From the Los Angeles Times

Yahoo settles lawsuit over jailed Chinese journalists

From the Associated Press

2:23 PM PST, November 13, 2007

SAN FRANCISCO — Yahoo Inc., reeling from a growing human rights backlash over its China operations, settled a lawsuit today that accused the Internet company of illegally helping the Chinese government jail and torture two journalists.

The settlement is a dramatic change of heart for Yahoo, which had steadfastly maintained it had little choice but to comply with a request from Chinese authorities to share information about the journalists' online activities, which they say led to their arrest.

But over the last week the company's cooperation with the Chinese government turned into a public relations nightmare, as irate federal lawmakers lambasted the company in hearings on Capitol Hill, accusing it of collaborating with an oppressive communist regime.

"While technologically and financially you are giants, morally you are pygmies," House Foreign Affairs Committee Chairman Tom Lantos, D-Calif., angrily said at that hearing.

Neither side disclosed details of the settlement other than to agree that Yahoo would pay the attorneys fees of the journalists, Shi Tao and Wang Xiaoning, and the family member who sued. Yahoo also said it would "provide financial, humanitarian and legal support to these families."

The case has raised questions about whether Internet companies should cooperate with governments that deny freedom of speech and frequently crack down on journalists.

Many other U.S. companies, including Google Inc., Cisco Systems and Microsoft Corp., are facing similar issues in China, said business professor Peter Navarro of the University of California, Irvine.

"They have all crossed a gray ethical line in China with their anything-for-a-buck mentality," Navarro said. "I don't believe that will change without a broader examination of the U.S.-China relationship."

Shi, a former writer for the financial publication Contemporary Business News, was jailed under state secrecy laws for allegedly providing state secrets to foreigners. Shi's e-mail allegedly contained notes about a government memo on media restrictions.

Wang was arrested in 2002 in connection with anonymous e-mails and other political writings he posted online. They are both serving 10 year prison sentences.

The men were represented in the lawsuit by The World Organization for Human Rights in Washington D.C.

At the Congressional hearing last week, Yahoo Chief executive Jerry Yang and General Counsel Michael Callahan apologized to Shi's mother, who was sitting behind them.

Yang met with family members afterward.

"After meeting with the families, it was clear to me what we had to do to make this right for them, for Yahoo and for the future," Yang said in a statement Tuesday. "We are committed to making sure our actions match our values around the world."

Yang said the company also was establishing a "human rights fund to provide humanitarian and legal aid to dissidents who have been imprisoned for expressing their views online."

The journalists' U.S. attorney, Morton Sklar, also declined to discuss the settlement terms, but said Yahoo's will to fight the lawsuit withered amid the growing outcry that began when Congress accused company officials of misleading it.

"There was a dramatic change in their position and that was strong incentive to settle," Sklar said. "They did not want to be on the wrong side of this issue."

Sklar said he suspects there are many more dissidents in Chinese jails because of U.S. companies' cooperation with the Chinese government. Sklar said there may be other lawsuits filed and further pressure on Capitol Hill if U.S. companies don't soon change their business practices in China.

"They will have to recognize they have to do more than just follow the law," Sklar said. "They can negotiate with the host countries and not be complicit in torture."

Lantos also called on other Internet companies to "resist any attempts by authoritarian regimes to make them complicit in cracking down on free speech, otherwise they simply should not do business in those markets."

"It took a tongue-lashing from Congress before these high-tech titans did the right thing and coughed up some concrete assistance for the family of a journalist whom Yahoo had helped send to jail," Lantos said in a statement. "What a disgrace."

But Navarro and other China watchers said the settlement would do little to stem similar behavior by other U.S. business operating in one of the world's fastest growing economies.

"Congress hasn't figured out that Yahoo is not the only culprit," said Navarro, who just published the book "Coming China Wars."

Shi and Wang in April sued Yahoo and the Chinese company Alibaba.com, China's biggest online commerce firm.

In 2005 Yahoo bought a 40 percent stake in Alibaba, which took over running Yahoo's mainland China operations.

Yahoo shares gained $1.32, or 5.3 percent, Tuesday to close at $26.10