Pa. Sup. Ct. hears case of illegal diversion of charity $. Refuses to release name of the charity.

[JPZenger]

Last edited Mon Mar 9, 2015, 04:28 PM - Edit history (2)

http://www.pacourts.us/assets/opinions/Supreme/out/145%20MAP%202014%20-%20Order%20Granting%20Limited%20Disclosure.pdf

:large

http://www.thelegalintelligencer.com/home/id=1202719789179/Justices-Take-Up-Sealed-Nonprofit-Confidentiality-Case?mcode=1202617075166&curindex=0&slreturn=20150209154812

So much for open government.

The PA. Supreme Court is about to decide upon the case of Redacted v. Redacted. That is right - they won't let the public know either party in the case.

It is a case of an alleged illegal diversion of assets from a charity. Apparently, an attorney for the charity reported possible illegal action to the Attorney General, who has the legal authority to oversee charities. The charity went to court and argued that the attorney had no right to report wrong-doing.

The charity must have really really expensive lawyers to have been able to keep their name out of the public.

You would think it was a case of extreme top secret national security matters that would threaten the nation if the public found out the name of the charity. Maybe the charity is installing top secret spyware to disable Iranian nuclear weapons.

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Excerpt from Legal Intelligencer Article:

Eric Davis of Elliott & Davis in Pittsburgh works frequently with nonprofits. In a way, he said, a public charity belongs to the public, as the petitioner implied in filings.

"I think that in a nonprofit realm we're talking about diversion of funds that were going to be used to cure cancer or feed hungry kids so it raises a bunch of interesting questions," Davis said. "This really turns on what is your duty of confidentiality to clients."

According to Samuel C. Stretton, a solo practitioner in West Chester who also writes an ethics column for Legal sibling publication Pennsylvania Law Weekly, there is an exception to confidentiality in certain situations under Rule 1.6.

"There are exceptions for crimes and serious financial crimes," he said. "It's interesting because the exception is not mandatory, it's discretionary."

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Is it possible this case might have something to do with this story???

http://www.huffingtonpost.com/2011/02/11/hershey-charity-robert-reese_n_822191.html

http://news.muckety.com/2013/05/28/hershey-kisses-state-investigation-goodbye/42851

[Curmudgeoness]

1. I think you are on to something.

That is a charity with the money available to fight this hard, and the influence to get the names redacted. And since there was already a problem reported, I would bet it could have gotten to the PA SC. I have to wonder what attorney for the charity would have the nerve, and the ethics, to speak out. Good for him/her.

[Divernan]

2. I'm a PA atty. & have never heard of Redacted v. Redacted on any case.

Stories circulated throughout the state capitol for decades about the fraudulent squandering of funds and self dealing by the Hershey board. Hershey's is definitely the prime suspect in this mystery. But it sure would be sweet if someone blew the whistle on "charitable non-profit" international money making UPMC and its egomaniac boss, Jeffrey Romoff. I googled Redacted v. Redacted and found:

Once again, Howard Bashman of How Appealing has brought to our attention another crazy case. This one is too rich. Now who do you suppose these litigants might be? And how long can the secret be kept? - See more at: http://www.pittsburghlegalbacktalk.com/archives/6990#sthash.20MLuiJf.dpuf

However the highlighted "crazy case" link did not work.

Interesting because the case must have gone through a county level Court of Common Pleas, and then Pennsylvania's intermediate appellate court, The Superior Court, before landing in the state supreme court, and yet the secret has not been leaked.


From the OP link:

When Kathleen Kane won the Pennsylvania state attorney general election last year, many hoped that the Hershey Trust would get some long-overdue scrutiny. The trust, majority stockholder in the Hershey chocolate company, owner of Hershey Entertainment and Resorts, and overseer of the Hershey School for disadvantaged children, had a well-established pattern of political entanglements and questionable expenditures.

