Federal investigators have apparently closed their investigation into business practices at the San Diego Association of Governments without filing any criminal charges, agency officials say.
The decision by federal prosecutors in San Diego was announced by the subject of the investigation, the regional planning organization known as SANDAG. It was neither confirmed nor denied by local Department of Justice officials.
“SANDAG is pleased to report that it has been notified by the U.S. Attorney’s Office for the Southern District of California and the FBI that the federal investigation has been concluded, and that no federal criminal charges will be filed against the agency or its employees,” SANDAG said in a statement.
SANDAG declined to say how it was notified, or provide any records or corroboration of the federal government’s decision to close its case. An aide to U.S. Attorney Tara McGrath said the office would not discuss the investigation or the SANDAG announcement.
“We do not confirm or comment on the existence of criminal investigations,” spokesperson Kelly Thornton said by email.
The investigation was first reported by The San Diego Union-Tribune in March, after SANDAG officials formally alerted staff to the probe and advised anyone who might be contacted by the FBI to cooperate with investigators.
While details of the federal case were never disclosed, SANDAG said the investigation apparently focused on its contracting practices.
“Although SANDAG was not provided with complete information about the nature and scope of the investigation, we understand that it focused on the contracting activities of SANDAG, and whether those activities had violated federal law,” the statement said.
The $1.3 billion planning agency outsources tens of millions of dollars worth of services every year. According to multiple reports by the SANDAG independent auditor, the agency relies too heavily on outside contractors and too often fails to properly monitor its vendors.
The criminal investigation apparently was initiated after the agency last year publicly acknowledged serious lapses in the toll-collection system assessing drivers along the 10-mile section of state Route 125 formerly known as the South Bay Expressway.
SANDAG documents and court records show the agency learned about failures within the toll software in 2017 but did not inform the board of directors until late last year.
Multiple SANDAG board members questioned the scope of the Department of Justice investigation, largely because they were never interviewed by the FBI about the organization’s contracting practices.
“I wish they would have spoken to all of us,” said one board member, who asked to remain unnamed because they are not authorized to speak publicly about agency business. “I am a little concerned about the depth of the investigation, because I’m not sure who they interviewed.”
The failed tolling software from contractor ETAN Tolling Technology came to light last fall, after a newly hired finance director refused to sign off on official financial statements that she said contained inaccurate data.
The finance officer, Lauren Warrem, was fired and is now suing the planning agency.
SANDAG also faces a class-action lawsuit filed by plaintiffs who claim they were wrongly billed for using state Route 125 or wrongly issued fines.
According to SANDAG, executives learned some seven years ago that ETAN Tolling software could not properly account for charges and penalties assessed to drivers on the 10-mile stretch of state Route 125. The ETAN system also could not properly reconcile charges for drivers on the pay section of Interstate 15 between San Diego and Poway.
The toll systems work was supposed to be managed by another contractor called HNTB, but that firm also did not ensure the software worked properly, SANDAG staff reports and the independent auditor said.
ETAN Tolling lost its contract earlier this year, but HNTB continues to consult for SANDAG.
Hasan Ikhrata, the longtime CEO who resigned at the end of 2023, told the board at his final meeting last December that he had not told directors about the tolling software problems because he was addressing the failures internally.
In the wake of Ikhrata’s resignation, Chief Financial Officer Andre Douzdjian and Deputy CEOs Coleen Clementson and Ray Major all departed from the planning agency. In April, SANDAG introduced longtime Caltrans official Mario Orso as the new chief executive.
“There was a lot of failure of communication under the former executive,” the SANDAG board member said last week. “I’m feeling encouraged with Mario so far, but it is too soon to tell.”
Orso has been implementing reforms to clean up the agency’s contracting failures, according to the SANDAG announcement.
“These measures will help to ensure that procurement practices are fair and competitive, staff are adequately trained to perform their responsibilities and that consultant resources are managed in line with contract terms and conditions and established budgets,” the statement said.
Even so, voters last month rejected Measure G, a half-cent countywide sales tax increase that would have generated hundreds of millions of dollars a year for future transportation projects across San Diego County. The measure was defeated by less than a single percentage point in the November general election.
Even though the federal criminal investigation appears closed, SANDAG continues to confront challenges in overseeing its contracts.
In October, the agency’s independent auditor issued a fresh report showing that SANDAG officials had withheld information from the board about the flawed tolling software.
The same report said the agency wrongly rushed to approve a no-bid contract to replace ETAN Tolling even though the new vendor did not meet SANDAG standards. As a result, SANDAG will have difficulty tracking and recording toll-road revenues, the audit said.
