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'Three Cups of Tea' author settles with Montana authorities

By the CNN Wire Staff
updated 9:49 PM EDT, Thu April 5, 2012
A family photo shows author Greg Mortenson in a house in the Waziristan region of Pakistan.
A family photo shows author Greg Mortenson in a house in the Waziristan region of Pakistan.
STORY HIGHLIGHTS
  • NEW: Montana's attorney general says the settlement can restore "donor confidence"
  • NEW: Greg Mortenson owed his charity for travel expenses and royalties from his books
  • The author "failed to fulfill ... responsibilities" as head of his charity, the state finds
  • He had earlier come under fire for allegedly fabricating details in "Three Cups of Tea"

(CNN) -- Greg Mortenson, under fire for allegedly fabricating details in his best-seller "Three Cups of Tea," agreed in a settlement to give the charity he co-founded more than $1 million, nearly a year after Montana's attorney general began investigating the organization's financial affairs.

The report issued Thursday notes the "accusations of inaccuracies and falsehoods in the narratives" of his books "were not the subject" of the investigation. But Attorney General Steve Bullock said his office's investigation did find "serious internal problems in the management" of the Bozeman, Montana-based Central Asia Institute that Mortenson helped create.

Under the terms of the deal, Mortenson must repay more than $1 million to the charity within three years.

This comes after state investigators determined Mortenson was "double-dipping" when he didn't reimburse the institute for travel expenses he got from sponsors. Their report also stated he did not pay the charity promised royalties and charged it "substantial personal expenses" -- like "L.L. Bean clothing, iTunes, luggage, luxurious accommodations and even vacations."

"When employees challenged him by attempting to get him to provide documentation to substantiate expenditures or otherwise to comply with sound management practices, he resisted and/or ignored them," the report's authors wrote. "Some of them ended up leaving."

While he can remain an employee of the Central Asia Institute, Mortenson can "no longer oversee financial aspects of the charity or serve as a voting member of the board of directors," according to the attorney general's office.

The Central Asia Institute's two other board members will step down after a transitional period of 12 months and a new seven-member board will be appointed in its place, according to the settlement. Its interim director, Anne Beyersdorfer, a "longtime family friend of Mortenson," will eventually give way to a new chief executive, Bullock told reporters Thursday.

In addition, the charity faces "more organizational and financial controls" and will be monitored by the attorney general for three years.

This comes after the attorney general concluded that Mortenson "failed to fulfill some of his responsibilities" as executive director, and gave a similar assessment of the institute's board.

Mortenson shot to worldwide fame with "Three Cups of Tea: One Man's Mission to Fight Terrorism and Build Nations ... One School at a Time." The book describes his getting lost in an effort to climb the world's second-tallest mountain, K2, being rescued by Pakistanis in the village of Korphe and vowing to return there to build a school for local girls. About 4 million versions were sold of the paperback version alone, which spent 57 weeks on The New York Times best-seller list, the attorney general's report said.

The riveting story led to the creation of the Central Asia Institute, an organization that endeavors to improve girls' education in Pakistan and Afghanistan.

Last spring, however, the charity and Mortenson found themselves on the defensive against accusations of mismanagement and exaggeration, if not outright fabrication, of key sections from the book. This followed a critical report on CBS "60 Minutes" in which Jon Krakauer -- the author of the best-selling "Into Thin Air," who said he had donated $75,000 to the Central Asia Institute -- said Mortenson's account is "a beautiful story, and it's a lie."

Days after that report, Montana's attorney general announced he was launching an investigation amid "concerns ... raised about the management and financial affairs of the Central Asia Institute."

The organization recorded income of $14 million in 2009, the vast majority of which was raised from private individuals, many of whom were no doubt inspired by Mortenson's books.

However, in 2009, less than half that money actually went to building schools in Afghanistan and Pakistan, and $1.7 million went to promote Mortenson's books, according to the institute's board of directors.

Mortenson resigned as his charity's executive director last November.

His successor in that post, Beyersdorfer, acknowledged in a statement on the Central Asia Institute's website that "this past year brought unprecedented challenges for all of us." She said that the charity is "pleased" that an agreement has been signed "resolving" the attorney general's investigation.

"While we respectfully disagree with some of the analysis and conclusions in the (attorney general's) report, we look forward to moving ahead as an even stronger organization," Beyersdorfer wrote.

She spoke highly of the work the charity has continued to do, as well as the role that Mortenson has had -- and may continue to have on its operations going forward.

"Greg and our overseas managers have dedicated their lives to helping fulfill countless dreams and aspirations, and we are honored to continue our life-changing work together," said Beyersdorfer.

Montana's attorney general stressed Thursday that he believes the charity has and can continue to do "good things," adding he hoped the settlement agreement will help restore "donor confidence."

"I think it's a fair settlement that it's in the best interests not only of the charity, but of the children of Afghanistan and others that the Central Asia Institute serves," said Bullock.

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