Preface

 

I am surprised that a plan for healing in connection with The Hershey Industrial School Trust, now known as the Milton Hershey School Trust (the “Trust”), has not already been written. Over the history of the Trust, the relationship between the Trust and various groups has changed. Today, the Trust’s relationship with the Community of Hershey is fundamentally different from that which existed when Milton Hershey was alive. Many Hershey community members do not understand why it is different and some are very concerned that the Community of Hershey does not derive more direct benefit from the Trust. The businesses that are now within the Trust, succeeding Hershey Estates and Hershey Chocolate Company, are very different from their predecessors and have different relationships with the Trust. In fact, some are concerned that their relationship today is too close, after considering the difference between Hershey Estates and its successor, HERCO. Their interest in the Trust resources such as land are reviewed with great anxiety by those who expect that all resources within the Trust should be used exclusively for the beneficiaries of the Trust.

 

Moreover, after two decades of alumni effort, alumni of The Hershey Industrial School, now known as the Milton Hershey School (the “school”), achieved in 2002 fundamental reform (the “2002 Fundamental Reform”) of the Board of Managers of the Trust, with full support of the Orphans Court and the Office of the Attorney General, to return the school to fulfilling the original intent of Milton and Catherine Hershey (the “Hersheys”). While this had been sought for 20 years, various groups of alumni of the school continue their infighting. While some would argue that there is more to it, my view is that the infighting revolves primarily around how to arrive at the same desired goal.

 

The reason I am writing this is not because I believe I have all the answers. Rather, I am writing this only because no one has already addressed the issues of healing and I strongly believe that the Trust will continue to experience great hardship if these issues are not properly addressed, making it increasingly more difficult for the Managers and the school to achieve the great philanthropy established by the Hersheys.

  

 

 

Introduction

 

In 1999, a cy pres petition that would have re-invented the Trust was defeated, in large part due to the efforts of John Halbleib, John Mardula, Graham McIntyre, Joe Berning, Mike Wilson, a few other individuals and my law firm, through MHSAA. This is a matter of public record, and the filings are available to registered users (who are logged in) in the Library area of this Website. This was the very first time that the Managers were defeated in their many efforts to modify the Trust following Milton Hershey’s death in 1945. At the time, it was widely believed that the Managers would receive the relief they were seeking and that our efforts in 1999 were pointless. Instead, this defeat of the Managers was and remains a fundamental turning point in the Trust and the efforts of all alumni to restore the school to its original mission and prominence, and is well described as the “1999 Turning Point”.

 

During 1999, 2000, 2001 and 2002, a team of individuals fought for fundamental reform within the Trust. This team included John Halbleib, John Mardula, Graham McIntyre, Joe Berning, Ric Fouad, Rod McLaughlin, Johnny O’Brien, other individuals and my law firm, again through MHSAA. This period is well described as the “1999-2002 Research, Investigation and Reform Efforts,” because during this period their was unparalleled research completed, an investigation by former Governor Dick Thornburg, a subsequent investigation by the Office of the Attorney General, and negotiations leading up to an agreement designed to return the Trust to fulfilling the philanthropy of the Hersheys as set forth in the Deed of Trust. Concurrent with the entering into this unprecedented agreement, it became public knowledge that Hershey Foods Corporation was available for sale, supported by the Board of Managers. Within days, all of Central Pennsylvania rallied around many of the issues raised by the alumni, including that the Managers were no longer pursuing the Hersheys’ philanthropy; rather, they were pursuing a philanthropy that manifested the combined desires of a control group within the Managers. While there were other common elements of concern, it seemed that Central Pennsylvania seized their vague recollection that the Hersheys philanthropy was of a unique nature somehow combining Community, Business and Education in a self-reliant philanthropic model. Their vague recollections proved sufficient to cause more than a majority of the Managers to voluntarily resign and the remaining Managers to elect a few new Managers and for Johnny O’Brien to become the President of the School, which was a fundamental reform supported by the Orphans Court, the Office of the Attorney General, the Community of Hershey, Central Pennsylvania and the Milton Hershey School Alumni Association (“MHSAA”) (the “2002 Fundamental Reform”).

