NICK’S VIEW - For a case study in lost public trust and squandered taxpayer money, look no further than California’s high-speed rail (HSR) program.
HSR is one of Governor Gavin Newsom`s abject failures that will doom his presidential aspirations.
Unbelievable as it may seem, Newsom vetoed a bill to boost oversight of California`s High -Speed Rail Authority. The measure would have allowed the Office of the Inspector General to hire highly trained workers for audits and investigations. Which leads us to ask: What is the governor afraid of? I hope the next governor will give us the answer.
In an apparent pay-to-play scheme Newsom has touted the project as a "jobs creator", but the project saw emerging jobs snatched up by myriad of consultant groups, contractors, and multinational engineering firms who had contributed heavily both to campaign finances, expressly for the bond initiative that funded the project, and politicians who support the project. Subsequently, these engineering firms, WSP, AECOM, and HNTB got multimillion contracts. Lost is money that could be diverted to productive economic engines such as affordable housing, clean energy, water desalination, repair of a grumbling infrastructure and addressing climate change.
Another failure is that the governor has consistently appointed to the HSR Authority political hacks and donors who do not have the necessary experience and time to oversee such a mega project, resulting in exposés of waste, abuse and lack of oversight, that we are reading continuously in the press.
In 2008, Californians approved $9.95 billion of state bond funding as seed money to build a $33 billion high-speed rail system promising a 2-hour, 40-minute trip between Los Angeles and San Francisco with speeds of up to 220 miles per hour, and an expected completion date of 2020.
Today, the official high-end cost estimate exceeds $231 billion, full service remains years away, and failed oversight and cost accountability have undermined public trust.
A September report by the California High-Speed Rail project’s Inspector General found that consultants were reimbursed for numerous questionable entertainment and travel expenses, and it uncovered deep weaknesses in oversight and approval procedures. In all, $624,400 was reimbursed in violation of state contracting rules and travel regulations.
Enough. This cycle of waste, abuse, delay, conflicts of interest and failed control has dragged on for too long. Accountability can no longer be postponed. This relentless pattern of delay and fiscal failure must end now. Bring in qualified independent auditors immediately to conduct a forensic audit—a thorough review of financial records for evidence of waste, fraud, embezzlement, regulatory violations, or other misconduct.
Anyone who violated the public trust should be held fully accountable under the law.
A central question remains: Where was the oversight board? The California High-Speed Rail Authority is governed by a nine-member Board of Directors responsible for overseeing the project’s planning, construction, finances, contracts, and major policy decisions. Five members are appointed by the Governor, two by the California Senate Rules Committee, and two by the Speaker of the Assembly.
The project has remained a major state priority throughout Newsom`s administration, making its performance and oversight part of his record. Why did the governors’ appointees fail to catch these damaging problems sooner?
The Board, for example, approved award of contracts of major construction before worksites were owned, cleared and ready for construction. The result is that close to $1 billion has been paid to construction contractors and construction managers for "not working" because real estate was not owned or the utilities were still in the way. In one case the contractor received $42 million for parking a couple of trailers and not doing any work for a long time, because the HSR Authority did not own the land.
This scandal now reaches far beyond embarrassing expense reports. It has become a management and oversight crisis serious enough for the Authority’s board, in a 7–2 vote, to limit former CEO Ian Choudri’s unilateral contracting power. The board belatedly acknowledged that executive discretion and existing internal controls were inadequate. It revoked Choudri’s sole authority to sign and manage contracts under $25 million and required the Authority’s in-house lawyers to approve or revise new and existing contracts.
But that is not enough.
On October 23, 2026, a CBS California exclusive reported that when the California High-Speed Rail Authority awarded a $24 million contract to KPMG, newly obtained records indicate it knew the consulting giant intended to charge more than its unusually low bid for high-level positions. For a possible explanation of how this decision was made read further down in this story who is on KPMG`s payroll.
In response to the CBS`s revelations, the Board Chair had the audacity to state: " I will formally request as Board Chair that the Office of Inspector General initiate an independent review of the contract, the billing practices, and the Authority`s oversight procedures". That`s the person Newsom appointed to oversee this boondoggle.
It is disheartening and alarming that the chair asked the IG to do a review and did not ask for an independent forensic audit. The IG does not have the manpower, scope and expertise to perform a detailed examination and evaluation to uncover fraud and other financial misconduct with the goal of gathering evidence that can stand up in a court of law, that a forensic auditor does have. Unlike a standard audit, a forensic audit acts like a zoom lens on specific accounts, contracts, expenses, vendors or suspicious behavior.
KPMG is not the only major company practicing this deceptive practice.
