I think you're missing the point here. You can say, "it is in fact prejudice" all you want, but that doesn't impact the rules by which these administrative processes are governed.
There's no rule that says the Commander can only be influenced in making their FEB decision by certain types of information. So, with respect to this situation, no, that MFR isn't wrong, illegal, against any rule, etc.
I get that you think you got a raw deal, but here's a dose of reality: the system doesn't care.
You came here asking for information and help, and there are several people who have actual experience with the FEB process, as well as the follow-up processes I mentioned before, like the BCMR. We are trying to give you a straight answer. If you don't like what we have to say, then pony up the cash to get yourself an actual attorney's opinion. Some of us have already spent tens of thousands of dollars on attorney's fees to even get this knowledge in the first place, but suit yourself.