(Photo: Diego M. Radzinschi) (Photo: Diego M. Radzinschi)

 

A group of Chinese dissidents filed a lawsuit in federal court Tuesday accusing Yahoo Inc. and two former general counsels of misdirecting millions of dollars from a fund set up to provide humanitarian aid.

The plaintiffs, represented by Cohen Milstein Sellers & Toll attorney Times Wang, are Chinese citizens formerly detained for speaking out against their government. In 2007, Yahoo created a $17.3 million trust fund to provide financial assistance to imprisoned Chinese dissidents as part of a settlement in a prior lawsuit.

In the new lawsuit, filed in the U.S. District Court for the District of Columbia on Tuesday, the plaintiffs allege the fund’s administrator used trust money for personal gain by increasing his salary, purchasing pricey Washington, D.C., real estate and paying for personal legal representation. Former Yahoo general counsels Michael Callahan and Ron Bell are accused of signing off on it.

The suit claims only 4 percent of the $17.3 million has been spent on actual humanitarian aid.

“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,” Wang said in a written statement. “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 said the company does not comment on litigation.

In the first lawsuit settled in 2007, the company was accused of giving the Chinese Communist Party information about its users, which the CCP used as evidence to imprison government dissidents. Yahoo settled after Congress held hearings that touched on the case, and public scrutiny intensified. The Yahoo Human Rights Trust was a condition of the settlement.

The company appointed Harry Wu, the director of the D.C.-based Laogai Research Foundation, as the trust’s administrator. Wu and Yahoo set up the Laogai Human Rights Organization to administer the fund’s assets. In 2009, the company chose Callahan, then the executive vice president and general counsel, as the fund’s trustee. When he left the company, Bell replaced him. Bell resigned from Yahoo last month amid the controversy surrounding a massive 2014 cybersecurity breach.

The Laogai Human Rights Organization disbursed funds to Wu’s Laogai Research Foundation with approval from Callahan and Bell. The lawsuit alleges that between 2008 and 2015, the LRF reported expenditures of more than $11 million, including almost $3 million on a townhouse in D.C.’s posh Dupont Circle neighborhood. The lawsuit also claims the LRF used money from the fund to defend Wu in various lawsuits, including a 2015 sexual assault case brought against him in Virginia state court.

Wu died in April 2016, though his estate is a defendant in the new lawsuit. He denied wrongdoing in an interview with The New York Times, published shortly after his death in August 2016.

The lawsuit claims that Yahoo, Callahan and Bell knew about the misuse of the funds and did nothing to correct it. It cites an instance in which a former LRF employee wrote a letter to the fund’s board, which included Callahan, about the LRF’s mishandling of its assets. In another example, a Yahoo shareholder proposed the company’s board of directors investigate the fund, and various other lawsuits were filed alleging misconduct by Wu.

“From the beginning, the Yahoo defendants’ management of the Yahoo trust highlighted the cynical reality that Yahoo used the Yahoo trust as window-dressing: it wanted to benefit from the creation of the Yahoo trust, but had no interest in fulfilling its actual mission or complying with its terms and the obligations that came with it,” the lawsuit said.