Hershey Charity Scandal: Robert Reese, Ex-Hershey Official, Claims Wrongdoing
HARRISBURG, Pa. (AP) — A former official involved with the multibillion-dollar charitable trust that controls the Hershey candy company is claiming in a court filing that board members used the trust's considerable assets to pad their bank accounts and treat themselves to luxury hotel stays, limousine rides and free golf.
That official, Robert Reese, was fired Thursday by the Hershey Trust Co., the bank that manages the charity's money. Reese, a former top executive at the Hershey Co. candy company for 25 years, is the grandson of the man who started Reese's candy, which Hershey's bought in the 1960s.
Most recently, Reese had served as a board member and the trust's president.
[AP CORRECTION: In a Feb. 10 story about court filings alleging misconduct by board members of The Hershey Trust Co., The Associated Press erroneously reported that former Hershey Trust president Robert Reese had been accused of recommending and allowing individual retirement accounts placed in the company's common fund, benefitting a trustee. The alleged practice was cited in a termination letter directed at another Hershey Trust official, not Reese.]
Reese's allegations come four months after the state attorney general's office said it was investigating transactions by the Hershey Trust, although the office has not specified which transactions.
In a brief interview Thursday, the 60-year-old Reese declined to say why he decided to go public with the allegations now and steered questions back to the school for underprivileged children that the trust benefits.
"What's important here is not me," Reese said. "It is the Milton Hershey School and School Trust."
Reese detailed his accusations of misuse of power in a document he filed Tuesday in Dauphin County Orphans Court. In a separate filing Thursday, he named 12 current and former Hershey Trust board members, including chairman LeRoy S. Zimmerman, a former attorney general of Pennsylvania and a longtime friend of newly elected Gov. Tom Corbett, who was the attorney general last fall when the office revealed its investigation.
Zimmerman did not immediately return a message left at his Harrisburg law office Thursday evening.
A trust spokeswoman released a statement saying the board had received word of Reese's first filing Wednesday. It came after Reese learned he had not been re-elected to the board for another term, the statement said.
"The Hershey Trust Co. board has received this petition and takes its fiduciary duties very seriously," it said. "We will review these matters and respond appropriately."
The Hershey Trust oversees more than $7 billion in assets, including Hershey Entertainment & Resorts Co., operator of Hersheypark and the Hotel Hershey, and the controlling stake in the candy company begun more than a century ago by Milton S. Hershey.
Reese said the Hershey Trust board members voted themselves exorbitant salary increases in recent years, boosting them from $35,000 in 2002 to as much as $130,000 last year.
The trust bought a financially troubled golf course, partly owned by then-Hershey CEO and trustee Richard H. Lenny, and directed millions of dollars in upgrades to the Hotel Hershey, even though the $70 million cost was opposed by the hotel's financial management, Reese said. Board members went on to golf for free at the course and stay for free at the hotel, while occasionally traveling by limousine and in first-class airline seating, he said.
The trust has defended the golf course's purchase as a valuable buffer, but Reese said the trust performed no financial analysis to justify the $12 million price, triple the course's appraised value.
A trustee, who was unnamed in the filing, hosted a political party fundraiser at the former home of Milton Hershey, High Point, which is owned by the trust, and a trust subsidiary catered the event without the political party committee paying any cost, Reese said. The trust or one of its subsidiaries also paid a government-relations consulting company partly owned by a son-in-law of a trustee hundreds of thousands of dollars without substantial evidence that the charity got its money's worth, Reese said.
In 2006, the trust allowed individual retirement accounts into its common funds, which financially and personally benefited a trustee, although the trustee had been advised that it was against federal securities regulations. Legal costs exceeded $11 million in money indirectly owned by the charity, Reese said.
Reese, who was general counsel of the candy company when he retired from it in 2002, joined the trust as a director in 2008 to advise the board on a potential merger with Cadbury PLC. The board elected him president in 2009.
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Information from: The Philadelphia Inquirer, http://www.philly.com
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First Posted: 02/11/11 05:50 PM ET Updated: 05/25/11 07:30 PM ET