Milton Hershey School: Interview with Ric Fouad

Recently, I had the opportunity to interview F. Frederic Fouad who is an attorney for a Japanese commercial law practice, but he also uses his free time taking on pro-bono child welfare cases. Last year, Fouad gave a speech at the Harvard Law School on the Milton Hershey School called “Making Bitter Chocolate Sweet”.  The presentation had three main themes emerge which identified poor outcomes for the children in their care, systems failures and policy making that affected the ability to improve outcomes, and  a system of patronage to maintain the status quo to prevent reform and any meaningful changes from being implemented.

As President of Protect The Hersheys’ Children, Inc., Fouad along with other Hershey alumni and supporters have united to increase awareness about their concerns at the Milton Hershey School.  According to Wikipedia,

The Milton Hershey School is a private philanthropic (pre-K through 12) boarding school in Hershey, Pennsylvania. Originally named the Hershey Industrial School, the institution was founded and funded by chocolate industrialist Milton Snavely Hershey and his wife, Catherine Sweeney Hershey. The school was originally established for impoverished, healthy, Caucasian, male orphans, while today it serves students of various backgrounds. Read More

Fouad was very passionate in our discussion about the metamorphosis of the school in which he feels is not in the best interest of the majority of student’s who enroll. Although Fouad states that his personal path ended well, his concerns are focused on the overall outcomes for the majority of children in care. This interview has been separated into two parts, and here is the first part of our interview:

SWH: Can you tell us a bit about your background, and your history with the Milton Hershey School?

I’m an attorney with a Japan-focused commercial law practice and do pro bono work in child welfare. I split my time between Tokyo and New York. My childhood was spent in various forms of residential care, including foster care and seven years at the Milton Hershey School.

Hershey provided the first stability I had as a child and led to dramatic turnaround. I went from being the problem foster kid who participated in no school activities and was constantly kicked out of class elsewhere, to Hershey, a place where I found enough structure to turn a corner. I became a distinguished honor roll student, class salutatorian, an Eagle Scout, student body president, and wrestling team co-captain. Then, I went to the University of Pennsylvania where I also wrestled, was in student government, and graduated cum laude. Overall, I feel I’ve had a charmed life and caught some key early breaks despite a less than promising start.

The combination makes me mindful of residential care as an essential component of the child welfare toolbox, and of Hershey’s saving-grace potential, tempered by awareness of the drawbacks too. To elaborate, when you think of Hershey today, with its $11 billion and probably the best frontline staff of any such facility anywhere, whether teachers or houseparents, there is no doubt that just about any child in America could obtain much more materially in Hershey than in his or her own household, other than the 1% class, of course.

SWH: Making Bitter Chocolate Sweet is a reference to the operation of the Milton Hershey School, what was the specific incident that made you decide to champion this cause?

If there was a single trigger, it was returning to Hershey one day, after college, and having an administrator smugly tell me that Hershey had “raised its standards” such that I would not be admitted if I had tried to enroll then. There was no effort even to hide what they were doing; i.e., moving to a kind of “boarding school” model for moderately low-income kids, who would be drawn by the school’s vast wealth, while rejecting kids who had nowhere else to turn and needed Hershey as a true refuge.

In essence, they didn’t want to start with the difficult child who needed a leg-up and help him or her, but sought instead to “recruit” children who had no behavioral issues and who faced minimal risk factors. A lodestar was the introduction of “college scholarship” offers, which were required to entice kids into enrolling when they otherwise would not do so.

SWH: Is the Milton Hershey School a nonprofit, private school, or a residential facility?

Good question! They don’t know, and that’s the problem! But looking at how they try to be all three at once illustrates this, so let’s do so:

In legal terms, the Hershey charity is a nonprofit (501(c) (3)) entity. But the self-selecting and unaccountable board pays itself compensation surpassing the hourly rates of Wall Street hedge fund lawyers. In some cases, the total annual pay for these part-time board positions is over $500,000 and the minimum pay is about $100,000. Compare this with say Harvard University’s board, comprised of vastly more accomplished individuals, but who pay themselves no compensation, as is generally the case in the nonprofit world.

