Better to Pay Lawyers, or Build Schools?
BY SHAHID HAQUE-HAUSRATH
Class action lawsuits are an important vehicle to ensure that large groups of people, each of whom have a small claim for damages, are nevertheless able to get justice when they are harmed. However, the recent federal class action lawsuit against Greg Mortenson is premature and unproductive. This lawsuit was filed by Alexander Blewett of Great Falls, seeking to represent a class of plaintiffs who were allegedly harmed by buying Mortenson’s books. Rather than benefitting young Afghani and Pakistani schoolchil-dren, this lawsuit will only serve to benefit attorneys, who will make millions of dollars at their expense.
Originally, this lawsuit was lodged against both Mortenson and the Central Asia Institute (CAI)—the non-profit organization run by Mortenson and others to further the cause of building schools in Pakistan and Afghanistan. Just recently, CAI was dropped from the lawsuit and damages are now being sought against Mortenson and his book publisher. However, CAI may still be obliged to defend or “indemnify” Mortenson in this lawsuit, especially to the extent that these claims relate to his duties as Executive Director of the organization.
Montana Attorney General Steve Bullock has opened an investigation into Mortenson and CAI to look into some of the allegations that have been made. The investigation and any potential litigation should be left to the Attorney General, who is better suited to pursue any punish-ment and mandate changes in their practices. A class action lawsuit, whether pursued against Mortenson or CAI, is not the best or most efficient way to resolve this matter. Of course, it is the only way that private attorneys can profit from the outcome.
Alleged Fraud Committed by Mortenson
Mortenson and CAI have come under fire for alleged falsehoods in Mortenson’s books, Three Cups of Tea and Stones into Schools. These allegations are outlined in detail in Jon Krakauer’s book Three Cups of Deceit. Below, I have outlined the essential allegations that Krakauer makes against Mortenson. However, very few of these allegations are specifically referenced in the Plaintiffs’ lawsuit.
Many of the criticisms against Mortenson appear to be substantiated, although other allegations are based on second hand sources that cannot be verified with any greater accuracy than Mortenson’s claims. Mortenson has responded to some of these allegations in interviews, admitting mistakes in some instances, but denying that any of his conduct rises to the level of fraud. The following is a fairly comprehensive account of the allegations against Mortenson.
Mortenson is alleged to have lied, embellished, and exaggerated facts in his two books, so that his stories would be more effective fundraising tools to accomplish his mission of building schools in the mountains of Pakistan and Afghanistan:
—Krakauer says that some of the details of Mortenson’s “creation myth” are false. Mortenson’s story begins as follows: In 1993, he fails to climb K2—a goal that he embarked upon after his sister died. On his journey home, he gets lost and winds up in Korphe, a small village. He is touched by the hospitality he experiences and is devastated by their lack of a school. He promises to build a school for the village. Krakauer states that after Mortenson failed to climb K2, he actually wound up in a different village, Khane, where he promised to build a school. Krakauer claims that Mortenson went to Korphe a year later, and decided to build a school there instead. He is alleged to have embellished his story so that Korphe was originally the intended site of the school.
—In Mortenson’s book, he recounts a harrowing incident from 1996 in which he was kidnapped by the Taliban, but ultimately released eight days later when the Taliban became aware of his plans to build schools in the region. According to Krakauer, this whole story is false, and Mortenson spent these days under the hospitality and protection of some friends.
—In his first book, Mortenson claims that his salary in 2002 was $28,000, while Krakauer claims that his salary was actually over $75,000.
—Mortenson is alleged to have exaggerated the extent to which his schools were built in fundamentalist regions where the Taliban operated. Krakauer claims that Mortenson used this imagery as a fundraising tool, as he claimed that his schools were keeping children out of Taliban hands.
—Krakauer claims that Mortenson lied about meeting the King of Afghanistan on a plane in 2003. The King himself is dead, but Krakauer contacted his grandson, who denied that the meeting took place. The allegation of the King’s grandson cannot be taken as conclusive proof that Mortenson was lying. After all, a meeting could have occurred without his knowledge.
—Krakauer claims Mortenson and CAI developed certain projects specifically to create a narrative around Mortenson’s second book. He states that Mortenson took creative liberties in creating drama about a dying Kyrgyz leader who wanted to see a school built before his death. Mortenson’s story involved a touching meeting with the leader. Someone later spoke to the dying leader, and he couldn’t remember Mortenson. However, he was able to produce one of Mortenson’s business cards, proving that Mortenson did, in fact, meet with him. Some do not believe that this leader considered the school to be of utmost impor-tance, as portrayed in the book.
Mortenson is alleged to have wantonly disregarded corporate formalities by refusing to maintain receipts, document expenses, and conform to IRS guidelines. He is alleged to have stonewalled the board to prevent them from exercising proper oversight. Many board members and financial officers of the organization are reported to have quit because they could not do their jobs effectively.
