Former Penn State head football coach Joe Paterno had close business ties with board members of The Second Mile, the charity that his assistant, accused child molester Jerry Sandusky, allegedly used to recruit his victims, The Daily has learned.
Around the same time a graduate assistant allegedly approached Paterno in 2002 to say that he had witnessed Sandusky raping a boy in the locker room showers, Paterno and three fellow investors, including longtime Second Mile board chairman Robert Poole, had just secured financing to build a $125 million luxury retirement community, according to public records.
Paterno also was partners with this team on developing a golf resort and nearby restaurant and inn. He has also partnered with other current and former Second Mile board members on a bottled water company, a coaching website and a chain of convenience stores.
The Second Mile has said in a statement that Sandusky told the charity he was under investigation in 2008 and was immediately removed from programs involving children, although Sandusky didn?t resign until last year. In an interview with The New York Times published Saturday, Sandusky said Paterno never confronted him about the accusations.
Officials at the charity would not specify who was notified. But some have questioned whether certain people within the charity knew before 2008, given Paterno?s close business and personal relationships ? including dinners and a Bahamas vacation ? with Poole and several other past and present board members.
?I honestly think there was a conversation. I can?t believe there wasn?t one,? fumed one former board member. ?To be honest, I think people were worried about what would happen to Penn State and The Second Mile if Jerry Sandusky was found out.?
Several former Second Mile board members, who all asked to remain anonymous because of their ties to the tight-knit community in State College, told The Daily that if anyone on the board knew about the 2002 incident, it would have been Poole, who also was close to the charity?s former CEO, Jack Raykovitz.
The Second Mile?s statement said Raykovitz was told in 2002 that a student was ?uncomfortable about seeing Jerry Sandusky in the locker room with a youth? ? not that Sandusky had allegedly raped the boy.
Victims? attorney Jeffrey Fritz ? who plans to file a civil lawsuit against The Second Mile ? said he?d like to know whether Paterno personally told any other board members about the 2002 allegations.
?It?s certainly the type of thing that I?d ask about in a deposition. I?d want to know how much time they [Paterno and his business partners] spent with each other,? said Fritz.
?If you think about it from a logical standpoint, how do you have this group of people that are so intertwined with each other, and then have something like this come up, and then they not talk about it??
Pinnacle Development, one-half of the developer team that built The Village at Penn State, included Paterno, Poole, William Schreyer ? a Penn State trustee whose daughter is a longtime board member of The Second Mile ? and local developer Philip Sieg.
Each partner stood to make an estimated $590,000 in fees and 15 percent annual interest on an $125,000 initial investment if the project was successful enough to get funding for a second phase.
It wasn?t. The Village?s nonprofit owner filed for bankruptcy on Wednesday. The filing indicated that Pinnacle was never repaid its initial investment.
Poole?s companies, Poole Anderson Construction and S&A Homes, had also expected to make an additional $3 million contracting fee, much of it coming with the second phase, which at the time would have been by far the largest project his firm had built. Sieg and Schreyer both held interest in S&A Homes.
Paterno, the winningest coach in college football history, was recruited ?because his affiliation would certainly make a lot of [retired] alumni perhaps take a second look,? Sieg told a reporter at the time.
Paterno could not comment for this article because he is ?undergoing chemo and radiation every day? for lung cancer, his wife, Sue, told The Daily.
As the project struggled to rent its apartments and cottages ? with entrance fees approaching $500,000 ? Paterno appeared in a 2005 ad promoting the hillside complex with a view of the football stadium as a place he could see himself retiring.
Penn State President Graham Spanier, who was fired after a grand jury report detailing the allegations against Sandusky was released Nov. 4, conceived the project in 1995.
Since the project was being built on Penn State property, a nonprofit was created to act as its owner and operator. Former Second Mile board member Peter Weiler was its president; Penn State?s former senior vice president for finance and business, Gary Schultz, was its treasurer. Both men declined to comment.
Schultz testified that he was notified of sexual abuse allegations against Sandusky in 1998 and 2002. He has been charged with perjury and failure to report the accusations, but has maintained that he was unaware of the seriousness of the allegations.
The group worked together on the project for roughly a decade after it was conceived in 1995. It was delayed because of financing difficulties, until a neighboring county eventually approved $56 million in bond financing in February 2002.
Developers were in the process of filing for building permits and marketing the units when graduate assistant Mike McQueary testified that he approached Paterno in March 2002 to tell him that he had seen Sandusky sodomizing a boy in the football team?s showers.
After being informed by Paterno, a week and a half passed before Schultz and Penn State athletic director Tim Curley called McQueary to a meeting to discuss the incident. No police report was filed.
?It?s no coincidence that they failed to act at the same time that they were working on this project,? said victims? attorney Jeff Anderson, who filed a civil lawsuit against Sandusky, The Second Mile and Penn State on Wednesday.
Anderson called the $125 million project ?another layer of motivation, individual financial stakes, in making sure that the stature of The Second Mile and Penn State remained intact.?
The Village at Penn State did not live up to its anticipated success. Occupancy was lower than expected, and two years ago, officials admitted they could not pay off the bond holders ? which public documents indicate needed to happen in order for Pinnacle to get its developer fee.
The Village?s executive director, Marianne Hogg, said Pinnacle has not been involved in the project since she started around 2007. Village tax forms indicate the developer team was paid $2.3 million prior to construction in 2000, but Hogg declined to say whether that was part of $4.7 million the developers expected to make as the project moved into its second phase.
Ed Lauth, a local businessman who is close friends with both Paterno and Poole, said, ?I can tell you emphatically that it [the 2002 incident] never came up one time, never.?
Lauth owned Aqua Penn, the bottled water company that Paterno invested in and helped build.
He said Paterno was more motivated by bettering the community than reaping profits from his business ventures. Two months after Aqua Penn sold for $112 million to a French company in 1998, Paterno reportedly donated $3.5 million to Penn State.
Penn State alumni Jim Scott, who lives in the retirement village with his wife, speculated like many that the now-84-year-old coach simply did not view the sex-abuse allegations as his problem. ?I can tell you that when I was growing up, you heard very little about this type of stuff, and if you did, you certainly didn?t go around talking about it.?
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An earlier version of this story reported "$18.8 million was owed" to residents of The Village at Penn State Retirement Community who had moved out and demanded refunds on their entrance fees. To clarify, the $18.8 million represents potential future refund obligations to residents, rather than any refund that is currently due and payable to current or former residents that moved out and/or demanded refunds. According to The Village, they "have not been and is not delinquent in paying any entrance fee refund obligations that have been owed to any residents that have moved out."
