Three Cups of Deceit: How Greg Mortenson, Humanitarian Hero, Lost His Way (10 page)

Book sales aside, Mortenson
’
s speaking engagements
—
which are arranged by the Penguin Speakers Bureau, a division of the corporation that publishes his books, Penguin Group USA
—
are extremely lucrative for him.
When Mortenson travels to speak, he typically does two or three events per city. He appears at many of them pro bono, but for some sixty events each year he charges upwards of $30,000 per event, plus $3,000 in travel expenses. According to former CAI staffers, the Institute has received none of the millions of dollars Mortenson has received for such events. In fact, CAI has never received the $3,000 per booking Mortenson gets reimbursed for travel expenses, despite the fact that CAI, not Mortenson, has paid for all of his travel costs (including chartered jets and deluxe hotel suites), as well as expenses incurred by family members and personal assistants who often travel with him.
“
Greg is of the attitude that CAI exists because of him,
”
says an ex-staffer who held a senior position in the organization
’
s Montana office.
“
Any money he raises for CAI, according to Greg
’
s logic, is therefore his money, and he can spend it however he wants.
”

According to the CAI website,
“
Central Asia Institute is a non-profit 501(c
)3
organization dedicated to use every dollar contributed as efficiently as possible. It is our goal to spend no more than 15% of your donation on overhead (administrative and fundraising costs), and to spend 85% of your contribution on our programs.
”
What this statement fails to disclose is that for accounting purposes, CAI reports the millions of dollars it spends on book advertising and chartered jets as
“
program expenses,
”
rather than as fundraising or other overhead. Were they reported honestly, CAI
’
s fundraising and administrative expenses would actually exceed 50 percent of its annual budget. In 2009, according to an audited financial report, CAI spent just under $4 million building and operating schools in Pakistan and Afghanistan, a sum that includes construction costs, school supplies, teachers
’
salaries, student scholarships, and travel expenses for program managers. In the same year, CAI spent more than $4.6 million on
“
Domestic outreach and education, lectures and guest appearances across the United States
”—
an amount that included $1.7 million to promote Mortenson
’
s books. CAI reported all of this $4.6 million on its tax return as expenses for
“
programs.
”

In a confidential memo dated January 3, 2011, an attorney who examined CAI
’
s most recent federal tax return advised Mortenson and the board of directors that CAI
’
s outlays for book advertising and travel expenses for Mortenson
’
s speaking engagements appeared to be in violation of Section 4859 of the Internal Revenue Service Code, which prohibits board members and executive officers of a public charity from receiving an excessive economic benefit from the charity.
(Since 1998, Mortenson has served as both CAI
’
s executive director and as a board member; presently, the board of directors consists solely of Mortenson and two other members.)
The memo, written by a lawyer at the firm Copilevitz & Canter, warned:

Assume that in auditing the Central Asia Institute, the IRS finds that in fiscal year 2009, Mr. Mortenson received an excess benefit from his charity in the amount of $2,421,152.71 (assuming that CAI
’
s advertising expenses related to Mr. Mortenson
’
s books were $1,022,319.71 and travel expenses related to Mr. Mortenson
’
s speaking engagements were $1,398,831 as reported on the organization
’
s 990 for
…
2009; and further, the charity received none of the revenue that Mr. Mortenson received from said book sales or speaking events)
…
. Further, assuming Mr. Mortenson received the same or similar excess benefit for the previous two years, and the IRS looked back to these years in its audit (as is often the case), Mr. Mortenson could owe CAI up to $7,263,458.13 for excessive benefits received during fiscal years 2007, 2008, and 2009
…
. [I]f Mr. Mortenson fails to timely pay the correction amount, he could face a total liability ranging from $7,868,746.31
…
to $23,606,238.62.

