A new federal lawsuit demanding that Greg Mortenson, the author of Three Cups of Tea, and his charity return millions of dollars of donations and book proceeds could shake up the nonprofit world.
Legal experts say that if the case, which is seeking class-action status, is allowed to proceed, it would give unprecedented recourse to people who feel they were duped into supporting a charity. It would also, they say, leave charities vulnerable to damaging lawsuits by unhappy donors and customers.
"If you follow the logic of this lawsuit, you can say that anyone who gives to a charity and then finds out that they were misled about something, they could then file a lawsuit to make the charity pay," says Jack Siegel, a Chicago lawyer and charity consultant. "It’s very troubling."
Possible Class Action
The lawsuit is the latest fallout from the controversy involving Mr. Mortenson and the charity he started, the Central Asia Institute, in Bozeman, Mont.
The complaint, filed last week in a U.S. District Court in Montana, alleges that Mr. Mortenson and the institute fraudulently solicited donations and earned book profits based on his claims about his experiences in Afghanistan and Pakistan.
The lawsuit stems from investigations by the "60 Minutes" news show and the author Jon Krakauer that have cast doubts about Mr. Mortenson’s accounts of his charity’s work and his own adventures. If the lawsuit is granted class-action status, Mr. Mortenson and the Central Asia Institute could be on the hook to return millions of dollars in donations and proceeds from the books. The lawsuit asks that the money and any additional damages be placed in a trust and used to build schools in Afghanistan and Pakistan, the Central Asia Institute’s stated mission.
Anne Beyersdorfer, spokeswoman for the charity while Mr. Mortenson is out with a medical condition, did not comment on the details of the case, but she said in an e-mail message to The Chronicle that the "events described in Greg’s book happened, and while no one likes litigation, we welcome an opportunity for the facts to come to light and be considered impartially through the legal process."
Mr. Mortenson has previously stood by his books and denied any wrongdoing. He has admitted, though, to taking some literary license in his storytelling, for example, by compressing events that took place over different periods of time.
Questioning Book Details
The Montana lawsuit alleges that Mr. Mortenson fabricated details in his books and in his speeches for the purpose of inducing "unsuspecting individuals" to make donations. Michele Reinhart and Jean Price, both Montana state lawmakers, say in the court documents that they each attended one of Mr. Mortenson’s speaking engagements and would not have bought his book or donated to his charity if they had known his story was untrue.
Alexander Blewett III, a lawyer in Great Falls, Mont., says the lawmakers filed the lawsuit because they feel that Mr. Mortenson and the Central Asia Institute "should never have gotten their money in the first place." And millions of other donors and book buyers who might feel the same way can join the class-action lawsuit, he says.
'Awfully Thin’ Case
But charity-law experts are not so sure that the lawsuit will pass muster in the courts.
"It’s awfully thin," says Daniel L. Kurtz, a New York lawyer and former state charity regulator. "You have to offer more proof than watching '60 Minutes,'" he says.
Mr. Siegel, in Chicago, calls the suit frivolous.
"It’s like saying that everybody who learned that John Edwards was not necessarily the clean-cut guy they thought he was is now entitled to ask for their campaign contributions back," he says.
The legal experts also say that the lawsuit might not clear some hurdles. Getting permission to represent an entire class of people is always tricky, and this lawsuit presents obstacles, they say, because it doesn’t distinguish between people who bought books and people who made donations.
At the same time, they say, the lawsuit may have made a smart end run around another issue that has in the past tripped up prospective lawsuits: the legal right of donors to sue a charity.
Courts have consistently limited the ability of donors to sue to correct alleged abuses at a nonprofit group, typically reserving that right for state attorneys general.
The Montana lawsuit, however, does not reach in to the business of the Central Asia Institute. Instead, it sticks to the claims of fraud involving solicitations for gifts.
Douglas M. Mancino, a Los Angeles lawyer who advises many nonprofits, guesses that the lawsuit is less about recovering any actual money for the charitable causes and is mainly designed to shed light on the activities of Mr. Mortensen and the charity he founded. "Obviously people feel hurt about what they are hearing about this guy," Mr. Mancino says, "and this is a back-door way to get into the books and records of the CAI and the whole situation to see what is really going on."