of the fund enriching himself and pursuing other projects tied to his interests. It was claimed Mr Wu, who died a year ago, misappropriated the funds to pay for real estate, inflated staff salaries and his own legal expenses. The lawsuit said Yahoo had the duty to ensure that the money got used correctly, but that it did not oversee Hu's activities.

The lawsuit claims that the foundation spent $4 million on property around Washington, more than $1 million on salaries for Wu and his wife, and hundreds of thousands of dollars on legal fees and expenses over the past decade. The settlement was for an undisclosed amount, and Yahoo agreed to establish a trust that would provide relief funds for Chinese political dissidents who are imprisoned for speaking out against the government online. Furthermore, a portion of the humanitarian fund, estimated to be around $800,000, was apparently used by late Wu who paid for legal defense against accusations of sexual harassment and mismanaging of federal grants.

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