News

The Reese’s Revolution

‘Inappropriate Sexual Behavior’ Charged at Springboard
By Dave Buffington


Construction of the ‘Cottages’ Construction of the ‘Cottages’ Confused?

You have a right to be.

Since our last issue, there’s been a lot of news about the Hershey entities – the Milton Hershey School, the Hershey Trust Company, the chocolate company, the golf course, et cetera, et cetera.

But the local media hasn’t made much sense of it.

Well, let me make it simple for you:

A revolution is under way.

And no one knows who’s going to win.

The First Shot

The first volley in the uprising came Feb. 8 when Robert Reese filed a petition with the Dauphin County Orphans’ Court, the body that has ultimate legal authority over the Hershey entities.

That petition accuses unnamed members of the Hershey Trust Company and Milton Hershey School boards of “self-dealing” in a long list of abuses of the Derry Township charity. Then, in a dramatic request, the petition asks the court to compel other board members to pay $22 million and to remove “said trustees as deemed appropriate by the Court….”

High Point Mansion High Point Mansion Now, if this petition had come from one of the other gadflies that regularly pester the entities, the charges could have been swatted away like pellets from a Nerf gun.

But Robert Reese is no gadfly. He’s the grandson of H.B. Reese – yes, the peanut butter cup Reese. Robert Reese is also a Harvard grad. A Georgetown law school grad. The former Chief Legal Officer of the Molson Coors Brewing Company. A former Senior Vice President at Hershey Foods.

And until a few days ago, Reese was President of the Hershey Trust Company and a member of the Trust and School boards.

Now, there’s some confusion over whether Reese quit or was fired from those positions and when exactly what took place, but for the moment, none of that matters.

Because these charges are cannon shots.

This widely circulated photo appears to show LeRoy Zimmerman (third from right) and other board members at the Hotel Hershey, but The Sun has been unable to independently verify its authentic­ity. Still, the School and Trust have not denied its authenticity, and if the image is real, it could support the charge that the “Grand Ex­pansion” of the Hotel was done for the pleasure of the board. This widely circulated photo appears to show LeRoy Zimmerman (third from right) and other board members at the Hotel Hershey, but The Sun has been unable to independently verify its authentic­ity. Still, the School and Trust have not denied its authenticity, and if the image is real, it could support the charge that the “Grand Ex­pansion” of the Hotel was done for the pleasure of the board. Zimm’s Palace?

In the Feb. 8 petition, Reese says the recent Grand Expansion of the Hotel Hershey wasn’t done to make the Hotel more profitable. Instead, Reese says, it was done for the pleasure of the other board members. To quote the petition:

… the direction by certain trustees to the 100% owned subsidiary to invest up to $70 million to upgrade Hotel Hershey so the trustees could enjoy their stays and experiences there. The $70 million investment was opposed by financial management of the 100% owned subsidiary because the investment would never have a payback to justify it. Even with the huge investment, Hotel Hershey loses money. In fact, the 100% owned subsidiary as a whole has a net loss, did not pay any dividends to the Charity, its sole shareowner, for several years and even when it did pay a “token” $2 million dividend to the Charity in 2010, it had to borrow the money to pay the dividend.

Elsewhere in the petition, Reese claims:

… the staying by these trustees and spouses at Hotel Hershey in luxury accommodations (believed to be $500 per night) and free amenities (e.g., frequent use of the luxury spa at the Hotel) at the times (usually two nights, in some cases, more) of regular Trust Board and School Board meetings (which lasted one and one-half days) and at the times of Special Meetings. Staying two nights at the Hotel Hershey in “cottages” at Board meeting times is the case even for trustees living within relatively short driving distances of High Point Mansion and Founders Hall in Hershey, PA where almost all the Charity’s Boards’ meetings take place.

‘Excess Benefits’

The compensation of board members has been a topic of discussion for some time. (For details, see the Oct. 14, 2010 issue of The Sun.) However, Reese’s petition elevates that discussion by calling the compensation a form of self- dealing:

Compensation since 2002 has nearly tripled. The average hours worked per week by Board members as reported in the most recent Form 990 filed with the Internal Revenue Service is approximately 5 (excluding the Petitioner, whose are 55). Under rules of the Internal Revenue Service, compensation paid above services rendered is considered “private inurnment” or “excess benefits”, which would correlate to the principles of self-dealing under Pennsylvania law, i.e., receiving a personal benefit well in excess of the consideration rendered….

High Point Fundraiser

Reese also cites the use of Hershey’s High Point Mansion for a political fundraiser, presumably the controversial 2007 fundraiser held to honor GOP operative Karl Rove:

Not only did the political party not pay for the use of Mr. Hershey’s home as a fundraiser, but submitted an invoice for $15,000 to the Charity with the notation “per [the trustee’s] request, please find an invoice for the fundraiser hosted by [the trustee] on behalf of the [political party] State Committee on [date] at High Point Mansion”. Instead of the political party or an individual paying for use of the Charity’s facility, the political party invoiced the Charity, and this invoice was paid to the state political party by the 100% owned subsidiary (or its political action fund at the direction of the subsidiary’s top management, which depleted the fund).

Job Losses in Derry Township

Three of the members of the Trust and School boards were on the board of The Hershey Company when the candy maker moved to close its East Chocolate Avenue plant in downtown Hershey. In his petition, Reese also says:

…these trustees took no action to oppose, and, in fact, supported the closing of the Main Hershey Chocolate Plant built by Milton Hershey, and other manufacturing and supply chain actions, resulting in the loss of 3,000 jobs in Derry Township, Pennsylvania and the consequent “economic impact”. These actions were not necessitated by the performance of the manufacturing facilities in Derry Township. The practical effect of these actions is, to a substantial degree, to undermine this Court’s decision in 2002 enjoining the sale by the Trust of the then Hershey Foods Corporation.

