UPDATE, Published April 2012:
Montana Attorney General announces a settlement agreement requiring Greg Mortenson, author of Three Cups of Tea, to pay more than $1 million in restitution for financial wrongdoing at the charity he founded, Central Asia Institute. Read the CharityWatch article that sparked the investigation, and visit the Montana Attorney General's website to read its investigative report, released on April 5th, 2012. The very same three person board, which includes Greg Mortenson and is responsible for the mismanagement of CAI, is empowered with selecting its replacement board, according to the settlement reached with the Montana Attorney General.
ORIGINAL ARTICLE, Published in the August 2011 issue of the Charity Rating Guide & Watchdog Report:
The American Institute of Philanthropy (AIP) was ahead of the curve in warning donors that the finances of Central Asia Institute (CAI), a charity known for building schools and funding girls' education in Afghanistan and Pakistan, did not match the heroic image of its founder and CEO, Greg Mortenson. A New York Times bestselling author for his books Three Cups of Tea and Stones into Schools, Mortenson was exposed by AIP in early 2010 for intertwining his personal business interests with those of CAI by using charity funds to pay for book promotion and lecture tour expenses. AIP later contributed to a 60 Minutes investigation that revealed additional evidence of financial impropriety and lack of accountability at the charity, and that also exposed Mortenson for fictionalizing many of the inspiring stories in his supposedly non-fiction books. CAI is now under inquiry by the Montana Attorney General and Mortenson is being sued by angry book buyers and donors. AIP believes that Central Asia Institute will be unable to recover from its tarnished reputation and regain donors' trust with Mortenson at the helm. For the good of the charity and its important mission of educating children in central Asia, AIP calls for Greg Mortenson to resign.
Three Cups of Tea vs. Three Cups of Deceit
It's a beautiful story, and it's a lie. -- Jon Krakauer, famous author and former donor to Central Asia Institute in a 60 Minutes interview when asked about the premise of Greg Mortenson's book, Three Cups of Tea.
Three Cups of Tea: One Man's Mission to Promote Peace . . . One School at a Time sold millions of copies. The book was co-authored by Greg Mortenson and promoted as a non-fictional retelling of how he came to know the people in the small village of Korphe, Pakistan and promised to build them a school. According to a synopsis on the book's web site, "Alone, without food, water, or shelter," Mortenson, exhausted and disoriented after a failed attempt to climb the world's second tallest mountain, "stumbled into an impoverished Pakistani village where he was nursed back to health…the village was so poor that it could not afford the $1-a-day salary to hire a teacher." After observing the village's school-age children outside, "scratching their lessons in the dirt with sticks," Mortenson was inspired to help and promised to return to help build a school. In the book Mortenson also recounts the nightmare of being kidnapped for eight days by the Taliban before finally convincing them to free him after they learned of his efforts to build schools.
An in-depth investigation by the news program 60 Minutes earlier this year revealed a much different picture of Mortenson and Central Asia Institute than the one portrayed in Mortenson's books. The charity's 2009 tax form provided a list of schools CAI claimed to have built in central Asia. 60 Minutes sent investigators to the region to survey nearly thirty schools. It found that while some of the schools existed and were performing well, roughly half of them were empty, built by somebody else, or not receiving funding from CAI. One official said his school had not received any support from the charity for things like supplies or teachers' salaries in years. Some schools were being used by locals as storage facilities for things like spinach or hay. Six schools in Afghanistan were found not to exist.
The number of schools CAI claims to have built or supported is not the only discrepancy the news program found. In his books Mortenson claims to have been kidnapped and held for eight days by the Taliban during a trip to Pakistan in 1996. Experts on central Asia report that at that time there were not yet any Taliban in that region of Pakistan. In addition, 60 Minutes obtained a photograph of Greg Mortenson holding an assault rifle, smiling and commiserating with the very people he had accused in his books of being his Taliban captors. The news program was able to track down two of the men in the photos and two others who were present when the photos were taken, all of whom deny being Taliban. It turns out that one of the men, Mansur Khan Mahsud, is actually an internationally renowned scholar and a director at the FATA Research Centre, a respected, nonpartisan think-tank in Islamabad, Pakistan. Mahsud denies being associated with the Taliban and has publicly threatened to sue Mortenson for defamation of character. When 60 Minutes asked Mahsud why he thinks Mortenson would accuse him of being party to his kidnapping, he replied, "To sell his book."
