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State pact with Hershey Trust would limit member pay, terms

MARK SCOLFORO, Associated Press
  • The agreement developed from an investigation into the Hershey Trust’s compliance with a 2013 agreement.
  • A 2013 report concluded that school assets paid excessive compensation to members of trust’s board.

HARRISBURG — State regulators and a $12 billion trust established by the founder of chocolate maker Hershey to educate poor children have announced a deal to revamp the trust’s board and change its operating rules following reports about its lavish spending.

Kathleen Kane recently resigned as the attorney general of Pennsylvania.

The deal, announced Friday, requires five members of the 10-member Hershey Trust to retire by the end of next year, puts new limits on how much board members will be paid and imposes limits on their expenses.

“The sole motivation is to make sure that trust does as well as it possibly can to educate these children who so desperately deserve it,” Democratic Attorney General Kathleen Kane said.

The agreement was filed in a courthouse 10 miles from the town, school and massive candy manufacturer named for company founder Milton S. Hershey, who died in 1945.

Board members Robert Cavanaugh, Joseph Senser and James Nevels will be off the board by January, followed a year later by the departures of James Mead and chairwoman Velma Redmond. Terms will be capped at 10 years, and board members must retire after age 75.

Redmond said the board was satisfied with the deal and the departures already were in the works under “a previously adopted succession plan with age and tenure limits,” which the board didn’t have before.

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The Hershey Trust is overseen by the attorney general’s office as a charity because it manages assets that fund the 2,000-student school for disadvantaged children that Hershey and his wife established in 1909. It holds a controlling interest in The Hershey Co., whose products include Reese’s Peanut Butter Cups and Kisses, and owns Hershey Entertainment and Resorts Co., the operator of Hersheypark and the Hotel Hershey.

The agreement developed from an investigation into the Hershey Trust’s compliance with a 2013 agreement and should not affect or influence the company, Kane said.

A 2013 report that followed a two-year investigation by the attorney general’s office found no wrongdoing by board members, but it concluded that Milton Hershey School assets had paid excessive compensation to members of the trust’s board.

It determined that fair market value was paid when the board spent $12 million in 2006 for a financially troubled golf course near the school, a transaction that drew criticism.

At that time, Kane said an agreement to change operating rules would make the board run better and was more appropriate for an entity that aims to help and educate disadvantaged children.

Those changes included notifying Kane’s agency of any significant real estate transactions, cutting board members’ pay and limiting their ability to serve on multiple boards at the same time.

The new board eventually will be expanded to 13 members, and the attorney general’s office will get a month’s notice whenever a new member is being added. Board annual salaries will be capped at $110,000, indexed for inflation, with the chair getting $140,000 and committee chairs another $10,000.

Members are no longer allowed to bill the board for first-class airfares, and perks such as spa treatments and entertainment are prohibited. The trust must stop paying travel expenses for family members.

The Philadelphia Inquirer reported last month that a weekend meeting last year at a New York hotel cost $18,000, part of some $362,000 in travel, meals and lodging over the past 2 1 / 2years. Payments to the board were $6.9 million in the past three years, the newspaper reported.