The Nation has a blockbuster expose based on a Philadelphia Inquirer series that goes to the heart of the corruption of charitable enterprises in the US. F. Frederic Fouad:
Milton and Catherine Hershey signed the deed of trust establishing the Milton Hershey School as an orphanage in 1909, funding it with revenue from the famous candy company. Since then, the school has officially been dedicated to “the purpose of nurturing and educating children in need.” Because its founder gave MHS Trust a controlling interest in the Hershey Company, today it boasts a massive $8.5 billion in assets and also owns Hershey Entertainment & Resorts (operating hotels and an amusement park). In keeping with its mission, the Milton Hershey School serves about 1,800 students from pre-kindergarten through twelfth grade, who study in state-of-the-art school buildings in Hershey, Pennsylvania.
What the charity also does, of late, is shovel money and favors to a coterie of prominent Pennsylvania Republicans. MHS’s alleged wrongdoing is pervasive and well documented, but thanks to the GOP’s grip on power in the state—most crucially its iron lock on the attorney general’s office—the charity has never been effectively called to account. With the first real possibility of the attorney general’s office shifting to the Democrats since it became an elected position thirty-two years ago, all this may change come November.
For a sense of MHS’s alleged misdeeds and the culture of impunity surrounding the charity, consider how, in 2006, board members of the school allowed the trust fund to purchase a failing luxury golf course called Wren Dale. The $12 million investment was two to three times the appraised value of the course and bailed out as many as fifty prominent local businessmen and doctors—including a former Hershey Company CEO who also sat on the MHS board. These investors stood to lose tens of thousands of dollars if the course closed. With the purchase, the investors turned their potential losses into profits of between $15,000 and $100,000. MHS’s board then sank another $5 million into a swanky, Scottish-themed clubhouse for the money-losing course, all paid for by the charity. The charity explained the purchase as necessary to create a “buffer” between MHS students and the community, and later claimed the land was for future MHS expansion.
Last year, an MHS administrator named William Charney Jr., who was in charge of training houseparents, went to prison for receiving and distributing child pornography. The Philadelphia Inquirer exposé described how yet another administrator, Peter Gurt, mocked a sexual act involving several students, reportedly seeking to elicit laughs from this at a senior roast. Gurt was later promoted and is rumored to be in line today to become the next MHS president. Another two MHS teachers were fined and disciplined in 2006 and ‘07 for engaging in sex with students.
“The problem with the Hershey Trust,” Sitkoff says, “is that its massive fund has been captured by Pennsylvania politicians to provide takeover protection for a local company. But that’s not the purpose of the trust. The purpose of the trust—which enjoys a federal tax subsidy—is to take care of needy kids.”
If Hershey were doing its task, by my calculation, it would be spending at least $300 million dollars a year on orphans. The entire Pennsylvania state budget is $27B, of which $10B is public welfare. While one cannot make out how much of that is devoted to orphans, it looks to me like about $1.6B is devoted specifically to children, not including Medicaid. So, waste on this order of magnitude (say, $100M annually) is a huge chunk of what is spent on Pennsylvania’s disadvantaged children.
While Fouad points out that this widening scandal has been protected from investigation by Republican Attorneys General, Ed Rendell also failed at leadership.
And this seems to be the trend. As the rich decide they can play by their own rules, nominally charitable functions are corrupted into personal piggybanks and political vehicles. The Milton Hershey School is being subsidized through the federal tax code and probably through state and federal spending. The Milton Hershey School is a disgrace, and it’s just one among many.