Author Jon Krakauer, well-known for such books as Into the Wild and Into Thin Air, was once an enthusiastic supporter of Central Asia Institute, donating upwards of $75,000 to Mortenson's charity. He stopped supporting the group in 2004, he told 60 Minutes, after hearing from a mutual acquaintance once involved with CAI that the charity was not accounting for the bulk of its expenditures. According to Krakauer, this friend said that "Greg uses Central Asia Institute as his private ATM machine."
Shortly after the 60 Minutes story aired, Krakauer published an online book detailing his own investigation into Mortenson and CAI entitled Three Cups of Deceit: How Greg Mortenson, Humanitarian Hero, Lost His Way. In his book Krakauer criticizes the "excessive benefits" received by Mortenson at the charity's expense, saying "CAI has routinely paid for extravagances…" Specifically, he describes a "four-day excursion" to the 2010 Telluride Mountain Film Festival at which Mortenson was a featured speaker. CAI rented multiple residences, according to Krakauer, and chartered a Learjet that by itself cost "more than $15,000" to transport Mortenson, his wife and children, and others to and from the festival. Based on published ad rates CAI may also have paid as much as $100,000 for "full-page color advertisements in The New Yorker to promote Mortenson's books," states Krakauer.
Krakauer also contends that the premise of Three Cups of Tea is based on a lie. Mortenson's first book that inspired donors to contribute more than $50 million to Central Asia Institute, according to Krakauer, is "a compelling creation myth, one that [Mortenson] has repeated in thousands of public appearances and media interviews." Krakauer, whose research included interviewing several of Mortenson's climbing partners, states that "Mortenson didn't really stumble into Korphe after taking a wrong turn" upon descending from a failed mountain climb. He did not make the acquaintance of anyone in Korphe until more than a year later and "under entirely different circumstances."
American Institute of Philanthropy's Investigation
It sounds like a book tour to me. -- AIP president, Daniel Borochoff, when interviewed by 60 Minutes about CAI's spending on domestic travel and advertising for Greg Mortenson's speaking events & book promotion.
AIP began investigating Central Asia Institute in 2009 after receiving many requests from donors for a rating of the charity, and was the first to publish concerns about the lack of segregation between the organization's finances and Greg Mortenson's personal business interests. The charity's web site prominently featured Mortenson's books and provided links to online retailers where they could be purchased, but AIP's review of the charity's recent tax forms showed it was earning no revenue from book sales or advertising. Mortenson's extensive speaking schedule was also detailed on CAI's web site. Not only did the charity report receiving little to none of the $25,000 fees he charged to speak at many of these events, its tax form showed that it was covering many of the expenses related to carrying out Mortenson's U.S. speaking tours. In 2009 the charity's tax form also showed it spent $4.6 million on what it described as "domestic outreach and education" to fund these speaking events at which Mortenson promoted his books. This amount included expenses paid for things like domestic travel and advertising. In contrast, CAI reported spending only $4 million to build and operate schools in central Asia that year.
AIP hoped that a third-party audit of the charity, which is required of most charities of CAI's size by about 20 states as a condition of being allowed to solicit contributions, would help shed light on the organization's finances. In late 2009, after the charity failed to respond to AIP's certified letter requesting copies of its audited financial statements and other information, we contacted CAI by phone and spoke with its operations director, Jennifer Sipes. She told us that the charity "[does] not have audits." This lack of transparency and CAI's failure to answer questions about its finances prompted AIP to assign the charity a "?" rating, and to warn donors about the group in our April 2010 article, Nobel Prize Nominee's Charity Wins No Award for Accountability.
