PHEAA foundation chief fired, board blasts expenses
BY JAN MURPHY | Of The [Harrisburg] Patriot-News
Michael Hershock was given an ultimatum Friday to resign or be fired from what is perhaps the most lucrative part-time job in state government.
Hershock, who is president and CEO of the nonprofit Pennsylvania Higher Education Foundation, chose to be fired over a dispute about travel expenses.
At a special meeting on Monday that lasted nearly three hours, the foundation board voted unanimously to terminate Hershock from his $150,000-a-year post. The position required him to work more than 20 hours a week but less than 40. The job also came with about $25,000 in benefits.
In a written resolution explaining the firing, the foundation board cited a "willful breach of the president's fiduciary duty involving personal profits."
Hershock, 64, could not be reached for comment on Friday or Monday. His attorney, Walter Cohen of Harrisburg, said he has advised Hershock that he has rights under his contract "which the foundation board is totally disregarding at this point."
Hershock's job was to run the foundation created in 2001 by the Pennsylvania Higher Education Assistance Agency, a student-aid agency. PHEAA had wanted a nonprofit group that could raise money in the private sector that would match contributions from PHEAA. Since its founding and through August, the foundation raised about $98 million, much of it distributed as grants and assistance to nursing students.
Hershock raised about $11 million in eight years through the private sector. The rest had come from PHEAA.
Hershock's travel troubled the foundation board and some members of PHEAA's board because they said they have tried to rein in spending.
In 2005, The Patriot-News reported about more than $860,000 that PHEAA had spent on board retreats to posh resorts from 2000 to 2005. That story helped set off a series of events, including a 19-month court battle waged by PHEAA against the newspaper and two other news organizations that were trying to get details about the $860,000. Eventually, the state auditor general investigated and raised questions about bonuses and other issues at PHEAA.
Rep. Bill Adolph, R-Delaware County, a foundation board member and PHEAA's chairman, and Sen. Sean Logan, D-Allegheny County, who serves as the PHEAA board's vice chairman, said they are particularly sensitive because they heard the criticism about past spending by previous leaders and implemented reforms.
But Hershock's expense records told them that he "didn't get it," Logan said. "He missed the memo."
"It's embarrassing," Logan said. "Over the last two years that Billy and I have busted our ass and have been just beat up relentlessly ... then this guy does this. It's not a good feeling."
Hershock's firing takes effect in 15 days, as is required by his contract. But Adolph said Hershock was expected to clear out his office immediately.
The foundation board plans to meet Wednesday to appoint Hershock's replacement.
Hershock told board members he would reimburse the foundation for some expenses that board members found excessive, Adolph said. But Hershock didn't indicate what that payment might be, he said.
Some of the expenses that board members questioned included:
Hershock was asked to defend the expenses, but Adolph said he was "very disappointed" in the explanations that were offered.
Cohen said Hershock told him he has a personal relationship with some board members and was uncertain whether he would pursue litigation. The lawyer advised Hershock "that would certainly be an appropriate action."
Cohen dismissed the $14,000 in expenses incurred during eight years as a small amount.
"But I think the legislative members are very sensitive to any amount, even though his contract sets out certain responsibilities he has to carry out, and he had to travel to do that," Cohen said.
The foundation board members became aware of Hershock's travel expenses when they reviewed records that had been requested by The Patriot-News through the state's new Right to Know Law, Adolph and Logan said.
Adolph and Logan acknowledged they had been focused on the foundation's mission and had not examined the expenses until then. Instead, they said they had devoted attention to saving PHEAA during the economic downturn, including the enactment of the stricter travel policies for PHEAA workers in 2007. They had expected the rules to apply to the foundation as well.
Logan said the travel records caused him to doubt Hershock's ability to manage the foundation.
"I'm not going to tolerate the practices of the past and the literal abuse of taxpayer dollars," Logan said.
Hershock was told on Friday that the board would meet on Monday to fire him if he did not resign before then, Adolph said. In a letter sent later Friday by his attorney, Hershock responded that he would consider resigning if the board agreed to give him a severance payment because it was breaching the contract it had with him.
"We did not breach our contract," Logan said. "He breached our trust."
The foundation board will perform an internal audit, Adolph said.
Taylor, the foundation board chairwoman, said the decision to support Hershock's firing was difficult for her.
"Mike has done so much good for the foundation," she said. "As far as I'm concerned, he was a very, very good leader."
She, too, questioned some of his expenses, such as the trip to Canada that she thought the bankers' group should have covered.
Hershock also had come under criticism for not raising more money.
"PHEAA should have insisted that the foundation carry at least as much financial weight as PHEAA did," Auditor General Jack Wagner said in August after the release of an audit of PHEAA.
Wagner also questioned the need for the foundation.
Several board members have shared that view.
Rep. Ronald Buxton, D-Harrisburg, said the foundation's focus on alleviating the nursing shortage was laudable but that more money should have been raised.
"I was never convinced that Mike Hershock was going out and raising matching money," Buxton said. "I don't think he ever got close to raising the private funds he said he could raise."
PHEAA leaders are looking at closing the foundation in the next three years, but agency officials said that has nothing to do with Hershock.
Hershock initially served as the foundation head as part of his job as PHEAA president and CEO. After resigning that job in 2002, he continued as the foundation's leader with no salary. In 2004, he began to receive an annual salary of $145,000, which has increased since then.
Hershock had received a $374,850 separation payment for unused sick and vacation leave when he retired from PHEAA. His 34 years of state government service provides him with a $224,000 a year state pension.
Michael Hershock was given an ultimatum Friday to resign or be fired from what is perhaps the most lucrative part-time job in state government.
