Yahoo! Inc. (NASDAQ:YHOO) gets a hefty fine threat from the Feds

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By Thomas Copeland on September 12, 2014 Company

Yahoo! Inc. (NASDAQ:YHOO) free of cost email service could have become a huge expense for the company; it would have forced Yahoo to pay at least a quarter of a million extra every day.

Back in 2008 Yahoo! Inc. (NASDAQ:YHOO) was asked to give up its online information to the government for the sake of US surveillance’s expansion. Yahoo! Inc. (NASDAQ:YHOO) considered this an unconstitutional demand and resisted and as a result of which it was threatened by a huge fine. The reason given by the government for making such a demand was national security.

Mike McConnell, the then National Intelligence Director stated in a court document that Yahoo! Inc. (NASDAQ:YHOO) was used by international terrorists for communication and if the company resisted or delayed releasing its information; it could result in great damage to national security. He believed that if Yahoo! Inc. (NASDAQ:YHOO) didn’t cooperate then the government will have no access to the information that only Yahoo was allowed to access.

Yahoo! Inc. (NASDAQ:YHOO) resisted the request but ultimately was ordered by the court to cooperate with the government by a federal judge. The company was asked to unseal its court challenge material. Some sections of this material, which included terrorist names, were redacted before unsealing.

Yahoo! Inc. (NASDAQ:YHOO) came forward with a statement on Thursday that said back in 2007 a law was amended so that user information located online and owned by companies like Yahoo could be demanded. The amendment was challenged by Yahoo! Inc. (NASDAQ:YHOO) back in 2007. However, according to Ron Bell (General Counsel for Yahoo) both the challenge and the following appeal were denied.

Bell said that the new case material shows the efforts Yahoo! Inc. (NASDAQ:YHOO) had to make to resist the demand of US government surveillance. He said that the government even threatened them with a fine of $250,000 per day.
According to Yahoo! Inc. (NASDAQ:YHOO) the main reason for resisting the demand was to protect the user data; it further said that the company will not stand by any demands that that require it to give away private user information and are unlawful.

The documents that were recently released reveal that Bush administration was not very kind in its demand and expressed its disapproval in Yahoo for even attempting to resist. Yahoo’s argument was that Bush administration was guilty of violating the Fourth Amendment regarding Yahoo customers’ rights. According to a court brief it was FISA’s fault that it even allowed Yahoo! Inc. (NASDAQ:YHOO) to challenge the demands made by the government. The court papers contain Yahoo! Inc. (NASDAQ:YHOO)’s appeal to restrain the government when it comes to unlawful demands.

Yahoo’s lawyer, Marc Zwillinger has requested on the company’s behalf that the judgment made by the lower court be reversed by the Foreign Intelligence Surveillance Court of Review. It should deem the authorized surveillance not “otherwise lawful. The challenge was lost by Yahoo! Inc. (NASDAQ:YHOO).
According to The American Civil Liberties Union the case has made it clear that government surveillance should be more open and clear.

Yahoo! Inc. (NASDAQ:YHOO) started off today’s session at $41.73 and at 1:00 pm (EDT) was trading at $42.51. The stock’s day range till 1:00 pm was between 41.50 and 42.77.