Mortenson is alleged to be habi-tually late, and Krakauer takes offense that this trait is presented in the book “as if it were an endearing quirk.”
Mortenson is alleged to have used CAI funds for personal expenses, including:
—From 2007 to 2010, Mortenson travelled extensively at CAI’s expense to promote his book. Krakauer says that Mortenson speaks at many events for free, but collects fees for others. He is alleged to have kept his speaking fees, instead of giving them to CAI. He is also alleged to have kept his reimbursements of travel expenses, even though he didn’t pay them out of pocket. Krakauer explicitly admits, however, that CAI benefited greatly from these book tours and the publicity generated by Mortenson. He states that from 2006 to 2010, CAI’s total revenue increased from $1.6 million to $20 million.
—Mortenson is alleged to have used CAI funds to buy his books for distribution at events, and to keep the sales figures high on the New York Times bestseller lists. Krakauer states that he was surprised to learn that CAI doesn’t receive any of the proceeds from the sale of the books. However, Mortenson wrote the book personally, and never stated that CAI would get proceeds or royalties. Regarding distributing the books at events, Mortenson and CAI likely believed that this would be a fundraising tool, and CAI’s revenues would seem to bear this out.
Krakauer reports that CAI’s administrative expenses exceed 50 percent of its annual budget. In 2009, an audited report shows “just under $4 million” went to building and operating schools, while CAI spent $4.6 million on outreach, education, lectures, and book tours. CAI has since revealed that its strategic reserves (i.e. savings for future years) are included in the latter figure, explaining why its administrative expenses are so high.
Mortenson is alleged to have badly managed the schools he has built, and it is alleged that some of them are now “ghost schools” that are not occupied. Mortenson is criticized for not ensuring that schools are filled with qualified teachers and continue to operate after being built. However, Krakauer does acknow-ledge the difficulties of operating in these remote regions of Pakistan and Afghanistan. Krakauer states that “a significant number of CAI schools exist only on paper.” The allegation that Mortenson and CAI lied about building schools is a very significant allegation to most donors. However, this particular allegation is especially undeveloped by Krakauer. Mortenson and CAI have since explained that there is some level of fraud they have had to deal with in certain communities, where school buildings have been subsequently used for other purposes.
To succeed in their lawsuit, the Plaintiffs will need to establish that the misrepresentations cited above are not only true, but that they constitute fraud, that they relied upon those misrepresentations to their detriment when purchasing Mortenson’s books. The Plaintiffs will also need to explain why other accomplishments by Mortenson were not sufficient to justify their investments. This may be difficult, considering that many important facts are not disputed by Krakauer:
—Krakauer admits as fact that by the end of 2000, when the organization was still young, Mortenson had built more than 20 schools.
—He says that Mortenson “has been a tireless advocate for girls’ education.”
—He commends Mortenson, saying: ”He’s established dozens of schools in Afghanistan and Pakistan that have benefited tens of thousands of children, a significant percentage of them girls.”
To the extent that some of Krakauer’s allegations turn out to be true, Mortenson’s readers and donors may choose to reevaluate his reputation as a humanitarian hero. Mortenson may have violated the tax code, and CAI may be required to pay penalties. However, this class action lawsuit is not a productive means of addressing any wrongdoing by Mortenson or CAI.
Regardless of whether Mortenson lied or embellished certain events in the books, or spent too much money on “outreach and development” as opposed to actually building schools, we can all agree that the solution should involve building more schools—not redirec-ting more funds away from schools and towards attorneys’ pockets. While action may need to be taken against Mortenson or CAI if they have committed any wrongdoing, this lawsuit is simply not an effec-tive or productive means of resolving the issue. Lawsuits of this nature continue for years, racking up millions of dollars for attorneys. If a settlement is ultimately reached, it will include attorneys fees for the Plaintiffs’ lawyers as well. At the end of the day, attorneys may siphon away as much money as was allegedly misused by Mortenson and CAI.
Government regulators have many tools at their disposal to more effectively resolve any changes that should be made to Mortenson and CAI’s practices. The lawsuit’s stated goal is to prevent Mortenson’s “unjust enrichment” by taking his book profits and putting them in a constructive trust, which will ultimately be given to “an appropriate third-party institution to be selected by the Court for the humanitarian purposes originally stated by Mortenson.” Of course, the lawsuit is silent as to the fact that private attorneys will also be taking a large cut of these funds that would be better spent on humanitarian endeavors. Perhaps members of the Plaintiffs’ purported class have something to say about these funds being used to pay lawyers instead of build schools.
Shahid Haque-Hausrath practices immigration law in Helena, has prior experience with class action lawsuits, and is not affiliated with any parties to this lawsuit.