Corbett's office investigates spending by Hershey Trust

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PHILADELPHIA -- They are longtime friends and close political allies, Tom Corbett and LeRoy S. Zimmerman, one about to become Pennsylvania's governor and the other a Republican elder who helped the younger man on his long climb from Allegheny County to the pinnacle of the state's political power.

Now that relationship has an added dimension: Gov.-elect Corbett remains, for now, Attorney General Corbett, and his office has confirmed that it is investigating the $7.5 billion Hershey Trust, overseen by Mr. Zimmerman, himself a former two-term attorney general.

The issue is the trust's $12 million purchase in 2006 of a money-losing golf course north of Hershey with funds intended to educate impoverished children and increase enrollment at the acclaimed Milton S. Hershey School. After acquiring the golf course, the charity embellished the Wren Dale course with the construction of a Scottish-style clubhouse and restaurant-bar, at a price of $5 million, again with funds meant for the Hershey School.

Trust officials say the acquisitions of the Wren Dale golf course and the nearby Pumpkin World USA roadside market, even at prices significantly higher than fair-market value, will allow expansion of the school's housing and a larger enrollment. The institution paid the prices at the height of the real estate market boom to gain ownership of the real estate for the institution.

If the attorney general finds the Hershey Trust was not prudent, or did not act in the interest of the beneficiaries, it could remove trustees, seek to have them reimburse the trust fund or reduce their compensation, trust attorneys say. One former board member may have to return profit from the sale of the Wren Dale course to the Hershey Trust.

Mr. Zimmerman declined to be interviewed, but he responded to questions e-mailed to him and has released a statement saying he believed the Hershey Trust acted properly.

"We have managed the Hershey Trust to be a thriving philanthropy that is growing its fulfillment of its mission," he said in a written response to The Philadelphia Inquirer.

Sources, who requested anonymity because they were not authorized to discuss the case, said Mr. Zimmerman lobbied to characterize the scrutiny into the Wren Dale golf course as a "review" rather than a noncriminal investigation. Mr. Zimmerman said: "I did not in any way or at any time protest the Attorney General's review of the Wren Dale purchase, nor did anyone on my behalf."

The investigation is being conducted through the attorney general's charitable trusts and organizations section, though Mr. Corbett's influence in the Hershey investigation doesn't necessarily end with the start of his governorship Jan. 18.

Mr. Corbett will manage the process of appointing an attorney general to complete his second term. That selection process is under way, and one name that has been mentioned is David J. Freed, district attorney of Cumberland County and Mr. Zimmerman's son-in-law. Mr. Zimmerman said he has not "advocated" for Mr. Freed to be appointed.

Mr. Freed said in a phone interview Dec. 8 that he was "flattered" if he was being considered but that no one has contacted him about it. He said he would have reservations about accepting the position because it is customary that the appointed attorney general does not then run for a full term when the interim term expires.

Two other candidates mentioned for Mr. Corbett's unexpired term are Dauphin County District Attorney Edward M. Marsico Jr. and First Deputy Attorney General William H. Ryan Jr.

The attorney general's investigation into the Hershey Trust is complicated beyond the friendship between Mr. Corbett and Mr. Zimmerman. Those complexities include:

• The office of attorney general has virtually exclusive regulatory oversight of charities in Pennsylvania, including the Hershey Trust. Yet it was not until September -- four years after the actual purchase of the golf course and in the wake of stories by The Inquirer regarding spending at the Hershey School -- that the attorney general began an investigation. The Inquirer reported on the Wren Dale deal in early October. One of the expenditures reported by the newspaper was the quiet payoff of $3 million to former students or their families for sexual abuse by a serial pedophile who was the son of a part-time live-in house parent at the school.

• The purchase of the golf course includes an apparent conflict of interest involving a former high-ranking Hershey Co. executive and raises questions about the board's conduct in upholding its fiduciary responsibilities for managing the philanthropic legacy of Milton S. Hershey, founder of the candy company and the school for poor children.

