Greg Mortenson

Greg Mortenson speaks to Bozeman's third through eighth-graders at the Brick Breeden Fieldhouse in this November 2009 file photo.

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Greg Mortenson, a Bozeman philanthropist and co-founder of Central Asia Institute, must pay more than $1 million in restitution for mismanaging the nonprofit’s money, according to the Montana attorney general’s investigation released today.

Mortenson also must step down from any position of financial oversight involving Central Asia Institute, Montana Attorney General Steve Bullock decided.

Mortenson failed to fulfill his responsibilities as the executive director and a board member for the nonprofit, which aims to empower communities of central Asia through literacy and education, particularly for girls, and to promote peace through education in the U.S. and abroad.

Mortenson failed to make contributions to CAI equal to the royalties he earned on the books the organization purchased, the investigation found. Both Mortenson and CAI failed to devise a fair way to split costs of advertising and promoting the book.

Mortenson accepted travel fees from event sponsors at the same time that CAI was paying his travel costs, according to the investigative report. He also used money donated to CAI on personal items such as charter flights for family vacations, clothing and Internet downloads.

The board of directors also failed in some of its duties, the investigative report said. The board did not respond adequately to repeated warnings about a lack of financial controls for the money CAI spent abroad and in the U.S.

Mortenson will be allowed to continue with CAI, but not in any role with financial oversight, or as a voting member of the board of directors.

A new executive director will also be hired to better manage CAI’s day-to-day operations. After 12 months, the two remaining board members must also step down and a new board of at least seven members will be appointed.

“The story of Central Asia Institute and Greg Mortenson evokes notions of the best of our aspirations to do good and the generosity of the American public,” Bullock wrote in the investigation. “It involves the efforts of a complicated person who has worked tirelessly on behalf of a noble pursuit, even while acting in a way that jeopardized that pursuit. The story also demonstrates how things can go wrong when officers and directors of a charitable organization fail to abide by fundamental principles of management and oversight.”

Bullock launched the investigation nearly a year ago on April 19, 2011, to look into allegations Mortenson had mismanaged the nonprofit’s assets.

The investigation came on the heels of a story aired on CBS’s “60 Minutes,” which said Mortenson had misused money and benefitted excessively from the charity. The story also alleged that CAI schools overseas did not exist or were abandoned and that Mortenson had fabricated parts of his bestselling book “Three Cups of Tea.”

The claims sparked an uproar as people around the country demanded answers from Mortenson and CAI. Several lawsuits were filed against Mortenson and the charity, some of which were later amended or dropped.

Mortenson co-founded CAI and served as its executive director and on its board. He co-authored “Three Cups of Tea” and “Stones into Schools.”

Shortly after “60 Minutes” aired, Mortenson announced he was having health problems and underwent heart surgery. He has been largely out of the public eye since.

“CAI’s mission is worthwhile and important,” Bullock wrote in the report. “Its accomplishments, driven by the vision and dedication of Mortenson, are significant – as even their harshest critics acknowledge. It has substantial assets which, if properly managed, can be used to pursue the charity’s mission and, in the process, improve the lives of people in a very challenging and complex region of the world. The settlement agreement allows CAI to move forward positively in pursuit of its mission.”

Representatives from CAI are expected to comment this afternoon.

For the full story, read tomorrow’s Chronicle or check back at dailychronicle.com.

Carly Flandro may be reached at 582-2638 or cflandro@dailychronicle.com.

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