 

In the fall of 2002, there was consensus that fundamental reform within the Trust had been achieved as a result of the reconstitution of the Board of Managers and Johnny O’Brien becoming the President of the School. There was an understanding that changes at the school would take at least 5 years, if not more and there was consensus to give Johnny O’Brien time to make such reform and return our school to its original greatness.  My law firm remained involved from early 1999 throughout 2002 and into early 2003, and withdrew as counsel once there was consensus that fundamental reform had been achieved. With the consent of Scott McCue, I am making our letter of withdrawal available for your review. Here is my firm’s letter of withdrawal:

 

 

 

Notwithstanding the consensus view in 2002 and early 2003 (which in the fall of 2002 seemed to be a view shared by Ric Fouad and other post 2002 MHSAA leaders) that material structural reform had been achieved and that Johnny O’Brien and the new, reconstituted Board of Managers needed time to make fundamental changes, a few members or the core team, including Ric Fouad (as well as a few others) later, separately determined that more needed to be done. Their view emerged as a strong minority view. Though this was a view held by a minority of alumni, they had achieved control of MHSAA’s Board of Directors. Notwithstanding efforts to require that they manage MHSAA consistent with the majority view of the alumni, this small splinter group used MHSAA to pursue their minority view of what needed to be done. To this date, I am not aware of any letter of thanks, or any other formal expression of thanks, received by my firm, by me or by Scott McCue.

 

Notwithstanding the consensus view in 2002 and early 2003 (which in the fall of 2002 seemed to be a view shared by Ric Fouad and others) that material structural reform had been achieved and that Johnny O’Brien and the new, reconstituted Board of Managers needed time to make fundamental changes, a few members or the core team, including Joe Berning and Ric Fouad (as well as a few others) (such 2003 leadership (Fouad, Rice and Waters, among others) (the “Post Reform MHSAA Leadership”)) later, separately determined that more needed to be done. Their view emerged as a strong minority view. Though this was a view held by a minority of alumni, they had achieved control of MHSAA’s Board of Directors. Notwithstanding efforts to require that they manage MHSAA consistent with the majority view of the alumni, this small splinter group used MHSAA to pursue their minority view of what needed to be done.

 

Before we can fully understand these competing views, one needs to understand the Hersheys’ original philanthropy. The next section describes the Hersheys original design of The Hershey Industrial School and the section follow such description, details some of the challenges of the Hersheys philanthropy. Once one has a better understanding of these two areas, it is easier to understand the context for the disputes that continue among alumni of the school. But these are not the only disputes that remain. The continuing dispute among alumni of the school is merely a good example of how good intentions can get in the way of progress.

 

 

Diagram 1: The Original Structure of The Hershey Industrial School – 1945

 

 

 

In naming three separate entities the same name, there was a message passed on each time emphasizing the overall scope of the Hersheys’ philanthropy. The Hershey Industrial School is comprised of three major components, each of which is reflected in its name:

1.      Hershey represents the community of Hershey, PA.  It includes Derry Township and certain surrounding land. This component of The Hershey Industrial School is referred to as Community.

2.      Industrial represents the various businesses, including the Hershey Chocolate Company which the Hersheys created. This component of The Hershey Industrial School is referred to as Business.

3.      School represents the education system which the Hersheys created within Derry Township, including those that were public and those that were not. This component of The Hershey Industrial School is referred to as Education. 

 

Community

The unincorporated town of Hershey is part of The Hershey Industrial School. Substantially all of Derry Township and land adjoining or conveniently near constitutes the Hersheys’ Children’s Home Campus; this constitutes the land upon which the Hersheys built The Hershey Industrial School, which includes the Hersheys’ “ideal community” – Hershey, Pa. Inasmuch as “the town of Hershey” (which includes Derry Township and certain surrounding land) is owned by the School, Hershey, Pa. constitutes the campus of the School (which is the same thing as the Hersheys’ Children’s Home). Accordingly, the Trust, or businesses owned and/or controlled by the Trust, would incur some “normal operating costs” such as streets and sanitation, education, etc.

As part of the Hersheys’ Children’s Home Campus, the Trust incurs these types of expenses and capital improvements in order to maintain and improve said campus. Such campus includes the town of Hershey which was established to serve as the home shared by the Current Beneficiaries and others who played a role in the Hersheys’ Children’s Home. The Managers operation of this campus, including Hershey, Pa., is provided for in Milton Hershey’s Deed of Trust. However, to be clear, this is not because the Community is a beneficiary of the Trust. Rather, it is because the Community is unincorporated, part of the Hersheys’ Children’s Home Campus and an important component of providing a real home for the Current Beneficiaries.

