"Three Cups" Greg Mortenson Could Owe $20 Million in Taxes

By: From CBS News
By: From CBS News

NEW YORK (CBS) -- The Greg Mortenson "Three Cups of Tea" controversy has now spilled into his home state. The Montana attorney general announced he's "looking into...the management and financial affairs" of the non-profit behind its leader's storybook success, the Central Asia Institute (CAI).

"The issues with charities and with people who are strong personalities who create charities, is that so often this balance between doing good and doing well for themselves," says the Alliant Group's Dean Zerbe.

CBS News has learned that a memo prepared by external lawyers for CAI warned in January that Mortenson could conceivably be liable for as much as $23 million in back taxes and penalties tied to "excess benefits" he received from CAI thru 2009.

But CAI told "60 Minutes" that one of its lawyers now says Mortenson received no excess benefits, because the charity "...appropriately receives a greater benefit from Greg's activities than Greg does himself."

As both a board member and executive director of CAI, Mortenson says his work as author, speaker and principle fundraiser is intricately woven with the charity's mission: Promoting peace primarily through the building of schools in Pakistan and Afghanistan. That mission is played up in flyers that say every donation, every cent goes directly to the schools.

But as Steve Kroft reported on "60 Minutes" on Sunday, only 41 percent of the money CAI spent in 2009 actually went to schools in those two war-torn countries.

"This is a betrayal to the donors," Zerbe says. "The donors have a right to know that the funds have been spent appropriately and properly and have a complete understanding of what is going on and so far - that hasn't been happening."

A former CAI board member told CBS News Wednesday that he resigned back in 2002 over concerns about Mortenson not communicating for months at a time, and his lack of financial transparency. Late this afternoon the charity said financial transparency is a priority and it intends to cooperate fully with the Montana attorney general.


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