Yahoo! CEO Jerry Yang was scolded this week by a Congressional Committee for sacrificing democracy and free speech for commercial gains.

Given all the heat generated by the issue of net neutrality for U.S. Internet users — now tied into immunity from prosecution that U.S. telecommunications providers are demanding for breaking laws on wiretapping without FISA warrants for the government — the only surprise in this Congressional tongue lashing is that it does not involve a United States citizen. It’s about China.

The Chinese government maintains strict censorship over all forms of speech and communications on Chinese soil. So, when government censors wanted to shut down two Chinese Internet users who advocated for democratic reforms and rights of free speech, they contacted the ISP these two nationals were using as a democratic soapbox and they demanded the Yahoo! users’ identities. Presumably, Yahoo! was offered something in exchange, such as permission to operate in China’s heavily regulated playing field.

Yahoo’s information hand-off to the Chinese was not a minor invasion of privacy or release of “personally identifiable information.” Its former ISP customer is now doing 10 years in a Chinese prison, accused of rebellion against the state for posting pro-democracy emails and information.

In a U.S. Congressional Committee investigation of this politically charged situation on November 6, Yahoo’s CEO Yang was accused of sacrificing the values of privacy and free speech for the bottom-line advantage of being allowed to offer Yahoo! services to the massive Chinese Internet market. Committee member Tom Lantos to Jerry Yang: “Technologically, you are giants; morally you are pygmies.”

Strong words from a Congress poised to grant a get-out-of-jail-free card to all U.S. telecom companies who similarly collaborated with the government, and violated clear laws forbidding wiretapping of Americans on U.S. soil without the proper warrants. The grant of immunity also keeps the lid on another can ‘o worms: the scope and extent of illegal wiretapping in the U.S. The good news is that nobody is going to prison here. Not even the perps.