The Hersheys’ purpose was to design, build, and operate the town of Hershey for the benefit of his and Kitty’s orphan boys. In summary, the Community is unincorporated, such Community serves as the “home” of the Resident Beneficiaries, the “home” to which the Non-Resident Beneficiaries would return, as well as the “home” of others who also play some role in the Hersheys’ Children’s Home (e.g., as an employee of Hershey Chocolate Company and resident of the Hersheys’ Children’s Home Campus) and such “ideal community” is part of the Hersheys’ Children’s Home Campus. In fact, the Indenture that each parent, guardian, or other competent authority entered into with the Managers expressly provided that “The home provided for the said orphan by the Managers is situated at Hershey, Dauphin County, Pennsylvania.” The Hersheys’ Children’s Home Campus is Hershey, Pa. (which includes Derry Township and certain land surrounding Derry Township) which was expected to, and did, grow into the areas surrounding Derry Township. In fact, the Hersheys’ Children’s Home Campus had spread from Derry Township, Dauphin County, Pennsylvania to land adjoining, or conveniently near, School property into two additional townships in Dauphin County, Pennsylvania, one township in Lebanon County and one township in Lancaster County; there were approximately 55 units in Derry Township, 5 units in South Hanover Township, and 2 units in East Hanover Township, Dauphin County, 1 unit in Conewago Township, Lancaster County and 2 units in Londonderry Township, Lebanon County, Pennsylvania. These three Counties match the first preference geographic areas listed in Milton Hershey’s Deed of Trust. Consequently, the Indentures were worded specifically because Derry Township and the surrounding area (which is paralleled in the postal service area, or town of, “Hershey”) was intended to be, and became, the community that served as the “home” of the Resident Beneficiaries, the “home” to which the Non-Resident Beneficiaries would return, as well as the “home” of those who played some role in the Hersheys’ Children’s Home (e.g., as an employee of Hershey Chocolate Company and resident of the Hersheys’ Children’s Home Campus).  Most importantly, it is the community to which the entire School Family belongs and in which they are considered members. That said, the residences of the students could be located in any of the three preference Counties (or other land for that matter), so long as the land on which it is located is adjoining or conveniently near School property, because each Indenture contemplated that a student’s residence could be other than Hershey, but their respective home would remain “situated at Hershey.”

 

As such, and because land used for school purposes was exempt from taxation, the community was subject to certain overall limitations in size and population because the Trust would have limited resources and such resources must be deployed in a manner that is in the best interests of the Beneficiaries; particularly in light of the high level of fiduciary duty imposed on each Manager under the Deed of Trust and each Current Beneficiary’s Indenture.

The unique role of Derry Township (and the land acquired for School purposes that adjoins or is conveniently near to School property) as the Hersheys’ Children’s Home Campus is illustrated when describing Hershey Estates’ role.  Hershey Estates operated all of the Hersheys’ Children’s Home Campus, including the related businesses.  In the context of fiduciary duties, its use to the School and given the overall philanthropy of the Hersheys, Hershey Estates, with approximately forty separate activities, was not to be viewed by the Managers in the classic manner. That is, as part of the overall philanthropy, the traditional rules relative to diversification of investments and the objective of making a profit were not entirely applicable in the context of the Hersheys’ philanthropic endeavor. Hershey Estates, as part of the School, provides employment for thousands and it provides service and facilities to the School, which, in view of its size, would have to provide for itself at far greater cost.  The interdependent relationship between the School and the community was well understood when M.S. was alive. If Hershey Estates were not the provider of the services it provided to the School, it would be far more costly if the School were required to provide these services for itself, particularly in view of its size.  This interdependence, unique purpose, and economic efficiency were well understood, which when all is considered justify Hershey Estates as a non-diverse and underproductive asset – because it satisfied this unique provision of service and facilities to the School. Thus it was the common understanding and expectation during M.S.’s life that the Hersheys’ Children’s Home Campus was to be, and remain, expansive and rural.  Moreover, Hershey Estates is part of the School – that is, Hershey Estates is part of the permanent “institution” designated the “School” in Milton Hershey’s Deed of Trust.

That all of Derry Township (and adjoining and conveniently near land) is part of the Hersheys’ Children’s Home Campus is reflected in the enhancements to the School arising through M.S.’s creation of the M.S. Hershey Foundation, the 1945 Residual Derry Township School District Trust, and the many improvements made to Hershey with funding coming from the Trust or a business owned by the Trust (e.g., Hershey Corporation, Hershey Chocolate Corporation, Hershey Estates, etc.).