Its overlapping boards, shown in the Muckety map above, created all sorts of potential conflicts.
The charity’s spending habits were examined in 2010 by the Philadelphia Inquirer, which found a litany of troubling practices, including:
* Prominent Republicans, including former Gov. Tom Ridge and Former Attorney General Leo Zimmerman, received a combined $1 million a year (each) to serve on three boards connected with the school.

* The school paid $12 million - two to three times the appraised value - for a money-losing golf course in 2006. The deal bailed out club investors, who included Richard H. Lenny, then-CEO of the Hershey Company.

* After buying a roadside attraction called Pumpkin World USA for $8.6 million, the Hershey Trust leased the business to its former owners. There were a couple of wrinkles in this deal: The price was more than nine times higher than the property’s fair-market value, and another party had planned to develop part of the land as a competitor to Hersheypark.

Robert Reese, a former board member and grandson of the creator of Reese’s peanut-butter cups, filed a court petition accusing the trust of misusing assets.

The attorney general race became a microcosm of the issues swirling around the trust. Kane promised closer scrutiny of charities, drawing strong support from Reese. Her opponent, David Freed, is the son-in-law of Leroy S. Zimmerman, who chaired the trust.

The likelihood that the case involves Hershey's Board is diminished by the fact that state AG Kane already completed a prolonged investigation of the trust , announcing a “reform agreement” with the organization. The pact limits overlapping board memberships and lowers compensation for the members.

A Philadelphia Inquirer described Kane's findings as a disappointing whitewash.

[JPZenger]

3. I think the case may have skipped county court

I'm not an attorney, but I believe the one link might infer that the case may have gone right to the Commonwealth Court, and skipped the county court. The county court (through the orphans court judge) does have authority over charities.

[Divernan]

6. PA courts: leading the way in preferential treatment of the One Percent

The Commonwealth Court was established in 1968 and is unique to Pennsylvania. It is one of Pennsylvania's two statewide intermediate appellate courts. The Commonwealth Court is primarily responsible for matters involving state and local governments and regulatory agencies. It also acts as a trial court when lawsuits are filed by or against the Commonwealth.

And if the case started out in Commonwealth Court, i.e, the court was acting as a trial court, that means a state agency filed the suit - perhaps Dept. of Treasury or Revenue? The AG's office? The plot thickens.

Basically it is outrageous enough for a court to hide the identities of an entity (business or charity)which would have to be registered with the state, but to hide the identity of the state or governmental agency as well? It is a very dangerous precedent. Separate rules of court for the rich, powerful & politically connected? Talk about the One Percent! I don't think it is remotely comparable to protecting the identities of minor parties in court proceedings.
http://writ.news.findlaw.com/hilden/20101123.html

Should Juvenile Plaintiffs Who Fear Reprisals Be Able to Keep Their Identities Secret? The Question Divides the U.S. Court of Appeals for the Ninth Circuit
By JULIE HILDEN
Tuesday, November 23, 2010

On March 2d of this year, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit affirmed a district court judge's ruling that juvenile plaintiffs in a controversial lawsuit could not remain anonymous. The juveniles' attorney then sought en banc rehearing (that is, review by a larger panel of the Circuit's judges).

On November 8th, en banc rehearing was denied. But there were two dissents to the denial of en banc rehearing-- penned by two of the Circuit's most well-respected judges, Chief Judge Alex Kozinski and Judge Stephen Reinhardt. These dissents opined that the juveniles' identities should have been kept secret, as they had asked.

Interestingly -- and ironically -- anonymous Internet threats against the young plaintiffs were among the pieces of evidence that convinced Kozinski and Reinhardt that the plaintiffs' names should not be disclosed. The verbal attacks against the juvenile plaintiffs were -- and have remained -- anonymous, but the juvenile plaintiffs themselves cannot continue to hide their identities, according to the courts' rulings.

In this column, I'll consider the arguments of both the original appellate panel, and Judges Kozinski and Reinhardt, and contend that the anonymity issue should have been reheard en banc.