The Hershey board members also appoint themselves and their allies to the lucrative boards of the three for-profit companies owned (or controlled) by the charity: HERCO (the entertainment and resort company); the Hershey Trust Company (a private bank); and the Hershey Company (the candy manufacturer). This heady “appointment power” gives the board the ability to make themselves and their friends millionaires, whether or not they know the first thing about residential care.

Now, the first two of these “for-profit” companies constitute a total sham: these entities are “for-profit” in name only, and the charity should simply divest them, rather than continuing to use them as a self-enrichment vehicle or patronage slush fund. The third one – the candy company – creates a gross conflict of interest. Collectively, all of this breeds a system that attracts the wrong (pay-seeking) people.

However you slice it, those in charge have learned to game Hershey’s odd governance structure in order to enrich themselves and their allies off the for-profit entities, while claiming to be a charity. This lucre is also what attracts the politicians and that’s a worse disaster.

Viewed as a private school, your question’s second category and the role that the charity has basically stumbled its way into. Hershey is failing and misspending money on a grand scale because vastly more kids depart each year than graduate, and loving families have been needlessly destroyed as a result. Over the last 10 years, 2,034 kids were removed while only 1,439 graduated. On average, more than one child is removed from Hershey every school day, resulting in massive dislocation and trauma for the children and families affected. Net-net, it’s arguable that Hershey is doing more harm than good, given these figures.

And when you look at the primary demographic being served today by Hershey “successfully” (i.e., kids who actually stay and graduate), at an annual cost of $100,000 per child, these kids and families would be much better off in many cases if served closer to home. This would keep families intact and provide what the majority of the kids seek anyway; i.e., a quality education, material assistance for households that have very little, and the Hershey “college scholarships” (which are in fact a bizarre bribe used to entice kids into enrolling and remaining enrolled, when they otherwise would not do so).

Basically, low-income children are told that to access Hershey’s free education, clothing, and “college scholarships,” they must also submit to Hershey’s group home environment. This is more often than not the wrong prescription and in any case, it is exceedingly costly.

But viewed as a residential care facility, the third category in your question, the Hershey failure is greatest of all: programs are primitive; enrollment policy is irrational (e.g., foster care kids and wards of the court are not accepted in any meaningful sense); and the children who truly need the residential component the most are also the ones most likely to be expelled, after Hershey policies cannot meet their needs.

Nonetheless, with $11 billion and the best physical infrastructure that money can buy, it is easy to be mesmerized by surface appeal and ignore what’s happening to kids on a systemic basis –which is why one has to look closely at actual numbers.

In sum, it is supposedly a charity –but its board fancies itself to be a for-profit operation, solely to rationalize its whopping pay. It promotes itself as a boarding school for poor kids –but this is irrational, wasteful, and ultimately harmful to kids from loving families who are best served at home.  Its legal/historic mandate is as residential care facility, but it has lost its way in fulfilling this role, and won’t even accept kids from the foster care system in any real sense.  According to Philly.com,

High in concept but thin on outcomes, the nation’s wealthiest school for needy children now says that Springboard belly flopped and will close in June after burning through $40 million to $45 million in capital and operating costs.

It’s the latest setback at the institution that seems in a constant state of construction, rebuilding, and unfulfilled potential.

The free school, with $7 billion in assets and financed with profits from Hershey Co. chocolate sales, recently announced that it won’t hit a widely publicized goal of 2,000 students by 2013 because of weakening income from its endowment. The school had said it would reach that enrollment after a late 1990s public outcry that the Hershey School, located southeast of Harrisburg, was failing its charitable mission to educate impoverished children.  Read Full Article

The board stubbornly refuses to recognize its failures lest it lose its grip on power and wealth. The result is a financial and social catastrophe. At present, not one member of the Hershey board even has child welfare qualifications. Hard as that may be to believe, it is as though they willfully eschew the only skill set that they must have to perform their core duties properly in favor of individuals who will join them in preserving the status quo.