 

Business

An essential component of a self-reliant Hershey Industrial School is the Business that serves as the economic engine funding the Hersheys’ philanthropy while at the same time providing employment and stability to the Community.  The Hersheys’ self-reliant philanthropic structure requires an economic engine to provide economic and employment stability in the Community.  Hershey Chocolate Corporation came to serve as a core component, but not sole component, providing economic and employment stability for the Hersheys’ Children’s Home Campus and surrounding areas.  Other components of the School (e.g., the school, Hershey Estates, and etc.) also provide economic and employment stability, but without the same profit incentive or motive.  Furthermore, the population from which Hershey Chocolate Corporation derived revenue, and its profits, was Nationwide.  Thus, the cost of the Hersheys’ philanthropy was distributed throughout the United States of America in exchange for chocolate.  To continue this self-reliant philanthropic structure in perpetuity, one would not consider any changes pursuant to which control of such profit driven economic engine might be lost. 

Control of the “Industrial” component of The Hershey Industrial School is fundamental to the continued success and viability of The Hershey Industrial School. M.S. fully understood and intended to retain this control.  Should The Hershey Industrial School not have control of the “Industrial” component, surely the success and viability of the Hersheys’ Children’s Home would be threatened.

 

Education     

One of the core components of The Hershey Industrial School is Education. The funding for these resources came primarily from the Hersheys and the Trust, as well as the community of Hershey, primarily through taxes. Lack of opportunity was M.S.’s concern for others, particularly his orphan boys, and education could serve to provide opportunity not otherwise available to a child.  As a consequence, the Hersheys made education a core component of their philanthropy, and this has been observed by many. Wherever possible, the Hersheys’ created educational resources to be utilized by both those admitted to the School, as well as other Derry Township residents.

Unlike other Derry Township residents, Current Beneficiaries typically have unique educational needs not necessarily as common in public school. As Current Beneficiaries came to the Trust, their initial special educational needs were attended to by the “school.” Approximately one-third of those admitted to the School had failed one or more years of education before entering the School. This is not a problem of intelligence or potential; rather, the primary cause is a combination of the disruptive family environment and social disadvantage that often results from the loss of one or both parents. ^[1]  Some new HIS students in various age ranges might repeat a grade or receive other courses to bring them to the appropriate grade level for their age.  Thus many of these new students required special programs not needed nor replicated in the public school system. If these new students are repeating a grade level or receiving other remedial courses while attending public school, the contrast in their daily programs might give the public school students the wrong impression that new students at HIS lacked intelligence and thereby undermine such new students’ view of their scholastic potential. For most of these children, their scholastic potential exceeded that which they were achieving when first admitted to the School. Moreover, the number of Hershey, PA residents who required education was also increasing dramatically.  These public school children were competing for positions in various programs available in the public schools. The Deed of Trust mandates a unique, individualized education for each student. Consequently, some educational resources must be available to the students at the school so as to ensure that each receives the proper education, without competing with students attending the public schools for access to such education.  

All of the uses contemplated by the M.S. Hershey Foundation were limited to Derry Township and its residents for educational purposes. Note that the geographic reach of said foundation and the benefits of the M.S. Hershey Foundation to residents were both subject to the limits of Derry Township; moreover, this foundation was focused on the third core component of The Hershey Industrial School – Education. Likewise, in 1945 upon M.S.’s death, he formed a residual trust pursuant to Milton Hershey’s 1944 Final Will through which M.S. bequeathed all of the rest and residue of his estate,

to Hershey Trust Company, of Hershey, Pennsylvania, in trust, nevertheless, to hold, invest and reinvest in such securities […] to pay the income thereof in semi-annual installments to the School District of Derry Township, Dauphin County, Pennsylvania, for the use of said School District, particularly for the purpose of assisting such Township to relieve the tax burden for the upkeep and maintenance of the public school in said District.

This final testament further manifests M.S.’s focus on Derry Township as the campus of The Hershey Industrial School (that is, the Hersheys’ Children’s Home Campus), as well as his focus on the third core component of The Hershey Industrial School – Education.

 

Legal Structure – The Hershey Industrial School Trust

 

The Hershey Industrial School Trust is the well designed legal structure the Hersheys created to ensure their continued control of their philanthropy during their lifetime and the legal relationships such structure created to ensure that the Hersheys’ philanthropy would survive in perpetuity. The Trust was, and remains, of central importance to the Hersheys’ philanthropy.

 

Picture 1:   John Snyder, Legal Architect of The Hershey Industrial School [1]

In 1891, M.S. formed his association with John Snyder.  Snyder, as well as M.S.’s grandfather, Jacob Hershey (of Derry Township), a Bishop of the Reformed Mennonite Church, both served on the board of the Emaus Trust.  The Emaus Trust was a children’s home located in Middletown, PA formed by George Frey in the early 1800s. Snyder is the legal architect that M.S. used, among other things, to make his philanthropy (including the “ideal community”) permanent.[2] John Snyder remained primary legal counsel to all Hershey Interests and M.S. up until his death on December 20, 1934.

