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The board that oversees the California High-Speed Rail Authority voted Friday to rein in Chief Executive Ian Choudri’s contracting authority following a state investigation that showed consultants billed the agency $600,000 in questionable travel expenses.
The investigation by the office of inspector general for the high-speed rail project found that some consultants flew first class, hailed luxury rides and traveled to a night club, a cigar lounge and numerous restaurants, bars and residences, sometimes after hours, on taxpayers’ dime.
Investigators looked at travel expenses submitted by four consulting firms over a two-year period and found that most of the trips were unauthorized, poorly justified — at times at the agency’s top executives’ request — and that agency staff failed to sufficiently vet the requests before approving them. In some cases, agency staff didn’t even know about the trips until they received invoices.
The board on Friday voted 7-2 to strip Choudri of his sole authority to sign and manage contracts under $25 million and to require the agency’s in-house attorneys to approve or change any new or existing contracts. The board already has to vote to award any contracts over that amount.
Board chair Steve Kawa told reporters afterward that the decision “adds additional eyes and ears and authority” over issues exposed by the investigation.
“We are not just gonna sit back and ignore that we had this travel issue,” he said. “Not one dollar of California taxpayer dollars should be misused.”
Several board members slammed the consultants for the travel expenses. Lynn Schenk, who has served on the board since 2003, said the spending suggests a troubling pattern and deserves a deeper dive.
“I am outraged that we would be treated like a piggy bank for these kinds of expenditures,” she said during the board meeting. “And it says to me that there are other expenditures that are being treated this way.”
Board member Henry Perea, suggested the travel payments are so egregious that the state should end its contract with the firms right away, something Gov. Gavin Newsom has also floated. However, Perea said he worried that doing so could set back the long-delayed rail project even further.
“I’d terminate these four (contracts) tomorrow or today, but I understand there’s a question of operational needs that we have with these folks,” he said.
But the board did not grill the authority’s top executives for failing to catch the behavior, even though the probe revealed that consultants told agency staff many times that they were traveling at the request of the agency’s top officers, including Choudri.
In response to the investigation, the authority paused all travel payments to the four consulting firms in question and has started reviewing their claims and training staff, executives and consultants on travel policies, said the authority’s Chief Financial Officer Jamey Matalka.
One legal consultant was paid $40,800 in travel reimbursements and an additional $86,500 in “travel time” for 30 trips between Denver and Sacramento in a year. When questioned about whether he needed to attend the meetings in person, he said Choudri had requested his presence so he did not need to justify it and that it would not be appropriate for him to question Choudri’s direction, “as other consultants in other Authority offices are learning the hard way.”
In response to the investigation, the authority paused all travel payments to the four consulting firms in question and has started reviewing their claims and training staff, executives and consultants on travel policies, said the authority’s Chief Financial Officer Jamey Matalka. The firms are: KPMG LLP, a global financial consulting firm; Nossaman LLP, a national law firm; AECOM-Fluor Joint Venture, which manages and coordinates the authority’s projects, and SYSTRA/TYPSA Joint Venture, which provides tracks and systems design.
The agency is seeking to recoup all questionable travel payments, he said Friday.
“We remain committed (and) we take full responsibility and accountability to fix if there was something broken in the system,” Choudri told the board.
Choudri also told board members that the agency has taken “disciplinary actions” against some consultants but did not clarify what they were. Choudri did not speak to reporters following the meeting.
Assembly Minority Leader Alexandra Macedo, a Visilia Republican, called for Choudri’s firing in a Thursday letter to the board. She accused him of demonstrating a “pattern of misuse of taxpayer dollars and abuse of public trust.”
“At a time when California families face unbearable financial pressures to cover essential household needs including rent, utilities and transportation, the routine approval of improper consultant expenses represents a severe breach of fiduciary responsibility,” she wrote.
The authority frequently approved expenses with vague justifications, such as “typical M-F week” trips, and approved travel at the request of executives without asking why. One consultant flew to California from Denver 20 times during the two-year period to “meet with the executive team” or attend executive meetings, without explaining why the meetings couldn’t have been remote, the report says.
The high-speed rail project is already long delayed and over its projected budget: In 2008, voters approved a $10 billion bond to build a high-speed rail line from San Francisco to Los Angeles by 2020 for an estimated $45 billion. The project is now estimated to cost between $126 billion and $231 billion, with a full buildout expected by 2040, according to the authority’s latest business plan. Current plans call for building a first leg linking Merced to Bakersfield.
But the rail agency failed this year to push through most of the state legislation it deemed necessary to keep construction of the 171-mile Merced to Bakersfield section on its current schedule.
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