"These [children] must grow up with a feeling that they have a real home." - Milton S. Hershey

AG Kane’s agreement with Hershey Trust disappoints reformers

Posted on May 9th, 2013 in News and Commentary

AG Kane’s agreement with Hershey Trust disappoints reformers

by Bill Keisling

Longtime Hershey Trust reformers are expressing bitter disappointment with Wednesday’s agreement between the Hershey Trust and Pennsylvania Attorney General Kathleen Kane.

On the surface, AG Kane put forward changes supposedly limiting such things as compensation and conflicts of interest involving board members.

But each of the supposed changes is weak and amount to window dressing, says longtime Hershey reformer Ric Fouad, president of Protect the Hersheys’ Children, a reform group.

“If this is a preview of the Kathleen Kane Hershey era, needy children and families will face four more years in the cold,” Fouad said. “Kane has probably squandered her good will in one stroke. She’s lost a lot of credibility.”

On the surface, Kane’s agreement with the Trust mandates reduced compensation to trustees; limits the number of boards open to each trustee; and a ban on certain conflicts of interest.

As well, Trust overseers were directed by Kane to “use their best effort to identify for election to their Boards individuals” who have experience with “at-risk” children and residential programs.

But none of these changes have any teeth, says Fouad. Board members can still receive several hundred thousands of dollars in total compensation from multiple trust positions, he says.

“The restrictions are virtually meaningless, there are so many way to get around them,” Fouad complains.

And none of the present board members were removed for past transgressions, Fouad adds.

“Because they didn’t remove board members, the composition of the board hasn’t change. There’s absolutely no change in the board. The same self-selection process remains in place. It’s basically old wine in an old bottle.”

Fouad and others pressing for reforms say they are dismayed that the AG closed her investigation without mention of past business dealings at the Trust that the AG’s office had promised to investigate, including past questionable land deals, and political donations made by the trust.

“Political donations were not even mentioned by the AG’s office,” says Ken Brady, of Protect Hershey’s Children. “And there’s no criticism of the golf course deal. Kane really side stepped some of the main issues in Hershey.”

In 2011 former Hershey Trust President Bob Reese filed a lawsuit alleging malfeasance at the Trust. In his lawsuit, Reese complained about $12 million paid for the Wren Dale Golf Course, a price, which Reese complained, was “three to four times its appraised value,” and to which “free passes to play were given to certain trustees.” The Trust then spent another $5 million on a bar, restaurant and clubhouse at the golf course.

Kane did not find that the Trust’s director’s violated their fiduciary responsibilities by developing the golf course.

“So far as I can tell, this agreement says ‘there was no wrong doing but we’re not going to do it again,’” says Fouad.

“It is startling that AG Kane is sanctioning $25 million squandered on a luxury golf course, runaway board pay, failing MHS policies, and politicization of a charity, with no one held accountable,” Fouad says. “Even worse, this provides scant improvement on future compensation and no improvement on programs. This is a disappointing day for charitable trust enforcement.”

Reese for example complained in his suit about a $15,000 political contribution made by the Trust’s Herco Political Action Committee to the Republican State Committee in August 2007. Democrat AG Kane also did not mention these donations in her agreement with the trust. The Herco PAC also contributed $10,000 to Democratic Gov. Ed Rendell in January 2007.

AG Kane furthermore directed that base compensation per board member be rolled back to $30,000 a year, from the $95,000 currently in place. Limiting the compensation to trustees had long been a goal of reformers.

Kane’s agreement supposedly returns compensation to limits previously in place.

When former Pennsylvania Attorney General LeRoy Zimmerman was appointed director of the Hershey Trust in 2002 by his political successor, AG Mike Fisher, the post paid only about $35,000 a year.

As well, before Zimmerman, Hershey directors were only allowed to serve on one of the trust’s interlocking boards. In June 2003, by order of AG Fisher, directors were permitted to serve on multiple boards, and to receive compensation from each.

These changes cleared the way for Zimmerman to reap as much as $495,000 a year from the charity.

As part of her agreement with the Trust, Kane limited the number of overlapping boards now open to trustees. “No more than one (1) Manager/Director may at the same time be a Director of the Hershey Entertainment and Resorts Company,” Kane ordered. And, “No Manager/Director who is a Director of The Hershey Company may at the same time be a Director of the Hershey Entertainment and Resorts Company.”

But there are exceptions in the agreement, Fouad points out.

“You can’t triple dip, now you can only double dip,” says Fouad.

All this isn’t enough, Fouad adds.

“Sad to say, very, very sad to say, what will end up exposing them is the number of kids being hurt,” Fouad says. “General Kane’s staff and the trustees can come up with as many artful and creative legal documents they like. What they can’t dance around is the number of kids being hurt by that charity. On average, they’re losing one child every school day. It comes down to child welfare, and we’ll continue to focus on that.”

“There is real tragedy of that agreement is its failure to do anything for needy kids. There isn’t a thimbleful of improvement on a child welfare level. There’ nothing there about best practices. There’s nothing there about restoring child safety provisions previously in place,” he says.

For example, Fouad points out, no managers were removed “who stood by while kids were hurt.”

“Yes it’s upsetting to see these people profiteer from a charity,” he says.“But what you really can’t stomach is kids being hurt by bad programs.”