Hershey Trust Settlement Shocks Many, Has a Lesson for All

Two years ago, the Pennsylvania Attorney General began an investigation into the $9 billion Hershey Trust, which operates a prominent residential facility for disadvantaged youth. The investigation started after the trust made multi-million dollar purchases of a golf course and an adjacent market. Allegations of inappropriate expenditures followed, claiming that board members received excessive compensation and that the real estate transactions were questionable.

Amidst great controversy, last week the AG released its findings. Announcing a settlement agreement with the Trust, the AG opined that the trustees did not breach their fiduciary duty.

Whatever one thinks of the terms of the settlement, the agreement itself is instructional for anyone who serves as a nonprofit’s director or trustee. It details conduct and policies that each of us may want to heed and clues us into the thinking of one of the nation’s tougher charity regulatory offices.  The agreement between the AG and the Trust provides a checklist of the types of governance issues the AG is interested in monitoring, including how the board of directors:

  • Discloses and evaluates conflicts of interest;
  • Undertakes due diligence when making major acquisitions; and
  • Ensures directors are selected based on their expertise and competence.

Indeed, the agreement provides examples of appropriate behavior we regularly impart to our clients, striving to help our client’s directors comport with their fiduciary duty and other legal obligations. If you’re concerned that your board’s misbehavior warrants clarification of the applicability of the Pennsylvania AG’s guidance to your state, we would be happy to help.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits, 4705 Laurel Canyon Blvd, #306, Studio City, CA 91607

Comments are closed.