Facing negotiations with the Pennsylvania Office of Attorney General after a year-long investigation, the $7.5-billion Hershey charity for disadvantaged children has hired as its general counsel Philadelphia attorney John H. Estey, a former chairman of the Delaware River Port Authority and chief of staff for Ed Rendell when he was Pennsylvania's governor.
Mr. Estey's appointment comes as the charitable section of the Office of Attorney General has concluded the fact-finding part of its investigation, and is said to be seeking reforms at one of the nation's wealthiest charities. Any reforms would have to be approved by the board of the Hershey Trust Co., the state-chartered institution that manages Hershey's billions of dollars in assets.
As general counsel for the trust company, Mr. Estey would lead the negotiations. The trust company also could reject reforms.
Mr. Estey gives Democratic credentials to the Hershey Trust Co.'s board, which is chaired by powerful Republican LeRoy S. Zimmerman.
Mr. Estey replaced Mary Louise Porter, who resigned Sept. 21.
Ms. Porter is a former corporate attorney with the Hershey chocolate company. She would not comment on her departure and the Hershey Trust Co. did not respond to questions regarding her departure, noting that Mr. Estey was appointed on Sept. 22. Mr. Estey is a partner with the Philadelphia law firm Ballard Spahr.
Hershey Trust Co. spokeswoman Connie McNamara said in an email that Mr. Estey holds the positions of acting general counsel, acting corporate secretary and acting chief compliance office at Hershey Trust Co.
Ms. Porter retained her positions as general counsel and corporate secretary at the Milton Hershey School, Ms. McNamara said. Milton and Catherine Hershey bequeathed their fortune to the Milton Hershey School, founded for orphan boys in 1909.
The school now enrolls boys and girls from impoverished families.
A recent issue for the Hershey Trust Co. board was whether the charity should use school funds to purchase and redevelop the historic Hershey chocolate factory in downtown Hershey. The factory is ending candy production next year.
An Inquirer story in June disclosed that the project could divert $100 million from the school and its beneficiaries, disadvantaged children. The Hershey chocolate company recently sold the old factory to a private investor.
Ms. McNamara said in a statement that a review of the factory project, "under the terms presented," did not meet fiduciary obligations to the school.
The state attorney general's investigation remains ongoing.
In the midst of his gubernatorial campaign last year, then-Attorney General Tom Corbett launched the investigation into the Hershey charity as the Inquirer was publishing a series of stories on questionable expenditures with school funds.
An Inquirer story in last October disclosed the purchase of a money-losing private golf course north of Hershey for $12 million, or two to three times the charity's own appraised value of the golf course. Though it was purchased as private "buffer land" for student safety, the trust for the Hershey School then built a $5 million restaurant/bar on the golf course, which is now open to the public.
After winning the governor's race in November, Mr. Corbett held a dinner in January for donors to his inaugural gala at the Hotel Hershey. The luxury hotel is owned by a for-profit company, Hershey Entertainment & Resort Co., that itself is owned by the Hershey charity.
Once governor, Mr. Corbett appointed Linda Kelly, a former federal prosecutor, to complete his unexpired second term as attorney general.
The investigation into the Hershey charity expanded after Robert Reese, the former top executive at the Hershey Trust Co. and a board member, filed a petition in Dauphin County Orphans Court claiming abuse of charitable assets. Mr. Reese later dropped the petition, claiming health reasons.
The Milton Hershey School and the Hershey Trust Co. said in court filings that Mr. Reese was vindictive because he was not re-elected to the trust company's board in February.
Mr. Estey did not return phone calls seeking an interview.
In a voicemail, Mr. Rendell said, "I don't know anything about his hiring at Hershey, but John Estey is an extraordinarily competent individual. ... He would be a terrific person for any organization."
Correction/Clarification: (Published October 19, 2011) A story about the Hershey charity said Mary Louise Porter, general counsel of Hershey Trust Co., was fired. Hershey Trust spokeswoman Connie McNamara said Ms. Porter resigned Sept. 21 and was not fired. Ms. Porter remains employed as the general counsel and corporate secretary for the Milton Hershey School.
Bob Fernandez: 215-854-5897 or email@example.com .