High-speed rail board limits CEO contract authority after $600,000 travel scandal

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.”

“I am outraged that we would be treated like a piggy bank for these kinds of expenditures.”

Lynn Schenk, a member of the Board of the California High-Speed Rail Authority since 2003

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.

‘They should all be here’

Of the four consulting firms investigated, only one sent representatives Friday.

Veronica Siranosian, an executive at AECOM-Fluor Joint Venture, told the board the company reviewed its travel invoices and found “no substantive departures from the established public processes.” 

The inspector general’s investigation found nearly $380,000 in travel expenses by the company’s consultants that were not allowed under state regulations or the company’s contract with the state.

Nevertheless, another AECOM executive, Mike Burns, said the company has identified only about $1,000 in expenses it overbilled the state, including for an Uber ride, parking in a garage that charged a higher rate than surrounding buildings and a flight that was on an international carrier instead of an American airline.

In some cases, Burns stressed, the dollar difference was small. He said the company’s consultants once took an $86 Uber ride in an electric vehicle whereas the standard policy would require an $84 Uber X instead. “It was a $2 differentiation,” he said. “There’s some nominal incidences like that.”

Schenk gasped. 

“Surely you are not saying that we are sitting here for these hours going through this … for a $2 difference,” she said. “And surely you will at least acknowledge that these instances show a disregard at the very least for state and high-speed rail requirements.”

“It’s gonna take a lot of $2 differences in Uber rides to get to the $380,000 that you guys billed the state of California,” said Vice Chair Anthony Williams. 

Board member Emily Cohen slammed the consulting firms that did not appear Friday.

“They should all be here. Unbelievable.”

Authority to step up training, improve policy

Matalka said the authority would implement all the fixes the inspector general’s office recommended. He said the authority would by the end of the year create a new travel approval form requiring more details. 

By the end of March, he said, it would establish a “consistent, uniform process” for advance travel approvals, ramp up training, create a list of approved office locations for consultants, recoup misspent state funding and use AI to flag travel requests that potentially violate policies. 

But much of the steps seems like “basic oversight,” Schenk said. “Why weren’t we doing this at the outset?” she asked. “What is the root cause?”

Matalka said some questionable travel requests slipped through the cracks because staff did not review them deep enough.

“Training needs to be done so that we make sure you are not just looking at the labor hours, you are not just looking at the lodging rate,” he said. “You need to actually Google the address, look at the timestamp, look at some of the very small print on the fare class.”

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 investigation 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.