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'Three Cups' Author Mismanaged Group

HELENA, Montana - "Three Cups of Tea" author Greg Mortenson mismanaged the nonprofit organization he co-founded to build schools in Pakistan and Afghanistan and spent millions of dollars of charity money on charter flights, family vacations and personal items, according to an investigative report released Thursday.

"Three Cups of Tea" details how Mortenson resolved to build schools in Central Asia after he became lost and wandered into a poor Pakistani village, then follows him as he expands his school-building efforts there. The book was originally conceived as a way to raise money and tell the story of the Central Asia Institute, which Mortenson founded in 1996 with a $1 million donation from Dr. Jean Hoerni, a Swiss physicist and mountaineer

After its release in 2006, the book became a best seller and it, along with Mortenson's tireless promotion that included more than 500 speaking engagements in four years, resulted in tens of millions of dollars in donations to the Central Asia Institute.

Mortenson's control of the Central Asia Institute went largely unchallenged by its board of directors, which consisted of himself and two people loyal to him, the report prepared by the Montana Attorney General's office said. When an employee would question his practices, Mortenson either resisted or ignored the person, the report found.

The result was a lack of financial accountability in which large amounts of cash sent overseas were never accounted for. Itemized expenses listed as program-related were missing supporting receipts and documentation. Employees and family members charged items such as health club dues and gifts to CAI credit cards.

Mortenson himself reaped financial benefits at the expense of the Central Asia Institute, including the free promotion of "Three Cups of Tea" and his later book, "Stones Into Schools," and the royalties from thousands of copies CAI bought to donate to libraries, schools, churches and military personnel, the report said.

Mortenson must reimburse the charity more than $1 million under a settlement agreement. Nearly half has already been repaid.

The books came under scrutiny last year when reports by "60 Minutes" and author Jon Krakauer alleged that Mortenson fabricated parts of both and that he benefited financially from the charity. The attorney general's probe focused only on the charity's finances and operations, and did not examine the books' contents.

Mortenson was permanently removed as CAI's executive director in November. Central Asia Institute Interim Executive Director Anne Beyersdorfer told The Associated Press that Mortenson will continue to work as a paid employee of the charity, but he will no longer serve on its board of directors unless the new board brings him on as a non-voting member.

Bullock's investigators found that CAI spent $3.96 million buying Mortenson's books to give away, paying full price through online retailers instead of using the publisher's discount for Mortenson.

The investigation also found that CAI spent $4.93 million on advertising and promoting Mortenson's books, costs that the charity and the author had agreed to split but never did.

CAI paid $2 million in charter flights for Mortenson to keep his rigorous speaking engagement schedule before he started paying for his own travel in 2011. The investigation found that in many cases he was "double-dipping," where CAI paid for his travel to a speaking engagement and the host of the event also paid him a fee or honorarium for his travel, which Mortenson pocketed.

Mortenson and his family also charged personal items to CAI in 2009-2010 amounting to $75,276 that included "LL Bean clothing, iTunes, luggage, luxurious accommodations and even vacations," according to the report.

The charity disagreed with that aspect of the report in particular, Beyersdorfer said. Those were not personal items but expenses that included clothing for overseas managers and music for presentations, she said.

Krakauer wrote in his blog on Byliner.com that the corrective actions are encouraging but pointed out that the new executive director and board members will be appointed with input from Mortenson.

"Neither the Attorney General nor any other outside entity has the legal authority to veto or contest any of the individuals appointed," Krakauer wrote. Adding "this should be cause for great concern."

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