Lake Laogai is a small body of water located within the Agrarian Zone of Ba Sing Se. It was stated by Joo Dee to be a vacation spot, but in actuality, it hid beneath it a secret underground prison created by Long Feng for his personal purpose of interning anyone there whose actions were contrary to his plans. This hidden location eventually became the Dai Li's base of operations, where they organized their conspiracy through brainwashing and other illegal means.
Dai Li base
Hidden beneath the waters of Lake Laogai was a large underground facility operated by Dai Li agents and run by the Grand Secretariat, Long Feng. It consisted of several chambers and tunnels, which held prison cells and training facilities for both Dai Li agents and Joo Dees, as well as chambers with equipment used to brainwash people who did not adhere to the rules enforced by Long Feng and his agents. Some of the rooms were spacious enough to hold a flying bison captive.
The secret headquarters is presumed to have been destroyed, as discovered by Team Avatar when they tried to convince Earth KingKuei of Long Feng's conspiracy. In an attempt to expose the facilities, Toph's raising of the ground under the lake with earthbending uncovered only a destroyed entrance to the base.
The term Laogai is an abbreviation for Laodong Gaizao, 勞動改造 (simp. 劳动改造), which means "reform through labor", and refers to the use of prison labor in the People's Republic of China. The Laogai are a series of camps where opponents of the Chinese Communist Party are sent to work as slave labor.