Point Austin: Southwest Key and Us

"I think the word is profiteering."

That was the conclusion of the tax-exemption expert, Marcus Owens, asked by The New York Times to review the financial practices of Southwest Key, the Austin-based "nonprofit" the Times report calls an "empire [built] on the back of a crisis." Of CEO Juan Sanchez, the paper headlined: "He's Built an Empire, With Detained Migrant Children as the Bricks" (Dec. 2, 2018). In the aftermath of the Trump administration's family separation policy, a harsh spotlight fell on Sanchez's remarkable personal return on investment: "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."

In theory, under federal grant regulations, the salaries of Sanchez and other officials are subject to caps but, the Times reports, thanks to various reimbursement methods that evade the caps, "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." The organization underwrote these salaries, in part, by self-serving real estate deals that included Sanchez, Chung, and real estate broker Ruth Hsu (among others). In the wake of the Times report (worth rereading in full, along with Mary Tuma's Chronicle stories), Sanchez has moved to divest of some of these properties while also vowing to continue expanding the organization.

Southwest Key has responded to criticism by claiming that big nonprofits pay big salaries. Even more dubiously, Sanchez – his tone deafness nicely illustrated by his preference for the title "El Presidente" – has suggested that doubts about his income are motivated by racism, or are somehow "puritanical" ("The Duality of Southwest Key," June 29). Nevertheless, what began as a small social justice organization helping young people avoid the school-to-prison pipeline has grown into a refugee shelter behemoth (plus charter-school spinoffs) in a devil's deal with the federal government.

The Local Faces

Austin learned of the seamier side of Southwest Key amidst the malicious fog of lies that is the Trump administration's narrative on immigration. If Trump, John Kelly, Jeff Sessions, Stephen Miller, et al. hadn't attempted to deter refugees by kidnapping their children, Southwest Key's organizational failings and excesses likely would not have come to light. In fairness, most of its sheltered children are unaccompanied minors ideally en route to better circumstances, and at least initially it had no choice but to accept the separated children. But there has to be a better defense of Southwest Key and other nonprofits addressing the refugee crisis than, "At least we're not prisons."

The controversy has spread to our local politics, with City Council voting to end contractual relationships with Southwest Key – few, as far as we can tell, although the organization's various for-profit businesses seem well disguised. More recently, incumbent (now re-elected) Council Mem­ber Pio Renteria attacked his opponent (and sister), Susana Almanza, for having served on Southwest Key's community board. Almanza has deflected criticism of the organization to the White House, but a more salient question is – other than providing very thin political cover – what actual, useful roles do she and other local activists perform for Southwest Key?

Contrast Martha Cotera, another well-known Austin community leader, who left another Southwest Key board after becoming skeptical about its contracts with its own for-profit businesses. "They were sold to us as economic development enterprises for the community," she told the Times, "but I saw that as very self-serving."

Bargaining Chips

What this all means for the future, in Austin and nationally, remains uncertain. Southwest Key says it will undergo an external review of its practices and maybe make some changes – perhaps a few of those streams of executive compensation will be stanched. Possibly, the public will eventually be made aware of the outcome of the review.

But Southwest Key now has a continuing, vested financial interest in the thousands of young Central American refugees fleeing violence and poverty (for which decades of U.S. foreign policy bear much responsibility). Southwest Key says all the separated children it briefly had in its care were returned to their families – as best as it could determine, since the feds kept such inadequate records. That leaves the thousands of unaccompanied refugee children still in shelters, not to mention thousands more headed to tent camps. They have become bargaining chips in international political warfare that they did not start and in which they have no role except as collateral damage.

It will remain important to keep reminding ourselves, and most especially our public officials, that the current scandal enveloping Southwest Key is but a symptom of much larger problems. Saving those children should be first on the list.