Soros Fund Frozen, Executives Suspended

International financier George Soros has frozen the funds of his $250 million Cultural Initiative in Russia and two top executives have been relieved of their duties over "serious mismanagement" within the organization, the new director said Wednesday.The interim director, Teodor Shanin, said in an interview that the funds have been frozen while a team of auditors from Soros' headquarters in New York investigate the foundation's accounts. Shanin said the auditors have found examples of "improper, insufficient documentation," but "there is not a penny missing."The two executives, whose names were not provided, will remain on the payroll for now, he said, but two other employees have been fired. "The sum total of the audit was that nobody did any criminal deeds, but there was mismanagement," said Shanin, a Lithuanian-born ?migr? who is a sociology professor at Manchester University in England. "The fundamental structure of the foundation is sound."The Cultural Initiative in Russia is Soros' largest single charitable project to date, and aims to reform Russia's education system by replacing the country's Soviet-era textbooks, retraining its teachers and rewarding innovative schools with grants.The Hungarian-born American billionaire announced plans to expand the program from $15 million to $250 million in March, drawing a bitter reaction from nationalist Russian politicians, who have called it the "Americanization" of Russia's education system. Soros, 63, fled Hungary at age 17, shortly after the Soviets gained control following World War II, and made a fortune in the United States in mutual funds. He is estimated to have made about $1 billion gambling against the British pound in 1992, and has since turned his attention to philanthropic work, primarily fostering open societies in the former East Bloc. Shanin insisted that the mismanagement problems would not hurt the foundation's long-term plans. "There will be no implications except some bitterness in my heart and the hearts of my colleagues," he said. The foundation announced Wednesday that its board voted Monday to completely redraft its original charter. The announcement included a statement from Soros in which he reaffirmed his "commitment to all programs in existence at the moment."The statement is being sent throughout Russia, Shanin said, because Russian grant recipients and educators working within the program have been inundated by rumors that they would lose their funding and the foundation would cease functioning in Russia.He said the reports are untrue and added that the foundation's funds will be released as soon as the audit is complete, in a matter of weeks.Sixty new textbooks have been published so far, Shanin said, on subjects ranging from contemporary world history to economics, and by the end of June that number will reach 100. Eventually, 300 or more are to be published, he said. "Don't forget the value of what we are doing," he said. "We have done in two years what the government could not do in 10."Shanin said he was pledged to confidentiality about the nature of the mismanagement charges until the foundation finishes resolving its problems and completes its investigation. Beyond issuing new textbooks, the Cultural Initiative has launched training programs for thousands of teachers and administrators and plans to bring educational tools like the American children's program "Sesame Street" to Russian television. "When a project is really successful -- one that can make a real impact -- I promote it into a mega project," Soros said during a press conference in Moscow last March. He and Russian educators took great pains to cast the programs as those managed by Russians, not by a foreigner with a political agenda. "We are not coming from outside and doing something, we are merely empowering the people who have been working here for years," Soros said.Spokeswoman Daphne Skillen said that the foundation's staff of 50 has been hard pressed to grow from a $15 million organization to a $250 million one. "Our programs in the last six months have expanded so rapidly, and we don't have the infrastructure to deal with it," she said. Soros was in Estonia on Monday as part of a trip to monitor the work of Cultural Initiative projects in the Baltics. Skillen said it was still unclear whether he would add Moscow to his agenda. "It's possible, but even if he does come he won't be meeting with the press," she said.The Russian Cultural Initiative represents Soros' largest charitable project to date. His foundations in 25 countries focus primarily on fostering open societies.In an interview with The Washington Post in 1993, Soros called the textbook and teacher-training initiative "the only thing that has really worked" during several years of projects in Russia. Many other attempts had been marked by disappointment and corruption, he said at the time.