Yahoo shares savaged over China journalist case

ByJim Hopkins and Jefferson Graham, USA TODAY

SAN FRANCISCO -- Yahoo yhoo shares plunged again Wednesday, a day after Congress hammered top executives over the company's cooperation with Chinese officials in the jailing of a pro-democracy journalist.

Shares slumped 7.7% as Rep. Chris Smith, R-N.J., renewed a call for Yahoo to endorse his bill banning such cooperation. Smith said he remained "absolutely bewildered and angered" that the beleaguered Internet portal had not pledged to stop the practice.

At a high-profile hearing Tuesday, Yahoo CEO Jerry Yang and general counsel Michael Callahan apologized to the House Foreign Affairs Committee for misleading Congress about Yahoo's role in the 2004 case against the journalist, Shi Tao.

Wednesday, Yahoo declined to endorse the bill. Repeating a statement Callahan made to the committee, company spokeswoman Kelley Benander said Yahoo "looks forward to working with the committee on constructive solutions to this complex issue."

Smith said Yahoo's support for his Global Online Freedom bill could spur other Internet companies to endorse it, too. "They would send a message to the other Internet and IT companies that there is a minimum standard — minimal corporate standards for online freedom," he said.

Smith's bill would ban companies from disclosing to governments such as China information identifying individual Internet users. Exceptions would be allowed when the U.S. Justice Department says such a disclosure is for a "legitimate law enforcement purpose."

The bill also would prohibit U.S. Internet service providers from blocking online content of U.S. government-financed sites and services. And it would mandate that companies disclose to a new State Department office any websites they block from foreign users. The bill calls for civil penalties as high as $2 million for businesses and $100,000 for individuals.

The Foreign Affairs Committee passed Smith's bill two weeks ago. The measure also is before the House Commerce Committee, which has not scheduled a vote, Smith spokesman Patrick Creamer says.

Tao is serving a 10-year prison sentence after Yahoo's now-defunct China arm turned over information about his online activities at the Chinese government's request. He was imprisoned for disclosing "state secrets," a charge often used against political opponents.

Callahan originally spoke to committee members in February 2006, when they were investigating the role of Yahoo and other Internet firms cooperating with repressive governments. He said Yahoo didn't know the facts of the case when it gave the information. But the committee staff found Yahoo employees did know the nature of the case, even if Callahan did not.

Since 2006, Yahoo created an internal employee team to "address privacy and freedom-of-expression issues," Yang told the committee.

Benander said that work is shaping business decisions in Vietnam and other regions.

Yahoo's nearly 8% stock decline exceeded the 2.7% fall in the tech-heavy Nasdaq stock index. And it came despite an upgrade by Standard & Poor's. Analyst Scott Kessler says he thinks investors are overreacting. "Is what happened in China a reason to sell off shares?" he asked. "I don't think so."

Hopkins reported from San Francisco, Graham from Los Angeles