The decision appears to conclude a gradual reversal of fortune for Southwest Key, which has worked with the federal government for more than two decades, operating more than 25 shelters across Texas, Arizona and California. It has been awarded more than $6 billion in federal funds since 2007. After the H.H.S. announced that it would review its grants to Southwest Key, Ms. Miracle, the spokeswoman, said that the government had frozen funding and put in place a stop placement order on Southwest Key shelters, forcing the nonprofit to furlough about 5,000 employees.
Housing underage migrants for the federal government has been a financial boon for contractors like Southwest Key, whose award money more than doubled during the family separation policy overseen by Mr. Trump in 2017 and 2018. It was one of several providers that cashed in as the administration scrambled to find shelter for more than 5,000 children forced into federal custody, turning the care of migrant children into a billion-dollar business with little transparency.
The New York Times revealed in 2018 that Southwest Key had funneled government money through a web of for-profit companies to convert public funds into private money for the organization and pay top executives millions of dollars. Shortly after, the Justice Department opened an investigation into possible financial improprieties. Southwest Key also began an internal inquiry, and high-level executives, including its founder and chief financial officer, eventually resigned.
The complaint filed by the Justice Department last year disclosed that Southwest Key had documented dozens of cases of abuse reported by children, the majority of whom were 13 to 17 and came from Guatemala, Honduras and El Salvador. But Southwest Key’s employees did not report abuse they had observed or knew of, or any violations of policies intended to protect minors.
By one account, a worker who sexually abused three girls ages 5, 8 and 11 threatened to kill their families if they told. In another case documented by Southwest Key, a supervisor deliberately changed shifts to be alone with a teenage girl he repeatedly raped, abused and threatened. At night, he would enter her bedroom and those of others in violation of Southwest Key’s policies. The girl was transferred to a different shelter after she reported the abuse.
At the time, a spokeswoman for Southwest Key said that the complaint did not “present the accurate picture of the care and commitment our employees provide to the youth and children,” and that the company remained focused on “the safety, health and well-being” of the children at its shelters.