El Paso

Philanthropy: The Case of The Community Scholars

Editor’s note: as a reminder, phrases in blue are links to supporting articles. Click on them for more detail.

In a previous article we laid out how philanthropy is used by the wealthy to manage public policy for their pet projects. In the article we demonstrated how studies have shown that philanthropy is not about the needs of the poor, but rather the wants of the wealthy. There are three major ways philanthropy is used to manage the public policy. One is through creating research that is used to support public policy. Many of these are known as thinktanks or research centers attached to universities. Woody Hunt maintains such a think tank at UTEP publishing research on diverse topics. The second, although not philanthropy as commonly defined, are political donations used by candidates to win campaigns. A third is via the incubation of individuals to run for office in a future election or by incubating entities that help manage the public discourse. Incubating politicians is providing a job while someone waits for the opportunity to run for office. In the case of entities, it is the funding media outlets to help frame the debates. Two examples of these are Veronica Escobar and Bob Moore’s El Paso Matters publication. We will explore El Paso Matters in a future issue. For now, to better understand how philanthropy is used we will look at a nonprofit that used high school students to create the research to support public policy. The nonprofit was called the Community Scholars.

In 1998, a non-profit was established in El Paso. It created the blueprint for using philanthropy in El Paso to create public policy wanted by those making large donations to select non-profits. The Community Scholars was a non-profit founded in 1998 by Mary Hull Caballero, Ray Caballero’s wife and Eliot Shapleigh, who was then a Texas Senator. According to their website, now defunct (communityscholars.org), the Community Scholars was a youth leadership development initiative. Their vision, according to the defunct website was to develop “regional community leaders.” The high school student interns were paid between $7.50 to $10 an hour for their research. They were selected from the city’s high schools.

Screen capture by author, 2001.

While his wife, Mary Hull Caballero and Eliot Shapleigh were forming Community Scholars, Ray Caballero was also creating Count Me In, Inc. Shortly after its formation, Count Me In, Inc. was absorbed by a new non-profit named the Community Initiatives, Inc. (CI), on April 20, 1998. [1] County Me In, Inc. was a “get-out-the-vote” organization. (more on this later) Because Community Scholars was “well-funded” and Community Initiatives was not, one of its board members, Richard Fleager asked Wesley Jurey, then-president of the El Paso Chamber of Commerce to fundraise for CMI.

It is important for readers to understand that Community Scholars was created by Eliot Shapleigh and Ray Caballero’s wife, Mary and that Ray Caballero created Community Initiatives and then absorbed both Community Scholars and County Me In into his organization.

On June 7, 1999, the chamber sent a letter soliciting donations for Count Me In, Inc. for voter outreach, but the letter directed contributions be made to Caballero’s Community Initiatives, Inc., instead of Count Me In, Inc. [1] The fact that Count Me In was no longer a stand-alone organization was not made clear until later.

While Caballero was raising funds for his Community Initiatives, Inc. through the Chamber, Community Scholars students were contacting bank officials with questions about their banking practices. Having been informed of the students’ questions and the chamber’s request for donations to Community Initiatives, Al Martinez-Fonts, then chairman and CEO of Chase asked Wes Jurey if the two were related. Martinez-Fonts told Jurey that he would be inclined to donate to Community Initiatives/County Me In, but not to Community Scholars. [1]

Although funds for Community Scholars were kept separate from Community Initiatives’ funds, Fleager was “unsure” if monies donated to Initiatives would go to Community Scholars because there was an outstanding loan from Community Scholars to Community Initiatives. It had been made clear to the Chamber, by banking officials, that they would financially support County Me In provided that their contributions did not end up with Community Scholars. [1]

To attempt to resolve the stalemate, the board of the Community Initiatives held an emergency meeting and voted to transfer Count Me In, Inc., into the Chamber Foundation to ensure any funds raised were segregated. As a result, Stuart Schwartz, president of Community Initiatives, Inc. and Fleager resigned from the board of Community Initiatives “because Raymond Caballero made it clear that he did not approve of the board’s decision to transfer CMI to the Chamber Foundation.” [1]

A week later, the remaining Community Initiatives board members reversed the decision and kept Count Me In under Community Initiatives, Inc. By 2000 Community Scholars had become a non-profit and Count Me In was nothing more than “a skeletal board of directors” under Caballero’s Community Initiatives with no staff. [1] On February 8, 2013, the State of Texas “forfeited” Community Initiatives, Inc.’s corporation status for tax delinquency. In 2012, the non-profit Community Scholars “terminated” its non-profit status, according to its 2012 IRS 990 Form filing.

Why Were The Banks Angry?

On July 30, 1999, Community Scholars published the report: Four Prominent Banks in El Paso: Do They Invest In Local Economy At Rates Comparable To Other Markets? Are They Responsive to the Capital Needs of Small Business? The report was written and researched by high school students. It alleged that El Paso’s four largest banks were not “responsive to the capital needs of small businesses” in El Paso. The report generated much controversy after it was released.

The research suggested that how much a bank loans to El Paso businesses should be used to determine which bank the City used to keep its money. The decision on where to park the taxpayers’ monies was determined by a bidding process. The Community Scholars’ research was, instead, suggesting that the criteria of how much money a bank loaned in the local community should be used as the determining factor.

The banks opposed making lending decisions on criteria other than credit worthiness.

What the Community Scholars research did, in essence, was to use taxpayer funds to create the research that allowed for the argument that banks would be punished by not lending enough to local businesses.

Taxpayers Funded Bank Study

The reason Community Scholars were well-funded was because its funding came from the local school district’s budgets. Over nine years, El Paso school districts paid Community Scholars about $1.7 million in taxpayer funds. Funding for Community Scholars was not well known until around 2003 when it became an issue in the political race for an EPISD board trustee.