 

The trust, the legal entity that is utilized to make the Hersheys’ philanthropy (including the “ideal community”) permanent, which has come to be known as The Hershey Industrial School Trust, was formed on April 14, 1910.  While the Hersheys signed and dated it November 15, 1909, April 14, 1910 was the date on which all the other parties to the Original Deed of Trust executed such document.  The name of the Trust (The Hershey Industrial School) reflects the overall composition of the School (which includes the “ideal community”) formed pursuant to the Original Deed of Trust.

 

Deed of Trust

 

On November 15, 1909, M.S. and Kitty executed an Indenture dated November 15, 1909 as settlors of the resulting trust. On April 14, 1910, such Indenture was accepted by the Hershey Trust Company as the Trustee and a number of individuals as the original Managers. On July 7, 1910, the Indenture was recorded in the Office of the Recorder of Deeds of Dauphin County, Pennsylvania. Though this instrument is self-designated an indenture, it has for some time been referred to as the “Deed of Trust.” The trust formed as a result of said Indenture was actually formed as a permanent, legal entity when the Hershey Trust Company and the initial Managers executed the Original Deed of Trust and thereby accepted the trust and duties imposed upon them under said Indenture. The Original Deed of Trust became binding on third parties when it was filed in the public records in the Office of the Recorder of Deeds of Dauphin County, Pennsylvania on July 7, 1910. This is the “Original Deed of Trust.” The Deed of Trust has been modified from time to time. For our purposes in describing the Hersheys’ philanthropy, we refer primarily to Milton Hershey’s Deed of Trust – that is, the Deed of Trust as in effect upon his death in 1945.

In late 1919, the Court of Common Pleas of Dauphin County, Pennsylvania entered a decree which granted the incorporation of the Managers as The Hershey Industrial School, a Pennsylvania nonprofit corporation, a corporation of the first class, pursuant to Paragraph 28 of the Deed of Trust and said “1919 Decree.” As a result, the Managers received court permission and did incorporate as The Hershey Industrial School, a Pennsylvania nonprofit corporation. The incorporation of the Managers is the third instance where the Deed of Trust names a separate and distinct entity “The Hershey Industrial School.” Following the incorporation of the Managers, each of three separate and distinct entities, that is, the School, the school, and the Managers, have the name “The Hershey Industrial School.”

On October 27, 1933, a Petition for Modification of Trust, dated October 27, 1933, was filed in the Court of Common Pleas of Dauphin County, Pennsylvania, in Equity, Equity Docket, Number 1096, by The Hershey Industrial School, a nonprofit corporation as the petitioner, by leave of the Attorney General. A Decree dated October 30, 1933 was issued in response to the Petition by the Court of Common Pleas of Dauphin County, Pennsylvania, in Equity. The decree authorized revisions which modified the Original Deed of Trust (1) to expand the class of orphans served by the school, as follows: (a) the maximum age range for admission of poor, healthy, white male orphans was expanded from between four and eight years of age to between four and fourteen years of age, and (b) otherwise qualified boys whose mothers were deceased but whose fathers were still living were made eligible for admission, and (2) to add the provision, “No person employed by the school, in any capacity, in connection with which any compensation or expenses are directly or indirectly paid, shall at the same time serve as a member of the Managers of The Hershey Industrial School,” as Paragraph 29 of the Deed of Trust.  M.S. joined in said 1933 Petition.

Following Milton Hershey’s death in 1945, various Deed of Trust modifications or deviations occurred, or were attempted, including those in 1951, 1953, 1963, 1968, 1970, 1976, 1990, 1998, 1999, 2000 and 2002. These Deed of Trust modifications or deviations are the subject of and discussed separately. To avoid any confusion between that which the Hersheys intended and subsequent modifications of the Original Deed of Trust, the phrase “Milton Hershey’s Deed of Trust” as referenced herein means the Original Deed of Trust as modified during M.S.’s lifetime, first, on December 30, 1919 with the incorporation of the Managers and second, on October 30, 1933, with the expansion of the class of orphans served and the addition of Paragraph 29. Moreover, the term “Deed of Trust” means the Original Deed of Trust, as revised through authority of the court and now evidenced by the 1976 Second Restated Deed of Trust.^[3]

 

Trust Structure and Governance

 

The “Trust” is the legal entity created pursuant to the Deed of Trust and known as “The Hershey Industrial School Trust.”  The Trust has two fiduciaries: the Trustee and the Managers. Beyond the parties described in Milton Hershey’s Deed of Trust, there is created pursuant to the Original Deed of Trust first, in the beginning of the Original Deed of Trust, an “institution” designated as the “School,” and then, another separate and distinct institution, which is referred to herein as the “school.” Both are named under Milton Hershey’s Deed of Trust as “The Hershey Industrial School.” As with all trusts, it also has beneficiaries.

