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NYT: Southwest Key execs “possibly engaged in self-dealing”

By: - December 3, 2018 9:15 pm

A Southwest Key facility in Glendale. Photo by Jerod MacDonald-Evoy | Arizona Mirror

The New York Times this weekend profiled Southwest Key founder Juan Sanchez and the organization he’s built. Southwest Key, a nonprofit, is the nation’s largest operator of shelters for immigrant children and has received $1.7 billion in federal contracts over the past decade.

Sanchez, the CEO of the Austin-based company, had a salary of $1.5 million last year — “more than twice what his counterpart at the far larger American Red Cross made,” the Times noted.

The company operates 24 shelters nationwide, including 11 in Arizona. Two Arizona locations recently shut down as part of a settlement agreement between Southwest Key and the Arizona Department of Health Services, which has oversight of the licensing as a facility that houses minors.

Part of Southwest Key’s growth and financial success is due to other for-profit operations it has created, which funnel money back to the nonprofit, the Times reported.

“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…

Southwest Key asked friendly developers to buy properties to rent to the charity. Mr. Sanchez said he did not want to be stuck with empty shelters if children stopped coming. “It’s just not worth it for us to be purchasing buildings,” he said.

The investors were well rewarded. Over the past five years, a group based out of Mesa, Ariz., has earned more than $28 million in rent for properties that cost roughly $16 million…

In one case, Southwest Key paid inexplicably higher rent than the prior tenant. The charity paid $117,000 a month for a building in Mesa where the previous renter, trying to sublet, had advertised a rate of $30,000 a month.”

Southwest Key has two locations in Mesa, four in Glendale, two in Peoria, two in Phoenix and one in Tucson.

Donations to AZ GOP

Arizona Department of Health Services sent a strongly worded letter to Sanchez on Sept. 19 notifying him that the state was starting the process to revoke all of Southwest Key’s licenses in the state. Two days later, at the nonprofit’s request, Southwest Key leadership met with ADHS.

A settlement conference was held behind closed doors Oct. 10 as a community group demanded more oversight of the shelter operator.

On Oct. 17, the Times reported, Sanchez and his wife each donated $5,100 to the Arizona Republican Party. It was an unusual move for them, both on the amount and political affiliation.

The article noted, “Their previous political donations totaled no more than $2,100, made only to Democrats and liberal causes, records show.”

On Oct. 24, the state and Southwest Key reached a settlement.

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Laura Gómez
Laura Gómez

Reporter Laura Gómez Rodriguez covers state politics and immigration for the Arizona Mirror. She was named Best Investigative Reporter by Phoenix Magazine in its 2018 newspaper category and has been honored by the Arizona Press Club for education, immigration, political, and public safety reporting and Spanish-language news and feature reporting. Laura worked for The Arizona Republic and La Voz Arizona for four years, covering city government, economic development, immigration, politics and trade. In 2017, Laura traveled the length of the U.S.-Mexico border for “The Wall,” the Pulitzer Prize-winning project produced by The Arizona Republic and USA Today Network. She is a native of Bogotá, Colombia and lived in Puerto Rico and Boston before moving to Phoenix in 2014. Catch her researching travel deals, feasting on mariscos or playing soccer.