AIP followed up with Mortenson, Sipes, and the charity's auditor in October of 2010 after its first ever publicly available audit was finally issued for financial year 2009. This audit revealed that "the organization paid $1,729,542 for book-related expenses" that year. AIP questioned CAI about why the charity was covering expenses for book sales and speaking events but not receiving the related revenues. We also asked about the charity's internal controls and board oversight of related party interests between CAI and Greg Mortenson. The responses CAI provided did not include answers to our questions.
After seeing AIP's 2010 article, 60 Minutes contacted us for insight into CAI's finances as part of its investigation into the group. AIP president, Daniel Borochoff, was later interviewed by 60 Minutes correspondent Steve Kroft. When asked to describe how the charity spends its donations, Borochoff responded, "It's disappointing. You would hope that [CAI] would be spending a lot more on the schools in Pakistan than on book-related costs. Why doesn't Mr. Mortenson spend his own money on the book-related costs? He's the one getting the revenues."
Mortenson & CAI Deny Accusations
When you re-create the scenes, you have my recollections, the different memories of those involved…and sometimes things come out different…So there were some omissions and compressions. -- Greg Mortenson responding to questions from Outside Magazine as to whether or not stories in Three Cups of Tea are fabrications.
In an interview with Outside Magazine Mortenson conceded that some of the stories in his first book did not unfold in real life exactly as they were portrayed on the written page. He shifted some of the blame for this literary license to the co-author of Three Cups of Tea, David Oliver Relin, whom he said had, among other things, synthesized multiple trips Mortenson made to Afghanistan into a single event. Mortenson denied that the premise of his book was fabricated but admitted to "discrepancies" that "have to do with compression of events." He also told the magazine that the story about his having been kidnapped by the Taliban is "pretty much accurate," and though he was not harmed he was definitely "detained against [his] will." Mortenson admitted he did not actually know whether or not those who allegedly kidnapped him were Taliban, and he later noted in a letter to 60 Minutes that "a 'Talib' means student in Arabic, and yes there were Taliban in the region."
CAI's board of directors contacted 60 Minutes with responses to its questions the day before the news story aired. The board confirmed that in 2009 CAI spent only 41% of its expenses on building or supporting schools in Pakistan and Afghanistan, but insisted that Mortenson's speaking engagements at which he promotes his books should also be counted as a program of the charity since their purpose is to educate Americans about the needs of people in central Asia. In addition, CAI confirmed that the charity "has purchased thousands of copies" of Mortenson's books over the years to give to schools, libraries, and others. Mortenson's royalty checks from book sales "are not split" with CAI, according to the board, but they claim he has donated "a percentage of his royalties from the books to CAI." The board admitted that the charity paid $1.7 million in book-related costs in 2009 that included "Advertising, events, film and professional fees, publications (books & freight), and some travel." They justified this by saying that "Greg [Mortenson] has personally donated hundreds of thousands of dollars to the organization," which they claim includes a percentage of book royalties. CAI said the charity also benefits from the donations it receives from readers who are inspired by Mortenson's story.
AIP is not impressed by CAI's responses. The financial arrangement the board describes has the charity absorbing business risks and costs for promoting Mortenson's books with no guarantee that compensation will be received as a result. It is difficult to imagine that a charity with an independent board of directors would ever agree to cover an author's book promotion expenses in return for the possibility, but no guarantee, that the author might donate some of the proceeds back to the charity at a later date. Furthermore, Mortenson may have been entitled to charitable tax deductions for any contributions he made to CAI when, arguably, the charity should have been entitled to receive these revenues directly since it was covering millions of dollars in book costs. Mortenson is also likely to have received royalties for any books purchased by CAI on the retail market. It does not seem appropriate to give Mortenson credit for donating money back to CAI that should have been received directly by the charity to begin with. If Mortenson did, in fact, donate "hundreds of thousands of dollars" to CAI as its board claims, there is no evidence of it in the charity's audit or tax forms.
