ALEXANDRIA, Va. (CN) – The Chinese couple who sued Yahoo! for its role in the husband’s being sentenced to 10 years of forced labor in a Chinese prison says the man who brokered the settlement with Yahoo! extorted millions of dollars from them. Plaintiff Ling Yu, of Beijing, is the wife of Wang Xiaoning, who is serving 10 years in a Chinese prison, accused of leaking state secrets.
Yu and Wang sued Harry Hongda Wu, of Vienna, Va., and his Washington, D.C.-based nonprofits, the Laogai Research Foundation and the Laogai Human Rights Organization. They also sued the Yahoo! Human Rights Fund, which was set up as part of the settlement of their previous case.
The new federal complaint alleges fraud, conversion and breach of fiduciary duty.
Yu and Wang made headlines in 2007 when they claimed Yahoo! gave up an IP address and other identifying information that landed Wang in a forced labor prison for political prisoners.
Yu says she turned to Harry Wu, who had served 19 years in a Chinese labor camp, to “assist her with … the identification of legal counsel and her subsequent initiation of litigation against Yahoo!”
After Wu’s incarceration, he moved to the United States and set up the Laogai Research Foundation, a nonprofit “dedicated to documenting and exposing systematic abuses of human rights in China, focusing on the forced labor camps,” according to Laogai’s website.
Because Yu does not speak English, she says she gave Wu her power of attorney to press her complaint in her interest.
After a congressional investigation, worldwide headline and public outcry, Yu met with Yahoo! CEO Jerry Yang and Wu and his assistant Tienchi. The parties agreed to settle and Wu persuaded Yu to drop her attorney and redraft his power of attorney agreement, according to the complaint.
Though they spoke Chinese at the meeting, the settlement that was reached a few weeks later was written only in English, and Wu took painstaking measures to keep the numbers secret, Yu says.
“Tienchi was specifically instructed by defendant Wu not to disclose any specific settlement amounts to plaintiff Yu, intending to conceal same from plaintiff Yu,” she says.
Yu says she found out later that Yahoo! had agreed to pay $3.2 million to her and her husband and give additional cash to the Yahoo! Human Rights Fund, which is managed and directed by Laogai.
Yu also claims that Wu lied to her, claiming she needed to pay her old attorney $600,000 in legal fees. After she paid, he asked for a $1 million “voluntary” donation to Laogai.
“After plaintiff Yu refused, upon information and belief, defendant Wu replied ‘$2 million is enough for you’ and demanded $1.2 million dollars from plaintiff Yu. In making such demand, defendant Wu became angry and abusive,” the complaint states.
Yu says Wu “chastised” her and called her “ungrateful.”
Yu says she later discovered that the settlement money was being held in a trust. She says that though it belonged rightfully to her and her husband, she was led to believe that she had to give money to Laogai to get access to the money.
“Plaintiff Yu, acting under extreme duress and without knowing the truth of the above facts which were concealed by defendant Wu and Tienchi from her, acquiesced to defendant Wu’s demand, but without donative intent, and purportedly agreed to pay the sum of $1 million dollars to defendant Laogai, same having been extorted from the plaintiffs by defendants Wu and Laogai,” she claims.
Yu says Wu took her to a bank with the donation paperwork and immediately transferred the money into Laogai’s checking account.
After extorting the $1 million, Yu says Wu ignored her repeated demands to release her settlement funds to her.
The complaint states: “Upon information and belief, Defendants Wu, Laogai and/or Yahoo! Fund each may have unjustly benefited from the alleged donation, all to their benefit and to the detriment of the plaintiffs.
“At no time since the alleged donation up until present, has defendant Wu nor
Defendant Laogai provided a written receipt to plaintiff Yu for her one million dollar claimed alleged donation, nor is defendant Laogai entitled to have received, nor to continue to have or hold for its benefit, all as ill gotten gains of their improper conduct to the detriment of the plaintiffs, and to their unjust enrichment.
“Following the extorted $1 million dollar alleged donation by plaintiff Yu, rather than releasing the remaining amount of funds received for the benefit of the plaintiffs,
Defendants Wu and Laogai sought ratification of the extorted alleged donation which has continued to be withheld from plaintiffs, and further, have failed and refused to release all of said remaining trust funds to the plaintiffs, notwithstanding repeated demands.”
Yu says she spoke with Tienchi in February 2010, at which time he was no longer working for Wu. “It was at this time that Tienchi began assisting plaintiff Yu in attempting to retrieve the full sum of monies duly owed to her and her husband by defendants, and Tienchi proceeded to make a full disclosure of the truthful facts to plaintiff Yu, including the full extent of the wrongful and illegal acts of defendants Wu and Laogai, which were carried out, inter alia, with the intent and for the purpose of unjustly enriching the defendants, and each of them, and converting plaintiffs’ money to their own use, all to plaintiffs’ detriment,” according to the complaint.
It continues: “The full facts and intent of defendant Wu and defendant Laogai were discovered by plaintiffs when plaintiff Yu retained counsel in May 2010. Counsel confirmed to plaintiff Yu that pursuant to the settlement agreement (a) she and her husband were entitled without condition to the settlement amount, which defendant Laogai agreed to hold on their behalf in trust, (b) Defendant Laogai is believed to have been given a significant sum of money in excess of the settlement amount paid on plaintiffs’ behalf by Yahoo! which upon information and belief established and funded the Yahoo! Human Rights Fund operated by defendant Laogai and others (c) Defendant Laogai did not have to pay $600,000 in attorneys fees to her prior attorneys, as her prior attorneys were paid separately and directly by Yahoo! and (d) defendant Laogai received from Yahoo! significant funds for its operational expenses, which presumably and under information and belief has personally benefited defendant Harry Wu and his wife.”
Yu adds: “Unbeknownst to plaintiffs, defendant Wu and his wife Ching Lee Chen, who is the Secretary and Treasurer for Laogai and also its accountant, have doubled their yearly compensation following the settlement, all to the detriment of the plaintiffs.”
The complaint states: “On January 29, 2009, defendant Wu converted to the benefit of defendant Wu an additional $1 million of plaintiffs’ monies which was to be held in trust. In or about August 06, 2010, plaintiffs were provided for the first time a copy of an annuity application which reflects that defendant Wu had taken $1 million dollars and converted it to his own personal benefit by purchasing an annuity in his own name from Trans America Capital Builders, with the money that defendants were holding in trust for plaintiffs. In said application, not only did defendant Wu certify himself as the owner of the funds, but he misrepresented and certified of plaintiff Yu as being his cousin, which she is not. …
“Defendant Wu has converted other monies of plaintiffs to his and defendant
Laogai’s benefit; said funds being held in defendant Wu’s individual name at PNC Investments, all to the detriment of the plaintiffs. …
“Defendant Laogai purchased a building located at 1109 M Street, NW for the sum of $1.45 million in Washington, D.C. as its new headquarters, all to the detriment of the plaintiffs.
“Defendant Wu invested plaintiffs’ money contrary to their best interest and in his own name, all to the detriment of the plaintiffs.”
Yu and her husband, who is still in prison in China, seek compensatory and punitive damages for conversion, fraud, unjust enrichment, breach of contract, and breach of fiduciary duty, and an injunction that will release the $3.2 million settlement to them.
They are represented by Barry Coburn with Coburn Coffman.