CEO's exit leaves California high-speed rail facing $4bn gap and audit

California's high-speed rail programme lost $4 billion in federal funding and its CEO on the same day in late October — and the new interim chief now inherits the disputed contracts behind both.

Ian Choudri resigned effective immediately on Oct. 28, hours after CBS California Investigates put questions about consultant spending directly to the High-Speed Rail Board in Los Angeles. The next day, the board unanimously appointed Joe Stephenshaw — Gov. Gavin Newsom's Department of Finance director for the past four years — as interim CEO.

The trigger for the federal loss was a missed procurement milestone. Court records and federal documents show the authority repeatedly missed deadlines to buy its trainsets. The Trump administration cited the first missed "trainset milestone" deadline in 2024 when it withdrew $4 billion. California sued, arguing it could still buy the trains in 2025, and swore to a federal judge it would meet a new deadline.

It didn't. California quietly dropped the suit and forfeited the money.

Legal experts told CBS the funds would have been frozen pending judgment had the lawsuit continued. Instead, the Trump administration spent them elsewhere. Newsom had called the withdrawal a political attack.

What did the board buy instead?

At the Oct. 28 meeting — hours before Choudri resigned — the board finally authorized a trainset contract. It covers the same wide-body trains from the same manufacturer Choudri declined to purchase two years ago, but on sharply worse terms:

• Californians now foot the bill without the $4 billion federal share.
• The order is cut from six trains to three, raising the unit cost of each.
• Without a Buy America agreement, the trains will be built in Germany with stock interiors.

Asked why Choudri delayed the 2024 purchase, the authority said it had "no additional comment beyond what has already been discussed publicly through the Board process."

How did the consultant bills stack up?

Inspector General Ben Belnap identified nearly $600,000 in wasteful and unallowable travel expenses — luxury rideshares plus trips to nightclubs and gyms that bore no visible relation to consultants' work. At the time, the authority was paying four major consulting firms nearly a quarter-billion dollars over two years for advisory work, not construction.

Whistleblower documents showed two of them — KPMG Managing Director Thierry Prate and legal consultant Brent Butzin, who billed through the KPMG contract — repeatedly charged taxpayers for late-night rides from Choudri's Folsom home, roughly 30 minutes from their Sacramento hotels. Both were subjects of the IG's travel investigation. Neither they, the CEO, nor the authority answered questions about who authorized the expenses or whether taxpayers covered their $460–$580 hourly rates during those outings.

A separate report found an engineering firm that promised to relocate six key employees to Sacramento under a contract worth up to $131 million instead billed airfare and hotels while commuting from Denver and Texas. One executive's weekly Denver–Sacramento commute ran on taxpayers, and his billing rate rose 23% after Choudri became CEO. Receipts show Choudri himself billed to commute from Denver; an auditor flagged it and the state clawed the money back. The IG flagged more than $76,000 in out-of-state travel overall.

Then came the contracts themselves. KPMG won a $24 million deal on "artificially low" rates the authority knew the firm never intended to charge, records show. A competitor's protest was dismissed as speculation, but state officials explicitly warned the authority not to pay more than the contracted $35-an-hour rates for certain positions.

It did. Invoices show billing at up to ten times the contracted rate, and a four-month CBS review found roughly $2 million in excess billing versus the winning cost proposal. KPMG didn't deny the findings, said the authority knew its staffing plan at award, and is reviewing the procurement for policy violations.

What happens now?

Board Chair Stephen Kawa called for an independent inspector general investigation into the contract and billing practices. Unlike journalists using the California Public Records Act, the watchdog can compel internal records — but findings and corrective action could take months.

The IG has also warned the project could run out of money by the end of 2027 without new financing.

Both consultants at the center of the reporting are leaving the program, the authority confirmed: Prate "is transitioning off the program" as principal in charge, and Butzin's "work is also wrapping up."

In announcing the departure, Kawa said Newsom had appointed new board members to strengthen accountability. "Californians deserve a project they can trust, and the governor will continue to insist on that from everyone working on it," Kawa said.

Stephenshaw's inbox is clear enough: investigate or enforce the contracts, recover any improper payments, and decide whether executives' proposed changes to financial-consulting management — which could reduce outside oversight — survive scrutiny.