In the spring 2011 edition of CAI's newsletter, Journey of Hope, the charity gives answers to what it refers to as "most-commonly asked questions." One question reads: "Every nonprofit must file an annual tax return. According to reports, your nonprofit only filed once in 14 years - is that true?" CAI appears to be attempting to debunk AIP's criticism that the charity has published only one audit in its fourteen year history by shifting the question from one about its audit, to one about its tax form. In its newsletter CAI answered this question, "No. IRS 990 forms filed for every year since CAI's inception are available on our website…" While it is true that CAI does post its tax forms on its web site, the information in these documents is self-reported by the charity. AIP's criticism referred to CAI's lack of audited financial statements produced by independent certified public accountants outside of the organization. Audited information is held to a higher professional standard and these documents often include disclosures that a charity does not want to, or is not required to report to the public in its tax forms.
It is Time for Greg Mortenson to Resign for the Good of the Cause
Greg had no sense of what it takes to run a business…We kept trying to persuade Greg to hire an administrator who would do all the stuff he wasn't good at, but he refused… Now that I know about the things he was hiding, I realize he didn't want anyone looking over his shoulder. -- Jennifer Wilson, former CAI board member, in an interview with Jon Krakauer as published in his online book, Three Cups of Deceit.
On learning of the fiction of Mortenson's supposedly non-fiction books and his use of Central Asia Institute to fund and promote his personal profit-making endeavors, many supporters of the charity seemed to experience the seven stages of grief many people go through on the death of a loved one-at first shock and disbelief that someone so seemingly humble and giving could lie in his books and use a charity for personal gain, and later anger and acceptance as more facts surfaced to substantiate the claims against him. A class action lawsuit, as yet unresolved, has been filed against Mortenson by aggrieved donors and book readers. In addition, some universities canceled Mortenson's planned speaking engagements after the 60 Minutes story aired. One school, Fontbonne University, rescinded its invitation for Mortenson to give its commencement speech and revoked an honorary degree it had intended to award him.
But Mortenson's problems go well beyond answering to disappointed or angry supporters. Krakauer obtained a confidential memo written by an attorney who examined CAI's recent tax return. This attorney advised Mortenson and its board of directors that "CAI's outlays for book advertising and travel expenses for Mortenson's speaking engagements appeared to be in violation" of IRS Code 4859, according to Krakauer. The attorney estimated that Mortenson could owe CAI up to $7,263,458 for "excessive benefits received during fiscal 2007, 2008, and 2009," or as much as $23,606,238 if he fails to repay the charity in a timely manner, Krakauer relays in his online book. CAI later claimed that a different attorney disagreed that an IRS violation had occurred.
Mortenson has temporarily stepped away from CAI's daily operations citing health concerns, including a recent heart surgery. One would think that a charity with programs to build schools and fund education in dangerous or remote parts of the world would hire an interim executive director with extensive experience in central Asia or international development to run the charity in Mortenson's absence. Instead the charity's board of directors, consisting of Mortenson and only two other people, appointed Mortenson's long-time family friend, Anne Beyersdorfer, who is a former media consultant to Arnold Schwarzenegger and a public relations agent based in Washington D.C.
There is no doubt Greg Mortenson should be given credit for doing arguably more than anyone else to bring attention to the dearth of education for children, especially girls, in central Asia. He also deserves credit for the functioning schools built and funded by his charity. But these good deeds do not let him off the hook for using CAI to absorb millions in expenses that generated personal profits for himself and his books' publisher. Mortenson, as many authors do, could have guaranteed a portion of his books' profits to charity while having book costs paid for by those persons who stood to benefit financially from their sales. These actions, combined with the alleged inaccuracies in Three Cups of Tea, have breached donors' trust to a degree that CAI will be unable to recover from, in AIP's opinion, with Mortenson at the helm.
Central Asia Institute is currently under inquiry by the Montana Attorney General's (AG) office. Given the serious allegations against Greg Mortenson and their grave consequences for the reputation of CAI, AIP believes it is appropriate for him to resign from the charity. A new board of directors should then be installed that, unlike its current board, has the ability to govern CAI effectively and independently of the personal business interests of Mortenson or any other CAI official. For a man who has dedicated so much of his life to promoting CAI's important cause, Mortenson's resignation letter to the charity is perhaps the most generous contribution he could now make to the people of central Asia.