Talk about a secret government! It is even worse and more hidden from public view than the storied Star Chamber proceedings in merry olde England.

http://en.wikipedia.org/wiki/Star_Chamber

The Star Chamber (Latin: Camera stellata) was an English court of law who sat at the royal Palace of Westminster, from the late 15th century to the mid-17th century (ca. 1641), and was composed of Privy Councillors and common-law judges, to supplement the judicial activities of the common-law and equity courts in civil and criminal matters. The Star Chamber was established to ensure the fair enforcement of laws against socially and politically prominent people so powerful that ordinary courts would likely hesitate to convict them of their crimes.

Court sessions were held in public, although witnesses and defendants were examined in secret.[1] Defendants were given prior notice of the charges against them, and had the right to be represented by an attorney.[2] Evidence was presented in writing. Over time, the Star Chamber evolved into a political weapon, a symbol of the misuse and abuse of power by the English monarchy and its courts

And finally it is antithetical to the public accountability and transparency required by the Rule of Law:
http://worldjusticeproject.org/what-rule-law
What is the Rule of Law?

Derived from internationally accepted standards, the World Justice Project’s definition of the rule of law is a system in which the following four universal principles are upheld:

The government and its officials and agents as well as individuals and private entities are accountable under the law.
The laws are clear, publicized, stable, and just; are applied evenly; and protect fundamental rights, including the security of persons and property.
The process by which the laws are enacted, administered, and enforced is accessible, fair, and efficient.
Justice is delivered timely by competent, ethical, and independent representatives and neutrals who are of sufficient number, have adequate resources, and reflect the makeup of the communities they serve.

Where is the ACLU when you need them? What's next? The friggin' Spanish Inquisition? Well, the U.S. has tolerated Guantanamo, Abu Graib, abandonment of habeas corpus, torture and extraordinary rendition. What was that quaint song about Land of the Free?

[JPZenger]

4. They weren't even going to release the fact that there was a case

If I read the link correctly, the PA. Supreme Court had to be persuaded to agree to even release the redacted filing. That redacted filing only includes a small portion of the text, and deletes the names.

(There was a techie one time who figured out the computer program that a law clerk had used for a redaction, and was able to undo it.)

When it comes to government and multi-billion dollar charities, sunlight is the best disinfectant.

[JPZenger]

5. On a completely unrelated matter, here is an unredacted legal argument about the Hershey Trust

http://www.protecthersheychildren.org/docs/AG_USA_Hershey_White_Paper_11_11_14.pdf

"The Charity that Must Not be Named."

[JPZenger]

7. More on this story

http://www.law360.com/articles/626810/pa-justices-scrutinizing-nonprofit-atty-reporting-duties

The charity is still a mystery.

[JPZenger]

8. Update: a little more info was released. President Judge says he can't talk about it.

This case is still before the PA. Supreme Court - of whether an attorney for a charitable organization is allowed to report wrong-doing to the PA. Attorney General, or whether the confidentiality of that attorney is "most sacred" as the charity claims.

http://www.nonprofitissues.com/article/attorney-confidentiality-question-changes-pa-supreme-court

http://www.law360.com/articles/626810

"The attorney argued in the unsealed petition that she had a responsibility to report the suspected theft because nonprofits ultimately exist to serve the public, and that resources controlled by nonprofits are held in trust on the public’s behalf.

“When [the lawyer] had reason to believe that the corporation was diverting public charitable resources into private pockets, she was at least permitted, if not obliged, to disclose that information to the attorney general,” the unsealed appeal petition said."

Here's what the Supreme Court has decided to let you see - almost all of it is blanked out.

http://www.pacourts.us/assets/opinions/Supreme/out/145%20MAP%202014%20-%20Order%20Granting%20Limited%20Disclosure.pdf

http://www.pacourts.us/assets/opinions/Supreme/out/exhibit%20a%20(appellant's%20brief%20-%20redacted).pdf#search=%22145 MAP 2014%22

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Meanwhile, during a court hearing this week on a somewhat similar matter, the President Judge of the Commonwealth Court specifically said he is not allowed to reveal anything about this case.