In addition to forcing Greg Mortenson to pay the Central Asia Institute more than $1 million to cover the funds he’d skimmed from the charity, in April 2012 the Montana Attorney General ordered CAI to expand its board of directors. (At the time of the Attorney General’s investigation, the board consisted of just Mortenson and two acquiescent devotees.) In July 2012, seven directors were added to the board, and they appear to be genuinely committed to reforming CAI from the ground up. Under the leadership of newly elected chairman Steve Barrett—a principled, highly respected Montana attorney—I’m guardedly optimistic that the board will eventually transform CAI into a trustworthy and effective organization
That’s the good news. The bad news? Overhauling CAI is going to be vastly harder than Barrett or anyone else on the revamped board imagined. These grim tidings were recently delivered by a reputable Pakistani accounting firm, HLB Ijaz Tabussum & Co., which CAI hired in the aftermath of the Attorney General’s investigation to conduct an audit of the charity’s overseas activities. The HLB auditors’ report, completed in late 2012, reveals that CAI’s foreign operations are plagued by widespread corruption, including acts of major fraud by CAI program managers. Thanks to appallingly lax oversight while Mortenson was at the helm, many hundreds of thousands of dollars—perhaps millions—have been squandered or embezzled by some of the charity’s Afghan and Pakistani staff.
In his bestselling memoirs, Mortenson repeatedly sings the praises of his handpicked team of foreign employees. In Stones into Schools (the sequel to Three Cups of Tea) Mortenson confides,
I often refer to this group as the Dirty Dozen because so many of them are renegades and misfits—men of unrecognized talents who struggled for years to find their place and whose former employers greeted much of their energy and enthusiasm with indifference or condescension. But inside the loose and seemingly disorganized structure of the CAI, they have found a way to harness their untapped resourcefulness and make a difference in their communities.
Problem is, several of the Dirty Dozen harnessed their untapped resourcefulness to steal a huge pile of money from CAI. The HLB audit makes clear that embezzling from the charity was ridiculously easy because nobody from CAI’s American office was monitoring how CAI funds were spent. As an ex-employee told me, “Greg was accountable to no one, and the staff overseas were accountable to only Greg, but he never held them accountable to anything. Ever. He never checked their books, never asked for receipts.”
It’s hard to make sense of this glaring lapse. It might be explained to some degree by incompetence. But it also seems to be at least partly attributable to the fact that Mortenson had secrets of his own that he wanted to keep hidden, so he actively discouraged his American staff from looking too closely at certain aspects of CAI’s overseas activities. As the ex-CAI staffer put it, “Greg did not like people discovering things.”
Two months ago I asked CAI Executive Director Anne Beyersdorfer to post the HLB audit on the CAI website, in accordance with numerous public assurances she’s made about CAI’s new commitment to transparency. I asked again last month, but the audit still has not been publicly released, prompting me to post what I know about the audit on Byliner. Although I have not seen the entire HLB report, significant portions of it (along with numerous corroborating documents) were sent to me by whistleblowers frustrated over Mortenson’s failure to take action against corrupt CAI program managers. Among the transgressions revealed by these whistleblowers was an expense of 4 million Pakistani rupees (approximately $41,300) claimed by CAI Community Program Director Saidullah Baig to build a security wall around the Diamond Jubilee Middle School in the remote Pakistani village of Passu; when an HLB auditor visited the school, he discovered the wall did not exist.
The most brazen and prodigious swindler exposed in the portions of the HLB audit I’ve seen, however, is Mortenson’s pal and confidante, Lieutenant Colonel Ilyas Ahmed Mirza, whose name will be familiar to readers of Mortenson’s memoirs. Here is how the retired Pakistani Army aviation officer is described upon making his first appearance in the pages of Three Cups of Tea:
Ilyas was tall and dashing in the way Hollywood imagines its heroes. His black hair silvered precisely at the temples of his chiseled face. Otherwise he looked much like he had as young man, when he served as one of his country’s finest combat pilots. Ilyas was also a Wazir, from Bannu, the settlement Mortenson had passed through just before his kidnapping, and the colonel’s knowledge of how Mortenson had been treated by his tribe at first made him determined to see that no further harm befell his American friend.