Son-in-Law?

The Reese petition also contains a reference to an unnamed son-in-law:

…the payment by the Charity directly or through wholly- owned affiliates of the Charity to a government relations consulting company, one of whose principals is the son-in- law of a trustee. These payments average $100,000 per year over several years, and there is not substantial evidence that equal consideration was received by the Charity and its affiliates. These payments for many years were not included in the Form 990. The company involved and at least one of its principals (not the trustee’s son-in-law) has been indicted by the Pennsylvania Attorney-General’s Office. The Company and individual involved have denied and are contesting the Attorney-General’s charges.

The “government relations consulting company” is not identified in the petition, and the School reported no expenses for “Lobbying” on its latest IRS Form 990. However, the School’s Form 990 does mention that:

Anthony B Seitz is a family member of Leroy S Zimmerman. Anthony B Seitz is a partial owner of Delta Development Group, Inc (the Company) The Company provides transportation consulting for 2 wholly owned entities of Milton Hershey School and School Trust. Delta Development Group, Inc was paid in total $289,819 by the wholly-owned for-profit corporations, Hershey Trust Company and Hershey Entertainment & Resorts Company. None of the amounts were paid by Milton Hershey School and School Trust.

Delta Development Group is based near the Patriot- News offices in Hampden Township, Cumberland County. At the Delta Development web site, “Tony B. Seitz” is listed as a Senior Vice President - Development Services. The web site also includes a document labeled “A Formula for Revitalization - Hershey, Pennsylvania.”

‘Hundreds of Free Passes’

As another example of “self-dealing,” Reese offers “the making of a profit by a trustee in the sale of his monetary interest in Wren Dale Golf Course to the Charity in 2006” and says that “hundreds of free passes to play were given to certain trustees.”

Of course, the Wren Dale issue has been been the focus of a lot of media attention, but still, the Feb. 8 petition was careful not to call out board members by name.

That changed three days later …

Naming Names

In a Feb. 11 amendment to his original petition, Reese lists:

LeRoy Zimmerman, Robert Cavanaugh, Robert Vowler, Anthony Colistra, Richard Lenny, James Nevels, James Mead, Velma Redmond, Raymond Gover, Joseph Senser, Hiliary Pennington, and Joan Lipsitz” as the “co-trustees, Directors and Managers whose acts or omissions occurred during the relevant periods ….

The big fish here is, of course, LeRoy Zimmerman, who is currently the Chairman of the Trust and School boards. Zimmerman was the Attorney General of Pennsylvania from 1981 to 1989 and is widely recognized as the most powerful figure in the Hershey “entities.”

Other notables include:

- Richard Lenny is the former boss of Hershey Foods (now “The Hershey Company”). Lenny has been tied to the controversy over the purchase of the Wren Dale (now “Hershey Links”) golf course.

- Anthony Colistra was a member of the School and Trust boards during the controversy over the sale of Hershey Foods in 2002. Colistra is now President of the Milton Hershey School.

- Ray Gover is the former president and publisher of the Harrisburg (now Hampden Township) Patriot-News.

The first Reese petition was a bombshell, a litany of substantial allegations by a top official of the Hershey entities. By itself, it threatened to force action by the state Attorney General’s office (which has oversight of the School and Trust) and the Dauphin County Orphans’ Court (which has ultimate authority over the School and Trust).

Still, the Feb. 11 amendment generally did not attach individual names to individual acts.

That changed four days later …

Divided We Fall?

On Feb. 15, Reese filed additional documents that specifically link individual board members to the individual acts mentioned in the original petition. For example…

- Lenny is identified as the trustee with the alleged “conflict of interest” in the purchase of Wren Dale.

- Zimmerman, Colistra and former Trust President Robert Vowler are identified as trustees supposedly using the “luxury accommodations” of the Hotel Hershey.

- Zimmerman is identified as the trustee whose son-in- law’s “government relations consulting company” allegedly received payments.

Also, the Feb. 15 documents unveil a damning new charge concerning the controversial and now-closed Springboard Academy on Clearwater Drive:

… at Springboard 20 boys slept in one bedroom leading to inappropriate sexual behavior …

That charge makes for a splashy headline, but the greater impact of the Feb. 15 filings is to split the individual board members from the School and Trust. They can no longer fully rely on Founder’s Hall – or its highly regarded professional staff – as a shield. The members may now have to defend themselves individually in public and in court.

Unusually Quiet

Indeed, Founder’s Hall has been unusually quiet of late. In response to the barrage from Reese, the School and Trust have made just one formal statement to The Sun:

The Hershey Trust Company board has received this petition and takes its fiduciary duties very seriously. We will review these matters and respond appropriately.

Although Mr. Reese has been a board member of Hershey Trust Company since 2007, the trust company received notification of this filing only after Mr. Reese learned that he was not reelected to the board for another term.

Also, the School and Trust have confirmed that Zimmerman is leaving his seat on the board of The Hershey Company, but there has been no explanation of that move.

What’s Next?

The judge assigned to the case – probably Judge Bruce Bratton or Judge Todd Hoover – is not under any set deadline to respond to the Reese petition. However, given the magnitude of the case, the judge is likely to act promptly.

If the judge responds favorably to the Reese petition, the board members will have 20 days to “show cause” why they should not be compelled to cough up their money and their positions.

Legal observers are expecting a pitched battle over whether Reese has legal “standing” in this case, since he is no longer a member of the boards or an official of the Trust. Interestingly, a source close to Reese has told The Sun that he is not seeking to be renamed to the boards.

Watch The Sun for further updates, and between issues, visit www.thesunontheweb.com for breaking news.


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