Three Cups of Deceit: How Greg Mortenson, Humanitarian Hero, Lost His Way by Jon Krakauer

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