Mortenson and Ilyas have been friends for more than a decade. In late 2009 or early 2010, Mortenson hired Ilyas to be CAI’s “Pakistan Chief Operations Director,” a position for which he presently receives an annual salary of $42,000. Ilyas was given the job as part of a long-range plan that would allow Mortenson to resign from CAI, take CAI’s lucrative “Pennies for Peace” program along with him, and run P4P as an independently registered, stand-alone nonprofit. Emails from Mortenson to his staff confirm that he intended “to step away from CAI… and find others to keep the flame alive.” Toward that end, shortly after Mortenson hired Ilyas, he created a pair of independent nonprofit foundations that he registered in Kabul to conduct CAI’s mission in Afghanistan. To carry out CAI’s work in Pakistan, Mortenson asked Ilyas to create an independent trust instead of a nonprofit foundation, because a trust could be set up much faster and with much less red tape or oversight.
Ilyas registered the Central Asia Institute Trust in Islamabad on November 24, 2010. It’s hard to believe that Mortenson or anyone else in the United States read the trust deed before the trust was a done deal. If the document had been vetted beforehand, it would have quickly become apparent that the trust appears to have been deliberately structured to allow Ilyas to embezzle from it with impunity.
Ilyas and his wife, Talat, are the sole trustees, giving them complete control of the trust and all CAI funds that pass through it. According to the HLB auditors, “Separate bank accounts for the funds of CAI-USA [i.e., money sent from CAI’s American headquarters] are not being maintained. [Funds from CAI-USA] are directly transferred in personal account of Chief Operations Director [Ilyas]. Non-maintenance of separate bank accounts implies weakness of controls that may result in embezzlement of funds.” Indeed, on November 10, 2010—just two weeks after the trust was created—Ilyas paid himself a $50,000 “hiring bonus.”
Below is a partial list of the irregularities described in the HLB auditors’ report and other documents provided to me:
A lavish Islamabad home purchased with CAI funds before the trust was created was sold by Ilyas for 47 million Pakistani rupees (approximately $486,000). All the money from this sale was deposited in Ilyas’ personal bank account. Ilyas refused to show auditors any documents related to the sale of this home.
A single payment of $14,000 to the Faheem Elementary School for teachers’ salaries was claimed in the books of both Ilyas and another CAI program director, Suleman Minhas. One of the men (or possibly both) pocketed fourteen grand.
On September 30, 2011, Ilyas redeemed a CAI certificate of deposit for $42,000 in cash, which, according to the trust accountant, he used for personal expenses.
An invoice from a Pakistani air charter company called Princely Jets shows that on January 16 and 17, 2012, the trust spent $14,210 to charter a private jet to fly Ilyas from Islamabad to Dera Ismail Khan, then to Bannu, and then back to Islamabad. On January 17, the same day that Ilyas returned to Islamabad from Bannu, other invoices show that the trust spent an additional $14,532 on two separate, round-trip helicopter flights between Islamabad and Bannu. The helicopters were hired from Askari Aviation—a helicopter charter company in which Ilyas has had a longstanding business interest. The trust, in other words, inexplicably spent $28,742 on three separate charter flights between Islamabad and Bannu in the same two-day time period.
According to the HLB report, “Contracts for the construction of colleges and schools were awarded [by Ilyas] without following any open bidding process, thus the opportunities of most economical constructions have not been availed.”
The trust pays Ilyas’ brother Idrees a salary of $48,000 per year to travel from Islamabad to Bannu once a month to “supervise” construction of a $700,000 library at the University of Science and Technology. The trust also pays the salaries of several of Ilyas’ cousins and cronies to work at the UST library project, but they appear to do little actual work.
