Ex-top Hershey official alleges charity wrongdoings

A former top-ranking official in the multibillion-dollar Hershey charity for poor children has claimed in a court filing that there were widespread financial irregularities, including the use of charitable assets for free rounds of golf, limousine rides and excessive compensation for board members, and violations of federal securities regulations.

Robert Reese, the former president of the Hershey Trust Co., the bank that manages the charity's funds, filed the document in Dauphin County Orphans Court on Tuesday.

He was voted off the charity's main board on Wednesday, according to sources.

The Inquirer, in the last 10 months, has reported a series of financial decisions by the boards that direct the sprawling Hershey empire that would seem to run counter to the directives of Milton S. Hershey, whose fortune is to be used to educate impoverished children at the namesake Hershey School.

The Hershey charity is one of the wealthiest philanthropies in Pennsylvania and is regulated by the Office of the Attorney General.

Reese said in a brief interview on Thursday that he would have liked to settle the issue privately, but that he believed he had to file the petition to protect the charity and that he had a legal duty to file under Pennsylvania law.

Connie McNamara, spokeswoman for the Hershey Trust Co., said she had not seen the petition.

Reese, a scion of the Reese's peanut butter cup fortune and former senior executive with the Hershey Co., seeks in the petition to have Hershey board members reimburse the charity $22 million for purchasing a nearby golf course at an inflated price and improperly co-mingling funds in the Hershey Trust Co. that led to remedial action after the trust company alerted the Securities and Exchange Commission.

Wrongly co-mingling trust money and independent retirement-account funds "financially and personally benefited the trustee/officer in his compensation," even though the officer "was previously advised by counsel in 1999 this was not legally permissible," according to the court petition.

The officer was not identified in the court document. The Hershey Trust disclosed the issue to its banking clients in a letter in July 2009.

The court action is the latest development to confront the Hershey charity, which has $7 billion in assets and operates the Hershey School, the largest free and private school for disadvantaged children.

The school gives preference to students from Pennsylvania. Critics say the school's enrollment would be substantially higher - if the trustees, as required, used the Milton Hershey estate and the dividends of the Hershey Candy Co. and the Hershey Entertainment & Resort Co. to grow the school. The current enrollment is 1,800.

At about the same time The Inquirer reported the details of the purchase of the Wren Dale Golf Club in early October, then-Attorney General Tom Corbett disclosed that he was investigating the deal. Corbett, now governor, was campaigning at the time.

The charity purchased the course for $12 million and then built a $5 million clubhouse. The charity's own appraisal valued Wren Dale at $4 million as a golf course and $6 million as a potential site for a housing development.

The school said it bought the golf course as "buffer land" for student safety and for possible future expansion of the school.

The attorney general's office was not immediately available for comment Thursday.

LeRoy S. Zimmerman, the head of the Hershey Trust and a former two-term Pennsylvania attorney general, has told the Hershey Co. candy giant that he would not stand for reelection to its board of directors at the stockholders meeting in late April. The Hershey candy company disclosed Zimmerman's plans on Wednesday.

According to the charity's latest nonprofit tax filing with the Internal Revenue Service, Zimmerman earned $500,000 in 2009 through director fees for serving on three Hershey-related boards.

Reese said in the court document that the improper conduct, for the most part, took place before he joined the charity in 2009. He was both president of the trust company and a trustee of the charity.