 

Trustee

 

The first fiduciary, the Trustee, is the Hershey Trust Company of Hershey, Derry Township, Dauphin County, PA, which is designated “Trustee” and “party of the second part” under the Deed of Trust. The Trustee, among other things, owns legal title to the Trust assets, which, following M.S.’s death, includes the stock of the Hershey Trust Company.  As with any corporation, the “Board of Directors” of the Trustee is selected by the shareholders of the Hershey Trust Company. During his life, M.S. reserved to himself the right to vote the stock of the Hershey Trust Company as a shareholder and pursuant to the 1935 Living Trust of Milton Hershey. Thus, during his lifetime M.S. controlled the Trust by determining who comprised the HTC Board of Directors. Upon his death, the Hershey Trust Company Board of Directors became the successor to M.S. and as a group selects their own successors as members of the Hershey Trust Company Board of Directors. 

The Trustee through its Board of Directors selects the Managers from the HTC Board of Directors – that is, from amongst its own members.

 

Managers and Board of Managers

 

The Trust has a second fiduciary called the “Managers.” The third part of Milton Hershey’s Deed of Trust begins at Paragraph 22 and is focused primarily on the Managers or operating fiduciary.  These provisions describe responsibilities of the Managers, as well as certain selection, organizational, and related matters. As reflected in Diagram 1, each of the School, the school and the Managers is a separate entity which shares the same name – “The Hershey Industrial School” as provided in the Deed of Trust. The Managers are the operating fiduciaries of the Trust. Milton Hershey’s Deed of Trust provides that the successors to the initial Managers shall be selected from the HTC Board of Directors by the Trustee. From April 14, 1910, the date on which the original Managers accepted under the Deed of Trust, through December 29, 1919, “Managers,” as a term used in Milton Hershey’s Deed of Trust, means the individual Managers named as “parties of the third part” and their respective successors. On and after December 30, 1919, “Managers,” as a term used in Milton Hershey’s Deed of Trust, means The Hershey Industrial School, a Pennsylvania nonprofit corporation,^[4] as successor in interest to the individual Managers pursuant to Paragraph 28 of the Deed of Trust and the 1919 Decree.

The “Board of Managers” as a term in the Deed of Trust, means that from April 14, 1910 through December 29, 1919, the individual Managers named in the Original Deed of Trust and their respective successors, collectively as a fiduciary under the Deed of Trust, who were from amongst their group to elect officers of the Managers following a corporate governance model. On and after December 30, 1919, the “Board of Managers” as a term in the Deed of Trust means the Board of Directors of The Hershey Industrial School, a Pennsylvania nonprofit corporation, collectively, who are from among their group to elect certain officers of the Managers. Members of the Board of Managers are selected by the Board of Directors of the Trustee from amongst its own members.

The Managers are the operating fiduciaries with responsibility for the management of the School or the Hersheys’ Children’s Home (which includes the “ideal community” commonly referenced by those who lived in Hershey), and is the first “institution” founded and endowed in perpetuity by the Hersheys pursuant to their Deed of Trust at the beginning of the Original Deed of Trust. It is the very same “institution” into which orphans are admitted pursuant to Milton Hershey’s Deed of Trust. This institution is an expansive operation for which the Managers are the operating fiduciaries with responsibilities that include day-to-day operation of the Hersheys’ Children’s Home. Inasmuch as it is so expansive and includes substantially all of Derry Township (as well as land acquired for School purposes that is adjoining or conveniently near School property), the Managers are the de facto governing body of the Hersheys’ Children’s Home Campus. While other townships or communities have governmental structures that perform the functions that the Managers perform in Derry Township, M.S., as a Mennonite, did not believe government was appropriate in the context of the Hersheys’ Children’s Home.

