A Shameful Practice at the Milton Hershey School

by Gary Snyder

Its assets are equivalent to the Ford Foundation, three times the size of the largest American community foundation, the $12 billion Milton Hershey School is under scrutiny and it is not good.

The avarice of some of the board members is shameful: One drew over $500,000 a year for his service on several Hershey boards, especially since the overwhelming majority of charity trustees and directors across the U.S. receive absolutely no payment. Yet this kind of greed pales when compared to the high-stakes use of the school’s assets.

Hershey School explicitly kept secret from the public and even their own professional associates — trust board members maneuvered to divert a significant portion of Hershey assets to a local development scheme and enlisted hush-hush promises of endorsement from the politically ambitious (judges, even the state attorney general) before the deal was announced.

A $50 million transfer was just the beginning of a series of other questionable actions, including a court-rejected 1999 effort to again divert significant funds away from the school. That didn’t stop the trust, however, from paying $12 million — two or three times the appraised value — for a troubled golf course owned by a board member and other local investors and then building a $5 million clubhouse there.

The regulators who indeed do have authority seem to have exercised it with great sensitivity to political pressure: Twice a state attorney general proposed significant conditions to modify the structure and behavior of the various boards and twice the top state regulator backed away at the last minute, leaving only minor modifications in place such as a still very generous ceiling on board compensation.

Of course the IRS has not intervened, and the local court with jurisdiction seems inclined to give Hershey directors free rein, possibly in deference to shared interests.

Pablo Eisenberg has argued that we need tougher and more robust regulation to correct abusive practices by nonprofit and philanthropic organizations. That will require the allocation of the funds necessary to protect the public interest, especially when abuses are reported by those who ostensibly are served, by those in the larger community, and by the news media.

(abstract of this: (Mark Rosenman opinion in the Chronicle of Philanthropy)

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Charity Navigator, Vermont Public Radio, Miami Herald, National Public Radio (NPR), Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), “Betrayal”, (a movie), NBC (on Charity Fraud…TBD), FOX2, ABC Spotlight on the News, WWJ Radio, Marie Claire, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, Charity Navigator, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics, Accountants News, Newsweek.com, Responsive Philanthropy Magazine, New York Times, Portfolio Magazine, The Virgin Islands Daily News, NANKAI (China) BUSINESS REVIEW, National Religious Broadcasters newsletter, The Charity Governance Blog, American Chronicle, Palm Beach Post, Detroit Free Press, Oakland Press, Nonprofit World, Socially Responsible Business Forum, PNNOnline, Ohio Nonprofit Resources, Nonprofit Good Practice Guide, Nonprofit Startup Guide, Nonprofit Blog, National Coalition of Homeless Newsletter, Finance and Administration Roundtable Newsletter, MichiganNonprofit.com, CORP! Magazine, Crain’s Michigan Nonprofit, ncrp.org, PhilanTopic, Nashville Free Press, Nonprofit Law Blog, Seniors World Chronicle, Carnegie Reporter, Assoc. of Certified Fraud Examiners Examiner, msnbc.com, Worchester (MA) Telegram and Gazette, Carnegie Corporation of America, EO Tax Journal, Wikipedia: Non-profit Organizations; Parent: Wise Austin, Accountants News, Veterans Today, Answers.com, Far-roundtable, #Nonprofit Report, nonprofithelpnews, nonprofit news; National Enquirer, Northwest Herald, The HelpWise Daily, The #Nonprofit Report, Wikipedia (Nonprofit Organization), Answers.com, Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)