- Associated Press - Thursday, April 5, 2012

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

Mr. Mortenson’s control of the Central Asia Institute (CAI) went largely unchallenged by its board of directors, which consisted of himself and two loyalists, the report prepared by the Montana Attorney General's Office said. When an employee would question his practices, Mr. 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 lacked supporting receipts and documentation. Moreover, employees and family members charged items such as health club dues and gifts to CAI credit cards.

Mr. 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.

At the height of his fame, Mr. Mortenson was lionized as one of the country’s most unusual and effective humanitarians, an author who was feted by New York Times columnist Nicholas Kristof and whose first book was a featured selection for the Oprah Winfrey Book Club.

Mr. 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 the author fabricated parts of both works 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.

The yearlong investigation concluded that CAI took in far more donations than it spent, and with $23 million in reserves, it still has a strong financial outlook. But the charity needs better oversight so that too much control is not in one person’s hands, the audit found.

Mortenson’s pursuits are noble and his achievements are important. However, serious internal problems in the management of CAI surfaced,” Attorney General Steve Bullock said in the report. “Despite the severity of their errors, CAI is worth saving.”

Mr. Mortenson was permanently removed as CAI’s executive director in November. Interim Executive Director Anne Beyersdorfer told the Associated Press that Mr. Mortenson will continue to work as a paid employee of the charity, but will no longer serve on its board of directors.

Mr. Mortenson, who had heart surgery last year, will not continue his former breakneck pace in promoting the books and CAI projects at home and abroad, but he will still be the charity’s public face and work to build relationships overseas, she said.

“He’s the heart and soul of the organization,” Ms. Beyersdorfer said. “He’s the co-founder and I think we all think of him as our chief inspiration officer.”

Mr. Mortenson declined to comment because of a still-pending civil lawsuit filed in Montana challenging the claims in his books, she said.

The attorney general's office plans to monitor the changes at the institute by naming an independent observer who attends the CAI board meetings and by receiving the results of the independent audits for three years.