The trust pays the salary of a cook, Nadeem, at Ilyas’ personal residence, and the salaries of four drivers—Javaid, Rauf, Mushtaq, and Shakeel—to chauffeur Ilyas, his wife, and his daughter around Pakistan in three vehicles purchased with CAI funds. Two of the vehicles are registered in the name of the CAI Pakistan trust; one is registered in the name of Ilyas.
The trust provides scholarships to relatives of Ilyas and relatives of Ilyas’ buddies. The trust also provides scholarship funds to a girl named Zainab Farhat who is the daughter of a government employee; this scholarship appears to be a thinly disguised bribe.
According to a prominent, frequently cited statement on the CAI website,
Each one of Central Asia Institute’s projects is locally initiated and involves community participation. A committee of elders guides each selected project. Before a project starts, the community matches project funds with equal amounts of local resources and labor.
The HLB audit indicates this statement has little, if any, basis in reality. According to the auditors’ report, “Selection of projects is at the sole discretion of Chief Operations Director [Ilyas] which raises the risks associated with lack of segregation of duty. There are no selection criteria… either for the selection of place for construction of schools/college or for providing support for it. Also the effectiveness of the projects is not measurable before or after the implementation.” The audit leaves no doubt that most, if not all, of the projects under the purview of Ilyas were implemented at his whim without community input, often with the primary aim of providing financial benefits to Ilyas, his relatives, and/or his friends.
Although I have not seen the full auditors’ report, which runs well over a hundred pages, individuals familiar with the document assure me that it unveils a deeply entrenched culture of dishonesty that pervades CAI’s foreign operations. The financial transgressions revealed in the documents I received pertained to only a portion of the financial activities of just two of the ten program managers who directed CAI’s operations in Pakistan and Afghanistan in 2010 and 2011. Each manager controlled his or her own fief. Although the sums embezzled by Ilyas probably surpassed the sums embezzled by other managers during this period, one can imagine that among the eight staffers who escaped my scrutiny, there were at least a few who played fast and loose with CAI’s money, as well.
Which should come as no surprise. The leaders of any charity—the executive director and the board of directors—determine the culture of the entire organization, largely by example of their own ethical conduct. And the leadership of Mortenson and his board was rife with ethical and managerial failings, as the Montana Attorney General’s investigation made abundantly clear:
We concluded that the board of directors failed to fulfill some of its important responsibilities in governing the nonprofit charity. Further, Mortenson failed to fulfill his responsibilities as executive director and as a member of the board…. When charities take the money people give for specific purposes, it is essential that the money be spent as intended. When it is not, the underlying public trust erodes and can be difficult to restore.
On November 26, in response to my most recent request to CAI that the charity post the HLB audit on its website, Chairman-elect Steve Barrett sent me an email explaining that
the board has been busy yet recognizes the many important issues that still need to be addressed and is dedicated to dealing with them professionally and transparently. The results will be evident, but the Board is not interested in playing out those resolutions in the media. While addressing all these issues CAI must also insure that the existing programs are supported so that thousands of young girls can continue their schooling.
Barrett’s reply leaves open the possibility that CAI may yet post the audit. I certainly hope it happens, and soon. People contemplating year-end donations to CAI deserve to know the truth about CAI’s overseas programs. Barrett’s suggestion that the charity needs to withhold the foreign audit in order “to insure that the existing programs are supported so that thousands of young girls can continue their schooling” is shortsighted. Keeping the audit under wraps undermines crucial trust in a way that is counterproductive to the charity’s mission over the long haul.
Changing CAI’s corrupt institutional culture is going to be a difficult, protracted process at best. But such a transformation will be impossible unless the new board of directors and new executive director (who is expected to be appointed by the end of 2012 or soon thereafter) stop trying to downplay the extent of CAI’s problems, and instead adopt a policy of genuine transparency. The sins of the Mortenson era—all of them, no matter how shameful—need to be brought to light before CAI can move forward in a meaningful way. It would be a great blessing if this were to occur. The need is huge for what a reformed CAI could provide.