Following are a couple of classic examples of the idiom "camel`s nose under the tent"
A few years ago, when I first was appointed to the Los Angeles Department of Water and Power Board (LADWP), I requested a forensic audit of the CH2M Hill contract. The company had secured a sole source $550,000 contract to act as an expert witness on dust mitigation to resolve legal issues related to Owens Lake. Astonishingly, the role of CH2M Hill morphed into program manager, designer, and construction manager, a series of flagrant conflicts of interest. The contract had ballooned to $120million! But that`s not all. The company had defrauded LADWP, it was sued in federal court and settled for $2.9miilion. Meanwhile, our utilities rates have hit the stratosphere.
Just this year, the City Council approved a massive hike to expand Gibson, Dunn & Crutcher, the powerhouse law firm`s budget from an initial three-year cap of just $900,000 to a staggering nearly $7.5 million to date. The firm was hired by the departing city attorney to defend in court the indefensible failed and corruption plagued Homeless Industrial Complex. But that's not all. The contract has also been modified to handle potential secondary legal fronts, including regulatory enforcement and disputes involving federal authority over city homelessness resources at a cost of $1,300 per hour.
I have previously written about the high-speed rail project’s heavy dependence on outside consultants for legal, financial, program and construction management, and engineering work. When contractors wield such influence, weak oversight can allow costs and authority to expand and abuse beyond their intended limits.
KPMG's winning bid proposed an average hourly rate of roughly $200, but records reviewed by CBS California show its billed average rate was more than double that. The report states that KPMG did not deny the findings; instead, a spokesperson stressed that California High-Speed Rail had been aware of its plan: "KPMG's bid in December 2024 detailed the people who would work on the engagement, their job classifications aligned to the state's definitions, and the associated billing rate for each person."
The impact, according to the report, “KPMG billed taxpayers roughly $2 million more in just four months than its winning cost proposal indicated. In its first year, KPMG has already spent nearly half of its four-year, $24 million contract.”
The CBS California report also stated taxpayers continue paying hundreds of millions for consultants who are not laying track or building trains, but who are at the center of an Inspector General investigation into wasteful and unallowable nightclubs, other entertainment and travel spending.
CBS California claimed that KPMG's winning bid cut hourly rates for its "Managing Directors," "Managers," and "Senior Associates" from hundreds of dollars per hour under its previous contract to just $35 per hour in its winning bid. Then KPMG raised the pay for people in its lowest-experienced "Associate" position from $45 to $425 per hour.
Enough reports. No more explanations will do. We do not want to hear promises that California’s bullet train is finally getting back on track. After years of escalating costs, scandals and missed deadlines, the project has arrived at a far more troubling crossroads, whether the very system designed to protect taxpayer dollars has failed. The answer must be a full, independent forensic audit, one that follows the money, examines the contracts, and determines where accountability breaks down.
A project that could cost taxpayers $231 billion cannot operate on faith. Not after the delays. Not after the exploding costs. Not after mounting questions about contracts, consultants, financial controls and alleged backroom deals. California should stop asking the public to trust the system and start proving, dollar by dollar and contract by contract, that the system can be trusted.
I call for a forensic audit not to presume guilt, but to establish the truth. Given concerns about management controls, lack of oversight, and the billions of sums taxpayers have committed, assurances are no longer enough. Open the books. Follow the money. Examine every major contract. Let an independent deep audit answer the question hanging over the high-speed rail project: What happened to taxpayers’ money, who abused it and who was responsible for protecting it?
Cohn Reznick Advisory scored higher than KPMG on technical qualifications but lost the $24 million deal by just two points on pricing based on KPMG`s unusually low pricing for three high-level positions. After KPMG was awarded the contract, it promoted all of its now $35 per hour "managing Directors"(Asinine hourly rate: this writer's opinion) to "Partners" at $460 an hour. Different titles. Same employees. Much higher bills.
Finally, I have written previously of the revolving door practice. The transit industry is an incestuous industry that essentially operates within a system whereby "the fox guarding the henhouse"
The CBS exposed a pervasive occurrence of this shameful and dangerous practice.
CEO Ian Choudri who abruptly resigned amid scandals had served as senior Vice President at HNTB before his appointment to the HSR. Interestingly, HNTB is prime consultant and project construction manager for the HSR. (HNTB is also a consultant for the LAX/ Automated People Mover, which is mired in controversies and is four years behind schedule, $1.4 billion over budget and is suing LAWA).
KPMG is billing hundreds of dollars an hour for highly paid subcontractors, including former High Speed Rail CEO Jeff Morales, former board chair Dan Richard, former Biden appointed Federal Railroad Administrator Amit Bose and Gary Walker, a former principal at AECOM, another consulting firm referenced in the Inspector General`s investigation.
Only if the next governor orders a forensic audit, and only then we can move forward to make the project work and gain the public trust.
(Nick Patsaouras is an electrical engineer, civic leader, and a longtime public advocate. He ran for Mayor in 1993 with a focus on rebuilding L.A. through transportation after the 1992 civil unrest. He has served on major public boards, including the Los Angeles Department of Water and Power, Metro, and the Board of Zoning Appeals, helping guide infrastructure and planning policy in Los Angeles. He is the author of the book "The Making of Modern Los Angeles.")
