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APNewsBreak: 'Three Cups' author mismanaged group

By Matt Volz

Associated Press

Published: Thursday, April 5 2012 1:00 p.m. MDT

Five new board members will be added soon and the search for a permanent executive director will begin either this summer or fall, she said.

"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.

Bullock, whose office oversees nonprofit organizations operating in Montana, launched his investigation in April 2011. Investigators signed confidentiality agreements that prevent many details of the probe from being made public.

Bullock's investigators examined financial statements, audits, meeting minutes and interviewed Mortenson, board members and employees.

They 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. A 2008 agreement between Mortenson and CAI required Mortenson to donate the equivalent of what he made in royalties from the CAI-purchased books, but he never did.

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.

He also was not a good financial manager and was notoriously late in keeping up with payments in line with the royaly agreement, she said.

"He was always committed to an equitable split and just fell behind," Beyersdorfer said.

Mortenson has repaid more than $495,000 of the $1.05 million that the attorney general's office says he owes CAI. He has $560,000 left to repay and will have three years to do so — with interest — because he has "insufficient financial resources" to pay it all at once, the report said.

CAI must hire an accountant to pore over credit card statements from previous years to identify additional personal charges Mortenson made and determine how much more he may owe, the attorney general's office said.

The CAI board considered the money spent on Mortenson's books and travel "a worthy and prudent investment," the investigation found. From 2003-2011 CAI spent a total of $9.5 million on book production costs, book purchases and advertising and promotions, according to the attorney general's calculations. Over that same period, CAI took in $72 million in donations.

The attorney general's office plans to monitor the changes by naming an independent observer who attends the CAI board meetings and by receiving the results of the independent audits for three years. CAI also will report on its progress in making the changes every two months starting in June.

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