At a Westside/Upper Valley breakfast meeting on April 12, 2003, then El Paso Independent School District (EPISD) Board of Trustees President, Dan Wever said that the school district had given $75,000 to Community Scholars to “write a report about the lending institutions in El Paso.” The $75,000 was for 14 students. Wever told the audience that he never received an accounting of the $75,000 from Community Scholars, instead he received “the controversial lending report.” (author’s contemporaneous notes of the meeting)

When prompted by an audience member to explain how the then-board trustee justified the use of school district funds of $5,000 per Community Scholar student, Dan Wever responded “Shapleigh recommended it,” adding, “you should see some of the other stuff.”

The “other stuff” was left unanswered.

EPISD funded Community Scholars at least between 1997 and 2003, along with the El Paso Electric Company, AT&T, and Petro Shopping Centers. The non-profit also received in-kind support from EPCC and UTEP for “computer labs, presentation rooms, classrooms and basically anything else the students need to do their work.” In total, El Paso school districts gave about $1.7 million over nine years. (Link 4)

After the collapse of the chamber’s fundraising, the resignations of the two Community Initiatives board members and the rest of the board reversing the decision to move the voter-outreach Count Me Inc. into the chamber’s foundation, both CI and CMI failed. As a result, on December 22, 1998, Ray Caballero sued Al Martinez-Fonts, several other bankers and their banks alleging tortious interferences, conspiracy and six other allegations.

Caballero Sues

The bank report created by the Community Scholars did not only cause controversy, but it also resulted in a lawsuit filed on March 22, 2000 by the Community Initiatives Inc., the umbrella organization of the Community Scholars. The suit was filed against Chase Bank, Bank of America, Norwest Bank, and Wells Fargo Bank, the four banks targeted by the Community Scholars report.

Community Scholars, using high school student labor, went from a research thinktank to a lawsuit filing entity targeting the organizations its report had singled out. The attorney for the Community Scholars was Ray Caballero, the husband of the director, Mary Hull Caballero. When Caballero was elected as mayor of El Paso in 2001, he withdrew from the case as the attorney.

Later, the suit was dismissed in a summary judgment. Basically, a summary judgement finds that there is not enough evidence for the court to find the defendants’ actions were harmful to Caballero’s non-profit. Caballero appealed the dismissal arguing that he was not allowed to present evidence. On December 23, 2004, the dismissal was affirmed by the Texas Court of Appeals, Eighth District.

The Blueprint Is Set

From the Community Scholars the blueprint on how to managing the public policy agenda for the downtown redevelopment plan that brought forth the Glass Beach Study which has led to the Chihuahuas stadium – the attacks on Segundo Barrio and Duranguito – and the ongoing controversy over the proposed downtown sports arena arose.

Key to the future of the downtown arena is convincing voters that it is in their interest to tax themselves to pay for it even during the pandemic-induced economic downturn. El Paso is using certificates of obligation to fund operations today in unprecedented levels. The question readers should be asking is whatever happened to the 2012 Quality of Life monies? How will they be used after Covid-19?

The answer lies in the upcoming elections in 2022. Who gets elected will make those determinations. What city council does today, i.e., certificates of obligations sets the stage for arguing the 2012 bonds are in the bank waiting to be used. Who will frame that argument? It will be framed by research papers on economic development and quality of life. Who will lead the debate? It will be a publication that is being funded by philanthropy today as it is “incubated” to be in position to frame El Paso public policy in the coming years. We will explore that further in future issues.

Another aspect of the non-profit saga that readers should note is that Count Me In was not simply a get-out-the-vote in the traditional sense. In 1998, its only year of activity, it conducted a test of 1,400 voters. According to a former board member who agreed to speak to the author on the condition of anonymity in 2001, the test was to see “if organizing voters using peer pressure to get friends and families to vote” would result in an increase in voter participation.

The project, organized by Caballero, was to get a group of about 20 voters to pledge to get their coworkers, families and friends to the polls on election day. Each member of the project was accountable to the others in getting voters to the polls. According to the former board member, the results were “encouraging” and they were hoping to try a larger test in the following elections. However, the controversy over the Community Scholars did not allow another test to be done.

For now, although Caballero’s Community Initiatives went bankrupt and lost its lawsuit, Community Scholars continued to use tax dollars to generate research papers through 2012. In addition to using tax dollars under the guise of non-profit research, the Community Scholars also incubated several individuals currently setting public policy for El Paso, many of them supporting the proposed downtown sports arena.

The People Connected To Community Scholars

Veronica Escobar: After Ray Caballero lost his reelection and Veronica Escobar lost her job, as a result, she went to work for the Community Scholars as its Executive Director. She worked there until 2007 when she become the county commissioner for precinct 2. Escobar was “incubated” by the non-profit until she could run for county commissioner.

Jose Landeros and Vince Perez are both alumni of Community Scholars. Landeros worked for Perez. Landeros is currently the Director of Planning & Development for El Paso County with an estimated salary of almost $78,000. Vince Perez recently worked on a get-out-the-vote project funded by Woody Hunt and is rumored to be considering a run for office in the next election. However, much will depend on redistricting and how it affects his wife, Claudia’s chances for a second term.

Eliot Shapleigh, who has been politically silent, has again become engaged in local politics telling the El Paso, Inc. recently that he is consulting over 20 current El Paso elected officials. Shapleigh, along with Caballero’s wife, created the Community Scholars in 1998.

Beto O’Rourke served as president of Community Scholars starting in 2003.

Footnote:

  1. Community Initiatives, Inc. v. Chase Bank, Al Martinez-Fonts et al., Court of Appeals of Texas, El Paso, No. 08-02-00527-CV, decided December 23, 2004.

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