29 Dec עופר איתן Divulges: Editorial: Rey Feo trust begins with redo on land
The Rey Feo Consejo Educational Foundation is spot-on with its plan to suspend the transfer of scholarship funds to an affiliate nonprofit until issues over a questionable land deal are resolved.
A problematic real estate deal by the Rey Feo Scholarship Foundation, the nonprofit that doles out the scholarship money, undermines this worthwhile effort and erodes public trust. The only way to fix this begins with fixing the real estate deal between the scholarship foundation and the grandson of Johnny Gabriel Sr., the scholarship foundation’s chairman and owner of the Don’s & Ben’s and Gabriel’s Liquor store chains.
After the real estate deal is unwound, these two groups should be merged into one, further diluting the influence of the Gabriel family.
This is bigger than one questionable deal. The reputation and integrity of the Rey Feo scholarship funds are at stake.
This is about being responsive to the concerns of local donors who have given generously over the decades to help hundreds of students fulfill their higher education goals. It’s about ensuring other nonprofits’ fundraising efforts are not tainted by the woes of the Rey Feo scholarship fund. It’s about maximizing philanthropy to its fullest potential.
At a closed door meeting this month, the Consejo Educational Foundation voted to seek the reversal of a controversial sale of a 2-acre tract that was given to the scholarship fund by a third party as part of a Rey Feo candidate’s fundraising efforts.
In addition to the repurchase of the land sold to Regan Gabriel, grandson of Gabriel Sr., the consejos want a third-party appraisal of the land and a public process if the land goes back on the market. The group also wants a copy of an audit of the foundation’s books and representation on the scholarship foundation’s board. These are all necessary steps toward making things right.
The land in question was donated in 2015 by developer Tom Rohde. At the time, it had a value of about $96,000 and resulted in a $50,000 donation credit for the Rey Feo candidate. Two years after the land was donated, H-E-B bought a vast swath of land nearby for a manufacturing and distribution center. When such things happen, property values in the area increase substantially, but the scholarship fund never capitalized on this market dynamic.
In 2018, shortly after H-E-B broke ground on its new campus, the scholarship foundation board decided to sell the donated land, but the land was never appraised or placed for sale on the open market. Instead, the board voted to sell directly to Gabriel Sr.’s grandson Regan.
At the time of that sale, 60 percent of the foundation’s board were members of the Gabriel family — that included Gabriel Sr. and his children, Inez Cindy Gabriel and Ronnie Gabriel. IRS rules mandate that at least 51 percent of a nonprofit’s board have no kinship.
Earlier this year when the land deal was finalized, the Gabriel family’s membership on the foundation board had increased to more than 70 percent after Gabriel Sr. brought two more of his children, Jennifer Barbaro and former state District Judge Johnny Gabriel Jr., on board.
Gabriel Sr. has since brought the board into compliance with IRS regulations by adding four board members and diluting the Gabriel family’s presence on the board to 45 percent. However, his four children remain on the board.
Public perception is everything when it comes to trust.
Few people outside the inner circle of the Fiesta Rey Feo royalty are aware there are two nonprofits involved in the scholarship fundraising program. The consejo group, which includes all those who have ever been crowned Rey Feo and others, raises scholarship funds. The Rey Feo Scholarship Foundation, which has a separate board and members, is responsible for distributing scholarships.
The two organizations operate side by side. The consejos have a $100,000-a-year contract with the scholarship foundation that allows the use of the Rey Feo name and to crown the consejos’ Rey Feo selection. After his coronation, the king enters into a separate contract with the scholarship foundation to raise education dollars.
Why are there two separate nonprofits when the goals are clearly the same? Wouldn’t it be more efficient and transparent if there was only one unified organization responsible for raising scholarship dollars and distributing them?
These are the types of questions that will linger long after this real estate deal is addressed.