• The attorney general's office was a driving force in placing Mr. Zimmerman, who remains one of Pennsylvania's most prominent Republicans, on the Hershey Trust board after a crisis-driven and sweeping leadership change at Hershey in 2002. A change in proposed governance rules of the trust, allowed by former Attorney General D. Michael Fisher in 2003, cleared the way for Mr. Zimmerman to have a seat on all four of the boards that oversee the sprawling Hershey empire, which includes the candy company, the company that operates Hersheypark and other amusements and the trust that funds and manages the Hershey School. Those positions provided the 75-year-old Mr. Zimmerman extended influence and compensation in 2009 of $499,996.

• The attorney general's office has been a bastion of Republican control since 1981. Only Republicans have been elected to the office since Mr. Zimmerman's first victory, and the Hershey-related paying boards include a number of notable Republicans, among them former Gov. Tom Ridge, former GOP gubernatorial candidate and Steelers hall-of-famer Lynn Swann, and former Ridge administration official James Sheehan.

Both Mr. Zimmerman and the attorney general's office assure that those relationships will have no influence on the investigation of the purchase of the golf course.

"Tom Corbett has been very clear that if there are violations, they will be investigated and they will be addressed," said Nils Frederiksen, a spokesman for Mr. Corbett.

"Mr. Zimmerman is a private citizen, just like any other private citizen out there," he added.

The Wren Dale Golf Club was founded by a group of local businessmen and doctors in 2001. The Hershey Trust Board paid $12 million for the struggling club, a figure that was two to three times higher than the charity's own appraisal for the property.

The price erased financial losses of the original investors, which included Richard Lenny, then the chief executive officer of the Hershey candy company. Mr. Lenny, in fact, sat on the charity board that OK'd the acquisition.

The board said it had no idea Mr. Lenny was one of Wren Dale's owners. In his open letter to the school and alumni on Oct. 18, Mr. Zimmerman said, "Like any good board, we have safeguards in place to ensure that any potential conflicts of interest are highlighted and resolved satisfactorily. As in most organizations, our safeguards rely on self-disclosure by directors of any potential conflicts of interest. The attorney general's office will make its own assessment of whether those worked properly here."

Mr. Lenny, who now lives in Illinois, has not responded to requests for an interview.

The Inquirer separately reported that the Hershey charity purchased the Pumpkin World USA roadside market for $8.6 million, or nine times its tax-assessed, fair-market value.

Through spokeswoman Connie McNamara, the Hershey Trust defended the purchases of Wren Dale and Pumpkin World as the costs necessary to secure "buffer land" next to the Hershey School campus, parcels that could allow for planned expansion of the school and its enrollment.

Mr. Zimmerman, in his response to The Inquirer, said he believed the newspaper's coverage of the trust has been unfair. "I want to respond to the questions you have posed. But I do not agree to sit with you for an interview. To do so would validate the recurring unfairness of your coverage."

In articles, the trust's "important contextual and contrary points are omitted completely, or tacked on in a cursory, limited and throwaway fashion" and their publication at times on the front page "is inexplicable and is a compelling indicator of The Inquirer's bias," he said.

Besides long-standing ties to the attorney general's office, Mr. Zimmerman has a personal and professional relationship with Mr. Corbett.

This July, Mr. Zimmerman had Mr. Corbett and nine others to his suburban Harrisburg home for a private dinner. Corbett aide Kevin Harley said Mr. Corbett has known Mr. Zimmerman for "years and years and years."

The dinner event was social and unrelated to fund-raising for Mr. Corbett's gubernatorial campaign, Mr. Harley said.

Mr. Zimmerman, who served as attorney general from 1981 to 1989, is senior counsel at the Pittsburgh-based Eckert Seamans firm, whose lawyers contributed $765,000 to state candidates or committees between 2000 and 2010, according to state and Inquirer data. Mr. Zimmerman is one of the lawyers representing the Foxwoods casino project in Philadelphia, court records show.



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