Hershock, who is president and CEO of the nonprofit Pennsylvania Higher Education Foundation, chose to be fired over a dispute about travel expenses.
At a special meeting on Monday that lasted nearly three hours, the foundation board voted unanimously to terminate Hershock from his $150,000-a-year post. The position required him to work more than 20 hours a week but less than 40. The job also came with about $25,000 in benefits.
In a written resolution explaining the firing, the foundation board cited a "willful breach of the president's fiduciary duty involving personal profits."
Hershock, 64, could not be reached for comment on Friday or Monday. His attorney, Walter Cohen of Harrisburg, said he has advised Hershock that he has rights under his contract "which the foundation board is totally disregarding at this point."
Hershock's job was to run the foundation created in 2001 by the Pennsylvania Higher Education Assistance Agency, a student-aid agency. PHEAA had wanted a nonprofit group that could raise money in the private sector that would match contributions from PHEAA. Since its founding and through August, the foundation raised about $98 million, much of it distributed as grants and assistance to nursing students.
Hershock raised about $11 million in eight years through the private sector. The rest had come from PHEAA.
Hershock's travel troubled the foundation board and some members of PHEAA's board because they said they have tried to rein in spending.
In 2005, The Patriot-News reported about more than $860,000 that PHEAA had spent on board retreats to posh resorts from 2000 to 2005. That story helped set off a series of events, including a 19-month court battle waged by PHEAA against the newspaper and two other news organizations that were trying to get details about the $860,000. Eventually, the state auditor general investigated and raised questions about bonuses and other issues at PHEAA.
Rep. Bill Adolph, R-Delaware County, a foundation board member and PHEAA's chairman, and Sen. Sean Logan, D-Allegheny County, who serves as the PHEAA board's vice chairman, said they are particularly sensitive because they heard the criticism about past spending by previous leaders and implemented reforms.
But Hershock's expense records told them that he "didn't get it," Logan said. "He missed the memo."
"It's embarrassing," Logan said. "Over the last two years that Billy and I have busted our ass and have been just beat up relentlessly ... then this guy does this. It's not a good feeling."
Hershock's firing takes effect in 15 days, as is required by his contract. But Adolph said Hershock was expected to clear out his office immediately.
The foundation board plans to meet Wednesday to appoint Hershock's replacement.
Hershock told board members he would reimburse the foundation for some expenses that board members found excessive, Adolph said. But Hershock didn't indicate what that payment might be, he said.
Some of the expenses that board members questioned included:
- A $1,032 hotel bill in 2007 from the Four Seasons Hotel in New York City to meet with potential donors.
- A $936 flight to Florida in 2007 to meet with foundation board Chairwoman Elinor Taylor.
- $1,360 for a 2005 presentation to the PA Community Bankers Association in Alberta.
Hershock was asked to defend the expenses, but Adolph said he was "very disappointed" in the explanations that were offered.
Cohen said Hershock told him he has a personal relationship with some board members and was uncertain whether he would pursue litigation. The lawyer advised Hershock "that would certainly be an appropriate action."
Cohen dismissed the $14,000 in expenses incurred during eight years as a small amount.
"But I think the legislative members are very sensitive to any amount, even though his contract sets out certain responsibilities he has to carry out, and he had to travel to do that," Cohen said.
The foundation board members became aware of Hershock's travel expenses when they reviewed records that had been requested by The Patriot-News through the state's new Right to Know Law, Adolph and Logan said.
Adolph and Logan acknowledged they had been focused on the foundation's mission and had not examined the expenses until then. Instead, they said they had devoted attention to saving PHEAA during the economic downturn, including the enactment of the stricter travel policies for PHEAA workers in 2007. They had expected the rules to apply to the foundation as well.
Logan said the travel records caused him to doubt Hershock's ability to manage the foundation.
"I'm not going to tolerate the practices of the past and the literal abuse of taxpayer dollars," Logan said.
Hershock was told on Friday that the board would meet on Monday to fire him if he did not resign before then, Adolph said. In a letter sent later Friday by his attorney, Hershock responded that he would consider resigning if the board agreed to give him a severance payment because it was breaching the contract it had with him.
"We did not breach our contract," Logan said. "He breached our trust."
The foundation board will perform an internal audit, Adolph said.
Taylor, the foundation board chairwoman, said the decision to support Hershock's firing was difficult for her.
"Mike has done so much good for the foundation," she said. "As far as I'm concerned, he was a very, very good leader."
She, too, questioned some of his expenses, such as the trip to Canada that she thought the bankers' group should have covered.
Hershock also had come under criticism for not raising more money.
"PHEAA should have insisted that the foundation carry at least as much financial weight as PHEAA did," Auditor General Jack Wagner said in August after the release of an audit of PHEAA.
Wagner also questioned the need for the foundation.
Several board members have shared that view.
Rep. Ronald Buxton, D-Harrisburg, said the foundation's focus on alleviating the nursing shortage was laudable but that more money should have been raised.
"I was never convinced that Mike Hershock was going out and raising matching money," Buxton said. "I don't think he ever got close to raising the private funds he said he could raise."
PHEAA leaders are looking at closing the foundation in the next three years, but agency officials said that has nothing to do with Hershock.
Hershock initially served as the foundation head as part of his job as PHEAA president and CEO. After resigning that job in 2002, he continued as the foundation's leader with no salary. In 2004, he began to receive an annual salary of $145,000, which has increased since then.
Hershock had received a $374,850 separation payment for unused sick and vacation leave when he retired from PHEAA. His 34 years of state government service provides him with a $224,000 a year state pension.
