Montana Attorney General releases findings from investigation of Three Cups of Tea charity—nonprofit takeaways

By Katy Snyder, JVA Consulting

We first wrote about Three Cups of Tea author Greg Mortenson nearly a year ago, when he and his organization, the Central Asia Institute (CAI) became embroiled in a scandal concerning the organization’s finances and Mortenson’s promotion of the book (and his second book, Stones Into Schools) using CAI funds. While accusations were also made that stated that Mortenson may have fabricated the story about the founding of the organization and his supposed brush with Taliban kidnappers, these accusations were determined to be outside the parameters of the Attorney General’s investigation; the finances and the practices of the directors and officers of CAI were investigated.

This morning, the Montana Attorney General, Steve Bullock, reported his findings via a conference call (a written report is also available by clicking here). Speaking to the intense media interest in Mortenson, members of media as varied as Jon Krakauer, the well-known author who had a hand in bringing the Mortenson case to light with the publication of his booklet, Three Cups of Deceit, and CNN and NPR reporters were also on the call.

While stressing the importance of the humanitarian work that Mortenson and the CAI undertake, Bullock said that the findings from his investigation uncovered significant missteps. Among the findings were that Mortenson neglected to share speaking fees and honorariums with the CAI and that he did not reimburse CAI for numerous copies of his book that it purchased. Other discrepancies, such as the fact that Mortenson was accepting travel fees from organizations that hired him to speak even while the CAI was already paying these fees, were also brought to light in the report. Furthermore, Bullock found that Mortenson “had significant lapses in judgment resulting in money donated to CAI being spent on personal items such as charter flights for family vacations, clothing and Internet downloads.” According to Bullock, “parallel” investigations of Mortenson and the CAI also revealed that the two paramount roles of nonprofit directors and officers—the duty of care and the duty of loyalty—had each been violated by both parties. In not fulfilling these duties, Bullock said, public trust has been “eroded” in the organization.

The settlement

To remedy these financial issues, Mortenson will be required to pay back an estimated $1 million dollars to CAI, and will be required to step down from any position at the organization where he would have access to the organization’s finances. Mortenson, who officially resigned as executive director last November, must also step down as a voting member of the board. CAI will also have to submit to oversight of its board by the Attorney General’s office for the next three years and reconfigure its board. At present, there are only three members of CAI’s board, one of who is Greg Mortenson. All three of these board members will be stepping down, after a transitional period, and the Attorney General’s office is requesting that CAI increase its board to at least seven members.  Despite these measures, the Attorney General will not pursue criminal charges against CAI or Mortenson.

Takeaways

Several points made by Bullock get to the heart of what nonprofits can take away from this situation:

A good board can make or break an organization. Says Bullock in the report, this story “demonstrates how things can go wrong when officers and directors of a charitable organization fail to abide by fundamental principles of management and oversight.” While many of the findings in the report point to Mortenson’s failings as an executive director, for me, the bigger takeaway is the failing of his board. Its small size and its members’ close personal relationships meant that Mortenson was not subjected to the scrutiny that he should have been. Furthermore, when suspicious actions were brought to light, such as irregular audit findings and financial discrepancies, the board elected to stop being audited and failed to speak with Mortenson about his lack of financial transparency. These are not the actions of an engaged or diligent board.

If you suspect something, speak up. One member of the media on the conference call posed the question of whether this scandal would have come to light if the media had not coalesced around the story. Bullock said that it potentially would have, as his office had received complaints from concerned CAI donors. This point is especially salient for the majority of nonprofits that are small and not well known—if something isn’t right, speak up. Most nonprofit scandals will never get the kind of publicity that this or other recent scandals, such as the Komen debacle have, which means that after the board, donors have a responsibility to make sure their donations are going where they think they are. If not, donors can act by withdrawing their financial support, and filing complaints with the appropriate authorities, just as some CAI donors in Montana did.

“Despite the severity of their errors, CAI is worth saving.” Bullock perhaps summed it up best with this statement. There is absolute value in the work that CAI does to build schools and promote peace through education. If CAI were to fold, who would build schools in the war-torn and dangerous regions that its serves in Afghanistan and Pakistan? While its censure was warranted, if CAI complies with all of the measures put in place by the DA’s office, there is no reason that it can’t remake itself by rebuilding its board, finding a new ED, and determining what, if any, is an appropriate role for Mortenson to play in the organization in the future.

Do you think Mortenson and CAI were adequately punished for their missteps? Or do you think the punishment was too harsh? Let us know by leaving a comment below.

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4 Responses to Montana Attorney General releases findings from investigation of Three Cups of Tea charity—nonprofit takeaways

  1. Osei May says:

    Wow – excellent summary, Katy! Thanks for returning to this discussion and sharing this post.

  2. lornanaegele says:

    Katy, not only is this a succinct summary of the attorney general’s findings, you also make a great case for board involvement, using this situation as an important learning opportunity for any nonprofit board. Thank you for including your takeaways!

    • jvaconsulting says:

      Lorna, thank you! The attorney general’s report that is linked to in the blog gives some other really interesting facts about CAI’s board if you are looking for more info.

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