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Cisco Facing US Lawsuit for Selling "Shackles of Oppression" to Chinese Government

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In a US lawsuit that's apparently getting more press abroad than at home, Cisco Systems is being sued on behalf of Chinese political dissidents who say that the company knowingly provided China's ruling communist party with network equipment and training used to persecute Chinese citizens.

The suit was filed in a Maryland District Court on behalf of three men -- Du Daobin, Zhou Yuanzhi and Liu Xianbin -- and 10 unnamed clients under the Alien Tort Claims Act. It attacks Cisco and a number of its top executives for "their knowing and willful aiding and abetting of the CCP’s harassment, arrest, and torture of Chinese political activists."

Cisco has rejected the suit as baseless.

Former lawsuits have used the Tort act to accuse American companies of aiding crimes by the Chinese government by providing technology or information. The most notable case targeted Yahoo, which was sued by two jailed journalists who said the company gave the Chinese government their email addresses and locations. That suit was led by the World Organization for Human Rights, USA. Yahoo! settled for an undisclosed amount in 2007 (the funds went to their detainee's families), but the company maintained that its operations followed Chinese law. 

The current case against Cisco makes an even more damning accusation, citing evidence that Cisco executives actually played up functions that would give China the power to track and pursue dissidents using Cisco's networking tools, which were employed to create both China's 'Golden Shield', also known as the Great Firewall of China, and its Policenet system.

The complaint includes a leaked document from a 2002 Cisco presentation that allegedly shows the company promoting its product's ability to support China's goals of "maintaining stability", "stop the network-related crimes" and "combat 'Falun Gong' evil religion and other hostiles".

Attorney Dan Ward of the D.C. firm Ward & Ward is representing the activists, who are also working with the lobbying group "Electronic Frontier Foundation." That group has also started an online petition asking Americans to write to Cisco about the business they do in China.
The case is being funded by the Laogai Research Foundation, run by Harry Wu, a former prisoner of Chinese labor camps who now lives in the States. The complaint statement says that Cisco's actions have created "countless victims" in China, including the artist Ai Weiwei, who was only recently released from a Chinese prison following a high-profile detainment. Other alleged victims include civil rights activist Chen Guangchen, and human rights lawyer Gao Zhisheng.

Dan Ward describes the back story and legal arguments against Cisco on his firm's blog. In one critique, he says:

A company that publicly stands for free thought, liberty, and human rights should not be selling the shackles of oppression on the grounds that the chains might also have a less insidious use. This immoral pettifogging is unacceptable. The act of selling jumper cables and car batteries to a country that has told you it intends to electrocute political activists with them does not become less repugnant because they can also start a car.

As the Sydney Herald notes, Cisco sponsored the Nobel Peace Concert in 2010, the same year that the Nobel Peace Prize was given to writer and human rights activist Liu Xiaobo, who was unable to attend the award ceremony. Liu is serving an 11-year prison sentence in China.

Earlier this spring, supporters of the spiritual group Falun Gong also launched a suit against Cisco for its industry connections to the Chinese government.

In January, the investment firm Boston Common Asset Management sold its 167,000 shares in Cisco over concerns about the company's human rights record in China.

The legal answers to such cases remain murky, even as it becomes clear that other American firms who sell technology to repressive regimes around the world are likely to face similar charges. Experts believe it may ultimately be up to the Supreme Court to decide whether a company will have to answer for the way its equipment is used overseas. Even if a company can't be targeted, individual executives might still hold liability. In May, a new wrinkle in the larger debate emerged. From the Economist:

Meanwhile, the global reach of China’s own internet firms, many of them listed on American stock exchanges, is drawing legal challenges. Campaigners in New York have started a suit against Baidu, saying its censored search results violate their constitutional rights. The plaintiffs’ lawyer, Stephen Preziosi, insists the case be heard in an American court -- Baidu sells advertising to American firms and aggressively protects its American trademark, he says.

So far Cisco's head lawyer has responded to the latest round of accusations against the company on a Cisco blog, The Platform. General counsel Mark Chandler says, "We have never customized our equipment to help the Chinese government -- or any government -- censor content, track Internet use by individuals or intercept Internet communications." He emphasizes that Cisco's sales to China and other countries fall within the boundaries of US export laws. According to Chandler, the company's overarching goal is to create a single, unified, global Internet.

For more on the tech industry's stand on these issues, see this New York Times report on a 2006 Congressional subcommittee hearing involving Google, Cisco, Yahoo! and Microsoft. That day Rep. Tom Lantos, a California Democrat, reportedly said to the tech titans, "I do not understand how your corporate leadership sleeps at night."

POSITION:  No positions in stocks mentioned.