FBI PROBES GALLEGOS' I.E.S.; S-WEST KEY'S SANCHEZ BARED

(Ed.'s Note: Once again Brownsville has caught the national eye, not as we would want, of course, but as a point of crisis and potential criminal wrong-doing and profiteering from a humanitarian debacle.This time it's Southwest Key's self-made millionaire Juan Sanchez,a Brownsville native, and I.E.S.'s Ruben Gallegos Sr. and Ruben Jr., also from here. The sordid details follow.)


By Kim Barker, Nicholas Kulish and Rebecca R. Ruiz

New York times

Juan Sanchez grew up along the Mexican border (in Brownsville) in a two-bedroom house so crowded with children that he didn’t have a bed. 

But he fought his way to another life. He earned three degrees, including a doctorate in education from Harvard, before starting a nonprofit in his Texas hometown.

Mr. Sanchez has built an empire on the back of a crisis. His organization, Southwest Key Programs, now houses more migrant children than any other in the nation. Casting himself as a social-justice warrior, he calls himself El Presidente, a title inscribed outside his office and on the government contracts that helped make him rich.

Southwest Key has collected $1.7 billion in federal grants in the past decade, including $626 million in the past year alone. But as it has grown, tripling its revenue in three years, the organization has left a record of sloppy management and possible financial improprieties, according to dozens of interviews and an examination of documents. It has stockpiled tens of millions of taxpayer dollars with little government oversight and possibly engaged in self-dealing with top executives.

Showing the ambition that brought him from the barrio to the Ivy League, Mr. Sanchez seized the chance to expand his nonprofit when thousands more unaccompanied children began crossing the border during the Obama era. When the Trump administration needed to house migrant children it had separated from their parents, Mr. Sanchez took them in.

As immigration intensifies as a flash point of the Trump presidency, with tear gas being fired at a migrant caravan and the price tag for separating families continuing to rise, Mr. Sanchez is central to the administration’s plans.

Southwest Key can now house up to 5,000 children in its 24 shelters, including a converted Walmart Supercenter that has drawn criticism as a warehouse for youths. The system is nearing a breaking point, with a record 14,000 minors at about 100 sites – a human crisis, but also a moneymaking opportunity.

Though Southwest Key is, on paper, a charity, no one has benefited more than Mr. Sanchez, now 71. Serving as chief executive, he was paid $1.5 million last year — more than twice what his counterpart at the far larger American Red Cross made.

Southwest Key has created a web of for-profit companies – construction, maintenance, food services and even a florist — that has funneled money back to the charity through high management fees and helps it circumvent government limits on executive pay.

The organization, sitting on $61 million in cash as of last fall, has lent millions of dollars to real estate developers, acting more like a bank than a traditional charity. It has opted to rent shelters rather than buy them, an unusual practice that has proved lucrative for shelter owners — who include Mr. Sanchez and the charity’s chief financial officer.

Marcus Owens, the former head of tax-exempt organizations for the Internal Revenue Service under both Republican and Democratic administrations, reviewed Southwest Key’s tax returns for The New York Times. Regulators, he said, seemed to be “asleep at the switch.” Describing the financial dealings of Mr. Sanchez and his colleagues, he said, “I think the word is ‘profiteering.’”

Mr. Sanchez defended his charity. It had to move fast at times, he said in an interview. But every act, he added, has been to help children.

“There are all these kids, they’re at the border, they’re in detention,” Mr. Sanchez said. “How do we get this thing done as quickly as we can so we can start serving those kids?”

Jeff Eller, a spokesman for Southwest Key, said on Tuesday that the charity was closely examining its management practices after questioning from The Times, and that there was “general acceptance” that the charity had made mistakes.

“Could we have done things better? Yeah. And should have? Yeah,” Mr. Eller said. “But there wasn’t a desire to game the system.”

Because of the substantial growth of migrant shelters, the federal government hired an accounting firm this year to review shelter grant recipients, said Mark Weber, a spokesman for the Department of Health and Human Services. He added that the department’s Office of Refugee Resettlement, which oversees migrant shelters, had also created a new division to monitor shelters’ spending.

Separately, the Federal Bureau of Investigation is looking into another shelter provider, International Educational Services, for possible misuse of federal money, according to two people informed of the inquiry. The nonprofit’s founder, Ruben Gallegos, said he had no comment on the investigation.

(I.E.S.'s 2015 tax filings show that President Ruben Gallegos earned $519,200; Chief Operating Officer Ruben Gallegos Jr., the president’s son, made $505,202; Chief Financial Officer Juan J. Gonzalez earned $390,273; Vice President of Business Affairs Norberto Perez made $201,601; and grant writer Nelly Weaver earned $194,414. All of those figures include benefits.

(The newer returns for I.E.S. show that the salaries increased tremendously – by more than $100,000 for Gallegos Sr. and Jr. – the following year. Before they were shut down, Gallegos Sr. was paid $677,242 and Jr. $633,240. Even State Rep. Eddie Lucio III was paid $139,312 as "legal counsel."

Still, just recently Gallegos Jr. posted on social media that: "the stars are lining up and people that doubted them should be ashamed of themselves.)

Mr. Gallegos’s charity – which Mr. Sanchez helped create but cut ties with years ago – lost its federal contacts in February for renting shelters owned by charity officials and paying those officials well above the government salary cap from migrant-shelter grants.

Last year, Southwest Key paid eight people more than the federal salary cap of $187,000. In addition to Mr. Sanchez, they included his wife, Jennifer Sanchez, who earned $500,000 as a vice president, and Melody Chung, the chief financial officer, who was paid $1 million.

To read the complete article, click on link: https://www.nytimes.com/2018/12/02/us/southwest-key-migrant-children.html