An example of the
“
excessive benefits
”
provided to Mortenson were several full-page color advertisements in
The New Yorker
to promote Mortenson
’
s books; CAI paid for all of these ads, each of which, according to the magazine
’
s published ad rates, cost more than $100,000. Another example: CAI has routinely paid for extravagances such as a four-day excursion by Mortenson to the Telluride Mountain Film Festival in May 2010, where he was a featured speaker. A Learjet was chartered to fly Mortenson, his wife and children, and four other individuals from Montana to Colorado and back. CAI rented multiple residences in Telluride to house the entourage. Lavish meals were billed to the foundation. The jet charter alone cost CAI more than $15,000.

“
For a charity that exists to help the poor in the developing world,
”
says Daniel Borochoff, president of the charity watchdog the American Institute of Philanthropy,
“
this is pretty outrageous behavior. Mortenson is acting as if CAI was his own private business. It
’
s not. He
’
s using the public
’
s money. CAI is a tax-exempt organization subsidized by our tax dollars. It sounds like he
’
s violating every financial practice that nonprofits are supposed to follow. It
’
s very important that any nonprofit separate personal and private business interests from its charitable interests. CAI should not be paying for all these expenses that serve to benefit Mortenson personally. The fact that the charity might also benefit doesn
’
t make it OK.
”

Mortenson
’
s Pennies for Peace program (P4P) is a commendable cultural studies course that also happens to function as a phenomenally effective marketing-and-fundraising scheme for CAI. By pitching P4P directly to kids, their teachers, and school administrators, Mortenson has induced nearly three thousand schools in the United States and Canada to make P4P part of their standard K
–
12 curriculum. Hundreds of thousands of children have contributed their lunch money in response to P4P fundraising appeals.
“
The Pennies for Peace money, every single penny, we put it very quickly to use over in Pakistan and Afghanistan,
”
Mortenson has assured these students and their parents.
“
All of the money is used for supplies, for books
…
. Everything is used to help the kids out.
”
⁶
In 2009, schoolchildren donated $1.7 million to Pennies for Peace. But CAI
’
s total 2009 outlay for the things P4P is supposed to pay for
—
teachers
’
salaries, student scholarships, school supplies, basic operating expenses
—
amounted to a paltry $612,000. By comparison, in 2009 CAI spent more than $1 million to promote sales of
Three Cups of Tea
and
Stones into Schools
, and another $1.4 million to fly Mortenson around in chartered jets. Donors unknowingly picked up the tab for all of it.

Part III

GHOST SCHOOLS

“
But education is a sacred thing, and the pledge to build a school is a commitment that cannot be surrendered or broken
…
.
”

—
Greg Mortenson,
Stones into Schools

This simply is not true, and Mortenson knows it isn
’
t true. Only a small fraction of his schools are found in locales that might be characterized as breeding grounds for terrorists. In Afghanistan, the majority of schools CAI has established are in areas where the Taliban has little influence or is simply nonexistent, such as the Panjshir Valley and the Wakhan Corridor. In Pakistan, most of the CAI schools are situated in a region the size of West Virginia that used to be known as the Northern Areas but in 2009 was officially designated Gilgit-Baltistan. North of Gilgit-Baltistan lies Afghanistan
’
s Wakhan Corridor; to the northeast, across the towering peaks of the Karakoram, is China; to the southeast is the fiercely disputed border with India
—
the so-called Line of Control.

Despite its proximity to contested areas of Kashmir administered by India, Gilgit-Baltistan is a tranquil land that has thus far escaped most of the violence afflicting so many other parts of the region. Ethnically diverse, the inhabitants of Gilgit-Baltistan are followers of Shia, Sunni, Ismaili, and Nurbakhshi interpretations of Islam, and
“
have historically lived in relative harmony,
”
according to Nosheen Ali, a sociologist with a doctorate from Cornell who has conducted extensive research in Gilgit-Baltistan. In an article titled
“
Books vs. Bombs? Humanitarian Development and the Narrative of Terror in Northern Pakistan,
”
published in the academic journal
Third World Quarterly
, Dr. Ali writes,
“
The most troubling irony is that the focal region of Mortenson
’
s work
—
the Shia region of Baltistan with its Tibetan-Buddhist heritage
—
has nothing to do with the war on terror, yet is primarily viewed through this lens in
[
Three Cups of Tea
].
”