On The Day That Alibaba’s Price Triples on Its IPO Debut, Yahoo’s Jerry Yang Apologizes to the Mother Of Shi Tao, The Dissident Yahoo Outed to Chinese Authorities, But On A Financial Basis Do You Believe The Chief Yahoo Is Really Sorry?

If Yahoo had not outed dissident Shi Tao in 2004 – he is now serving a 10-year prison term -- and other dissidents before, would Yahoo have been allowed in 2005 to buy 40% of Alibaba.com for $1 billion in cash while handing over its China operations to the Chinese online retailer?

Yahoo officials have always insisted they had to follow Chinese laws in doing business there. China wanted information on the guy sending out emails giving details of special security precautions being taken for the 15th anniversary of the Tianimen Square freedom demonstrations and since he was using a Yahoo account the Chinese asked Yahoo to identify him, and Yahoo did.

It caught a lot of negative PR flack for that, but it continued doing business in China, and this week Alibaba raised $1.5 billion by placing just 17% of its holdings in an IPO. On the first day of trading the shares tripled, they fell back 17.5% on the second day, but the company’s total market capitalization is now put at some $22 billion which means Yahoo, with its 40% ownership, has a $9 billion investment for the $1 billion it spent just a couple of years before. Not a bad return!

But in Congress this week Yahoo was taken over the coals yet again, partly because Yahoo now admits that some of the information it gave at the last Congressional hearing in February, 2006, was somewhat at variance with the truth.

ftm background

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The Congressional feeling this week was best summed up by Congressman Tom Lantos of California, head of the House Foreign Affairs Committee, who said of Yahoo, “While technologically and financially you are giants, morally you are Pygmies.”

Yang told the hearing, “I deeply regret the consequences of what the Chinese government has done to the dissidents. My heart goes out to the families.” Shi’s family sat behind Yang at the hearings, and Yang at one point spoke with Shi’s weeping mother, Gao Qinsheng, offering his apologies with a deep bow. He said Yahoo was in discussions with Chinese authorities to get Shi released.

It wasn’t said at the hearing, but with an eye on the Beijing Olympic Games next August the Chinese may well want to do that before then so Shi does not remain an issue for the world’s press. As an example of what the Chinese can expect if they don’t release Shi, The World Association of Newspapers (WAN) awarded him in June, on the 18th anniversary of Tianimen Square, its highest press freedom award, the Golden Pen of Freedom.

Shi’s mother, Gao Qinsheng, accepted the award for her son whom she described as "a direct victim of the shackles of press freedom." She added, “The Golden Pen Award proves that my son is indeed innocent. He has only done what a courageous journalist should do. That is why he has got the support and the sympathy from his colleagues all over the world, who uphold justice.” Chinese authorities had asked WAN to withdraw the award.

George Brock, president of the World Editors Forum, who presented the award, took aim at Yahoo! "How the Chinese authorities traced this e-mail, and discovered that Shi Tao was the author, is a cautionary tale with widespread implications for on-line privacy, and for the way that western communications companies do business in their understandably difficult dealings with repressive regimes.

"While those who do business around the globe must often deal with non-democratic countries, we believe that new media companies that provide more and more of the means for global communications have a special responsibility" he said. "They have an obligation to ensure that the basic human rights of their users will be protected, and they must carefully guard against becoming accomplices in repression."

Congress seems to agree and there is legislation pending that would bar US Internet companies from cooperating with what are called repressive regimes, specifically that information should not be handed over giving personal information to that would be used to suppress dissent. Individuals would have the right to sue in US federal court if information was improperly disclosed.

Yahoo already has a US federal court suit on its hands for outing in 2002 activist Wang Xianoning, who had sent anonymous e-mails and other writings seeking political reform. The Chinese asked Yahoo who the anonymous writer was and Yahoo gave him up.

Wang’s wife is suing Yahoo in US District Court in San Francisco, seeking unspecified financial damages and a court order requiring Yahoo to seek Wang’s release. Shi’s mother later joined the suit.

An 18th century US law allows foreigners to sue in the US for violation of universally accepted human rights standards. The suit accuses Yahoo of complicity for Wang’s alleged torture, arbitrary arrest and detention, and also seeks to hold Yahoo responsible for giving up the names of other anonymous Chinese users.

Yahoo has asked the court to dismiss the suit, but the lawmakers were very much of the opinion that a financial settlement of the case would be a way for Yahoo to make a financial contribution to the families, and Yahoo’s general counsel said the company was “open” to discussing settlement options.

Wang’s wife, Yu Ling, issued a joint statement with Shi’s mother before the Congressional hearing. “As a direct result of what Yahoo! did, a number of individuals have been put in jail and subjected to long-term abuse. Their families have been humiliated and destroyed. ... Yahoo owes all of these people a personal apology, not just to Congress. And they owe it to these people to stop these disclosures, and to do much more to get those who have already been arrested as a result of Yahoo!'s actions out of jail."

The hearing was not happy with Michael Callahan, Yahoo! senior vice president and general counsel. He had told Congress last year that Yahoo did not know why the Chinese authorities had requested such information. But a few months later the San Francisco-based Dui Hua Foundation on its web site carried a Chinese document translated, that showed that when China asked for the information it had explained to Yahoo! that Shi Tao was wanted for investigation of “illegally providing state secrets to foreign entities.”

If that was true then how come Callahan said what he said in his Congressional testimony last year? Callahan meekly responded he had not fully understood that a case involving “state secrets” really meant a search for political activists, but he admitted that once he did understand that after last year’s hearing he didn’t bother to correct his testimony.

“Given what I now know about the misunderstanding and concern created, I deeply regret that I did not think to contact you,” he told the Hearing. Lantos responded, “This was inexcusably negligent behavior at best and deliberately deceptive behavior at worst.”

The hearing marked one of the very few times in Washington that there was unanimity between the political parties, Republicans and Democrats: Yahoo had done wrong. Not one Congressperson rose to Yahoo’s defense. Even so, the company did not endorse the proposed legislation, neither would it commit to settling the San Francisco lawsuit.

Callahan also would not divulge whether there were any outstanding Chinese government demands for more information about Yahoo users, and neither would he comment on how Yahoo might today handle such a request, although he pointed out with the Alibaba deal Yahoo no longer controls its Chinese operations.

One thing seems sure, with the successful Alibaba float Yahoo is not about to put its position in China at risk. As a spokeswoman said before the Alibaba float, “China is one of the fastest growing Internet markets in the world, and it’s an important market in which to have a leadership position.”

So at the end of the hearing Lantos tried to use the personal touch. “Look into your own soul and see the damage you have done to an innocent human being and his family. It will make no difference to the committee what you do, but it will make you better human beings if you recognize your own responsibility for the enormous damage your policies have created.”