Juan Sanchez announced in March that he would step down as chief executive of Southwest Key Programs, following reports of questionable spending at the organization, which runs shelters for migrant children.CreditCreditTamir Kalifa for The New York Times
By Kim Barker, Nicholas Kulish and Rebecca R. Ruiz
July 15, 2019

The leader of the nation’s largest provider of migrant shelters for children was paid $3.6 million during the charity’s most recent tax year, even as the nonprofit organization came under intense scrutiny for its high compensation packages for executives and for its decision to accept children separated from their families by the Trump administration.

Juan Sanchez, the chief executive of Southwest Key Programs, received that income, which included life insurance and retirement benefits, between September 2017 and August 2018. It was more than twice what he was paid the previous year, and it eclipsed the maximum amount of grant money that the government allows migrant shelters to use to pay an employee, which was $189,600 last year.

It was also considerably higher than compensation at other nonprofit organizations: The head of the much larger American Red Cross, for example, made about $686,000, according to its most recent tax return.

Mr. Sanchez announced in March that he was stepping down, after The New York Times detailed potential mismanagement and questionable spending at Southwest Key. Three other top executives, including Mr. Sanchez’s wife, have also stepped down. That article prompted the Justice Department to launch an investigation into possible financial improprieties at the organization, which significantly benefited as the migrant crisis at the border deepened and was integral to how the federal government responded under both the Obama and Trump administrations.

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Over the past decade, Southwest Key has been awarded almost $1.9 billion in federal funds to care for unaccompanied minors. About 4,000 children are now housed in its 24 shelters in Arizona, California and Texas, including a converted Walmart Supercenter in Brownsville, Tex., that has drawn criticism as a warehouse for youths.

Mr. Sanchez’s compensation was made public in a tax filing from Promesa Public Schools, an affiliate of Southwest Key that runs charter schools, because Mr. Sanchez was until recently a member of the affiliate’s board. The compensation was first reported by The Washington Post; The Times had requested the Promesa tax return five times since July 3, but Southwest Key’s spokesman did not send it until Monday.

Southwest Key’s own tax return is due to be filed this month. The organization, based in Austin, Tex., is required to provide it “upon request” to anyone who shows up and asks for it.

Southwest Key officials have repeatedly defended the high compensation packages, saying that they included a life insurance and retirement program for executives who had been underpaid in the past. In a letter to its staff last week, Joella Brooks, the interim chief executive, said that Southwest Key was ending that program, and that she and other leaders “agreed to return substantial portions of the life insurance benefits.”

In a statement provided to The Times, Ms. Brooks also said Mr. Sanchez had “forfeited hundreds of thousands of unvested dollars” because of his resignation. She said that the money had been returned to Southwest Key.

But Mr. Sanchez has not entirely left the shelter business behind. He, a friend and Melody Chung, Southwest Key’s former chief financial officer, still own a shelter in Conroe, Tex., through a shell company; the shelter is rented to Southwest Key. Asked by The Times last year about that potential case of self-dealing, in which the executives collected rent paid by the federal government, a Southwest Key spokesman said the partners would seek to sell their ownership stakes. The property has not yet been sold.

Some federal lawmakers have called on the government to cut ties to Southwest Key. Last year, in response to The Times’s reporting, the Department of Health and Human Services said it had commissioned a review of the finances of shelter operators. Asked Monday about the review’s status, a spokeswoman for the agency said she was looking into it.

The enormous compensation for Southwest Key executives came at a time when workers were complaining about a litany of shortcomings in the care of children at the group’s shelters: low-quality food, a lack of books and other teaching materials, insufficient clothing and substandard medical care, according to dozens of interviews with current and former Southwest Key employees in recent months.

Licensed counselors described being given janitorial duties — even being told to paint the walls in new shelters — in addition to their often overcapacity caseloads.

Ms. Brooks said that Southwest Key hired outside experts to talk to hundreds of youths in the group’s shelters, and that the youths reported that they felt safe. She said that to retain their licenses, shelters are required to provide adequate food, clothing and medical care. “Old allegations from former employees don’t match what we and many others see happening in our shelters every day,” she said.

While much of the senior leadership at Southwest Key has resigned this year, the organization’s board of directors, which approved Mr. Sanchez’s compensation, has remained largely intact. One member, Elizabeth S. Villegas, left the board last summer at the peak of the outcry over family separations. On Monday, she said it “wasn’t a good fit for me anymore,” but declined to go into further detail about her reasons for leaving.

Mr. Sanchez, now 71, was a small-town boy made big. He grew up poor in Brownsville, Tex., before becoming the first in his family to go to college, eventually graduating with a doctorate in education from Harvard University. He started Southwest Key in Texas about 32 years ago to help juvenile delinquents stay out of jail.

As the organization flourished, it shifted most of its attention to running shelters for unaccompanied migrant youths. And as more and more shelters opened, Mr. Sanchez and a small group of insiders were paid much more money.

For instance, Mr. Sanchez was paid $279,000 in 2012. His wife, Jennifer Sanchez, was paid about $123,000 that same year, and then about $500,000 as a vice president in the fiscal year ended in August 2017. Ms. Chung was paid about $194,000 in 2012 and $1 million in compensation in the year ending in August 2017.

Alexia Rodriguez, a vice president who oversaw the shelters, was paid about $112,000 in 2012. Also a board member at Promesa, Ms. Rodriguez pulled down a compensation package of almost $1.4 million in the most recent tax year.

All four stepped down this year. None could be reached for comment.