By selecting senior officers of the underlying operations of the Hersheys’ Children’s Home (e.g., President of the Hershey Chocolate Company, President of the Hershey Trust Company, etc.) to be members of the Board of Managers, and holding each such Manager responsible to each Current Beneficiary of the Trust (through a combination of the Deed of Trust and each Indenture), this structure requires that potentially conflicting objectives of the underlying community, business and etc. be servient to the best interests of each Current Beneficiary as all of the components of the Hersheys’ Children’s Home are assets of the Trust intended to benefit the Beneficiaries. Moreover, each Manager has a solemn fiduciary duty to each Current Beneficiary due to the Deed of Trust and Indenturing. These legal obligations of the Managers to the Beneficiaries are the ultimate determinant, which mandate that the Managers make only decisions that are in the best interests of each Current Beneficiary.

 

Preservation of Control During Milton Hershey’s Lifetime

 

During M.S.’s life he reserved to himself the right to vote the stock of the Hershey Trust Company as a shareholder and pursuant to the 1935 Living Trust of Milton Hershey. Thus, during his lifetime M.S. controlled the Trust by determining who comprised the HTC Board of Directors. The Trustee through its board of directors selects the Managers from the HTC Board of Directors. This ingenious preservation of control over the Trust was achieved by retaining the right to vote the Hershey Trust Company stock and thus selection of the members of the HTC Board of Directors, from which the Managers must be selected.

In the end, when one considers that the Hersheys were the settlers of the Trust and the Hersheys’ Children’s Home was at all times controlled by M.S., one must conclude that the best evidence of what the Hersheys intended in the language of Milton Hershey’s Deed of Trust is what M.S. indeed created during his lifetime.  M.S. was very much aware that he was carrying out the terms of his own will while still alive and believed that everything would continue as he intended after he died just as if he were still alive and in control.

Upon his death, the Hershey Trust Company Board of Directors became the successor to M.S. and as a group selects their own successors as members of the Hershey Trust Company Board of Directors. 

 

The “institution” Designated the “School”

 

The first part of Milton Hershey’s Deed of Trust runs from the beginning of the Deed of Trust through Paragraph 10. This first part (1) creates the Trust, the Managers, and the School, and (2) provides for the operation of the School. The School includes the ideal community and the school.  As reflected in Diagram 1, each of the School, the school and the Managers is a separate entity which shares the same name – “The Hershey Industrial School” as provided in the Deed of Trust.

Beyond the parties to, and described in, Milton Hershey’s Deed of Trust, there is created pursuant to the Original Deed of Trust an “institution” designated as the “School.”  “School” as used in the Deed of Trust means the “institution” founded and endowed in perpetuity as contemplated by the first recital (and other provisions) of the Original Deed of Trust, known as “The Hershey Industrial School” located upon land in Derry Township and land adjoining or conveniently near to School property.

On a more substantive level, the School is the Hersheys’ Children’s Home and includes the Hersheys’ Children’s Home Campus (including Hershey, PA or the “ideal community”), Hershey Estates, the Hershey Chocolate Company and its successors, the School Family, The Hershey Industrial School Alumni Association, and the “school.” The M.S. Hershey Foundation and the 1945 Residual Derry Township School District Trust are likewise included as part of the School as subsidiaries or affiliates within the Trust and part of the “permanent institution” (which includes the “ideal community” also known as the “community of mutual interests”), similar to Hershey Estates but in a different legal form. The use of the phrase “Hersheys’ Children’s Home” is to describe a children’s home of the type, nature, and programs intended by the Hersheys under Milton Hershey’s Deed of Trust, giving full effect to the resources of the Trust. The Hersheys’ Children Home is the School and all of its components, which is a children’s home for the Current Beneficiaries (dependent, at-risk children, who are in need of substantially year round institutional care by a children’s home such as that intended by the Hersheys for the full development of each Current Beneficiary as a whole person according to such person’s unique abilities, interests, and commitment). Moreover, the phrase “Hersheys’ Children’s Home Campus” means substantially all of Derry Township and the surrounding land that from time to time is acquired for School purposes and adjoins or is conveniently near School property, which of course includes the community which serves as the “home” of the Current Beneficiaries. The overall relationships formed as a result of Milton Hershey’s Deed of Trust and the Indentures are illustrated in Diagram 3: Control of The Hershey Industrial School – 1910 – 1945. All activities of the Hershey Interests principally benefit the School.

 

 

The “school,” School Family and Milton Hershey’s Alumni Association

 

There are three resources within the School that serve the Resident Beneficiaries and Non-Resident Beneficiaries directly and are not expressly shared with others affected by the Hersheys’ philanthropy. These are the “school,” the School Family, and Milton Hershey’s Alumni Association. In contrast with the “School,” the “school” means the residential, educational and other related facilities, and employees that directly serve the Resident Beneficiaries and Non-Resident Beneficiaries; the school comprises a major component of the School.  The school is the second “institution” referenced in the Deed of Trust; it is introduced in Paragraph 11 of Milton Hershey’s Deed of Trust and organized pursuant to Paragraph 13. Section 3.6(a) describes the school in detail.

