Update 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.
Calls for Resignation of Central Asia Institute's Founder Greg
in the August 2011 issue of the Charity Rating Guide &
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
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
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