Rail Board Appoints Interim Chief After $4B Loss

The California High-Speed Rail Authority installed a new interim chief on October 29 to manage a project currently burdened by lost federal money and disputed consultant invoices. Joe Stephenshaw, who served as Governor Gavin Newsom's finance director for four years, took the role after the board unanimously appointed him. He succeeded Ian Choudri, who resigned on October 28. Choudri cited personal and family priorities in his departure, though his letter characterized his time in office as a successful project turnaround.

The leadership change arrived shortly after investigative reports questioned the authority's handling of public records and spending. The previous administration had delayed releasing requested documents for weeks. The new chief now oversees a portfolio that includes a $24 million contract with KPMG. Records indicate the authority knew the winning proposal contained artificially low hourly rates that the firm did not intend to charge. A competing bidder challenged the award, but state officials dismissed the claim as speculation. They warned the authority against paying higher rates for work assigned to positions priced at $35 an hour.

Despite those warnings, invoices showed charges reaching ten times the contracted rate for assigned positions. An examination of four months of billing identified approximately $2 million in charges above the winning cost proposal. KPMG stated the authority knew its staffing plan when awarding the contract. The firm is reviewing the procurement process and will address any policy violations it finds. Board Chair Stephen Kawa has called for an independent inspector general investigation into the matter.

The review extends to travel expenses and personnel placement. Investigators found repeated rides involving KPMG Managing Director Thierry Prate and legal consultant Brent Butzin. Both consultants traveled from Choudri's home in Folsom and nearby restaurants. The authority and the three men did not answer questions about who approved these expenses or whether consultants charged their hourly rates during these outings. The authority has since confirmed that both consultants are transitioning off the project.

A separate contract with an engineering firm worth up to $131 million raised further concerns. The firm promised to move six key employees to Sacramento. Instead, key personnel charged taxpayers for flights and hotels while commuting from Denver and Texas. Inspector General Ben Belnap flagged more than $76,000 in travel involving out-of-state key personnel. Records also showed Choudri charged taxpayers for commuting from Denver. An auditor flagged those expenses, and the state recovered the money.

The transition follows the loss of $4 billion in federal funding. The Trump administration cited a missed 2024 trainset milestone when withdrawing the money. California sued, arguing it could meet the final deadline by purchasing trains in 2025. The state missed that commitment as well and dropped its lawsuit. The administration then spent the funds elsewhere. Without the federal support, Californians will cover the purchase of the remaining trains.

On October 28, the board authorized a contract for wide-body trains from the manufacturer Choudri had chosen not to buy two years earlier. The order reduced from six trains to three. This change increased the cost per train despite stock interiors. The trains will be manufactured in Germany without a Buy America agreement.

The inspector general's team can compel internal records to examine who authorized disputed spending and whether contracting rules were followed. Findings and corrective action could take time. Stephenshaw also faces proposed changes to financial consulting agreements that could reduce outside oversight. He must resolve questions about enforcing existing contracts and recovering improper payments.