 

Profit Driven Economic Engines

 

The Hershey Chocolate Corporation and Hershey Corporation are the profit driven economic engines of the Trust. Due to the broad reach through the markets for their respective products, the profits that fueled the Hersheys’ philanthropy were derived from the broader United States and to some extent international markets, thereby distributing the cost of their philanthropy to lands well beyond Hershey, Pa. in exchange for chocolate and sugar products. After 1927, profits from primarily the Hershey Corporation (and to a lesser extent, the Hershey Chocolate Corporation) funded the large construction projects of the Trust which were prevalent during the period of great expansion of The Hershey Industrial School.

 

Hershey Estates

 

Knowing that The Hershey Industrial School would have an expansive set of responsibilities, the Hersheys established entities through which to centralize the performance and management of those responsibilities. Hershey Estates centralizes the ownership, operation and management of all of the non-chocolate interests of The Hershey Industrial School, which includes the ideal community of Hershey. The businesses operated by Hershey Estates include baking, coal, cold storage, dairy, department store, electric, experimental candy kitchen, feed and grain, farms, farming implements, filling station, garage, greenhouse and nursery, hospital, laundry, real estate, sewage, telephone, transit, water, hotel, as well as community building, cemetery, inn, theatre, country club, juvenile golf course, museum, park, park golf club, rose garden, and zoo. This list well illustrates the extensive scope of the Hershey Estates. The objective is to operate Hershey Estates without generating a profit but minimizing losses, to the extent possible. Hershey Estates is part of the School under Milton Hershey’s Deed of Trust. As such, it had the entire Trust behind it and did not require its own capitalization to succeed in fulfilling its unique role within the Hersheys’ philanthropy. 

In the end, Hershey Estates is that part of the School that operates the School (including the “ideal community”).  The centralization of all of these activities is a logical and efficient solution.  That is, the overall endeavor to have a self-reliant structure – or “institution” – that utilizes all of its own resources to their maximum benefit in order to achieve optimal economic, logistical, and most importantly, philanthropic results is achieved, in part, through Hershey Estates.  Hershey Estates was formed with a clear set of purposes:  that is, to consolidate the activities that were not entirely profit driven that served The Hershey Industrial School (that is, the Hersheys’ Children’s Home) and the Beneficiaries, which service revolved around designing, creating and preserving a self-reliant campus and ranged from producing the food, utilities and other resources to be consumed, to providing a community to which the Beneficiaries would belong, to providing Education.  Hershey Estates is the entity that oversees most, if not all, of the non-profit driven activities that constitute The Hershey Industrial School and for which the Managers have day to day operating responsibility.  The management and operation of other components like the Hershey Chocolate Corporation and the Derry Township School System were also directed by the Managers due to the Trust’s ownership and/or control of these and other components.  All of the industrial activities of the Community that are related to the Hershey Interests, other than the Hershey Chocolate Corporation, come under Hershey Estates, and, like the school, under the management of the Board of Managers pursuant to Milton Hershey’s Deed of Trust.

Moreover, Hershey Estates owns substantially all of the land “being the town of Hershey” and upon which school facilities were located. The school facilities were part of Hershey, the “ideal community,” which was owned and operated for the Trust as part of the School through Hershey Estates.

 

 

M.S. Hershey Foundation and 1945 Testamentary Trust

 

The M.S. Hershey Foundation and the 1945 Residual Derry Township School District Trust are part of the School as subsidiaries or affiliates within the Trust and part of the “permanent institution” (which includes the “ideal community” also known as the “community of mutual interests”), similar to Hershey Estates but in a different legal form.

The purposes of the M.S. Hershey Foundation, as stated in the Agreement of Trust which established it, are three:

• To establish and maintain “one or more educational institutions in Derry Township.”
• To support the public schools of Derry Township and to improve and elevate “the standard of education” -- indicating a “higher” level of instruction than provided by the secondary school.
• To advance “the vocational, cultural or professional education of any resident of Derry Township.”

From 1935 (the year of its creation) through 1945, the Boards of The Hershey Industrial School (that is, the Managers), the Hershey Trust Company (the Trustee) and the M.S. Hershey Foundation (the 1935 HJC Trust) were identical:

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