Audit sparked by Standard investigation finds tax official steered $10M contract to friend

San Francisco’s chief assistant treasurer steered a $10 million contract to manage billions of dollars in business taxes to a technology company led by her friends, according to an audit conducted by the city controller’s office, San Francisco’s fiscal watchdog.The independent investigation verifies reporting (opens in new tab) by The Standard last year, which led the office of the treasurer and tax collector to place Tajel Shah, the city’s chief assistant treasurer, on paid leave. Shah left city employment in November.The report describes a staffer who was allowed to put her thumb on the scale to help a family friend benefit from a city contract, buttressed by a lax staffing culture in an obscure office that oversees billions of dollars.Shah’s actions created the appearance of a “pay-to-play” business tax system, auditors wrote.Whistleblowers came forward last year alleging Shah had personal relationships with Roque Versace, then chief revenue officer at Mechanical Orchard, which describes itself as an “AI-native technology company.”Jose Cisneros, head of the city’s treasurer and tax collector’s office, requested the independent audit. San Francisco City Hall. | Source: Camille Cohen/The StandardIn a summary of the report sent as a letter to the treasurer and tax collector’s office, auditor Mark de la Rosa of the city controller’s office described the process of awarding a contract to Mechanical Orchard as “improper,” saying repeated decisions were made to help the company develop the highest-scoring proposal, even though bidding was supposed to be neutral.The office of the treasurer and tax collector’s “solicitation process was compromised by an undisclosed friendship between the former chief assistant treasurer, Tajel Shah, and the former chief revenue officer of Mechanical Orchard,” de la Rosa wrote. “Staff managed both procurements in ways that unfairly benefited Mechanical Orchard.”Supervisor moves to freeze $9M for Cal Academy after Standard investigation‘No idea what she’s doing’: Staff of SF’s disaster department turns against bossMechanical Orchard was in talks to obtain the contract to help manage $2.6 billion in city business taxes for two years, only to abruptly walk away from the process. The city controller’s audit linked Mechanical Orchard’s decision to halt pursuit of the contract to The Standard’s reporting.“It withdrew after The Standard contacted them for comment,” the auditors wrote.

De la Rosa said Shah allowed Mechanical Orchard to bid on the business tax system without sharing the results of the company’s work with all proposers, a normal course of business done to ensure equal information. She later developed a scope of work for the bid that closely mirrored Mechanical Orchard’s own project recommendations, nearly guaranteeing its success in pursuing the contract.Shah’s family may have benefited from her actions, the auditor wrote, after a subcontractor for Mechanical Orchard hired her niece. While the report notes that Shah denied any wrongdoing, the auditors found email messages showing she contacted Ratio PBC’s CEO directly to thank him for his firm’s work on the city project before asking if she could connect him with her niece.Seeking a job for a relative from a prospective vendor is “inconsistent with the high standard of conduct” required in public procurement, the auditors wrote.City controller auditors found that Shah “abused her position’s authority,” and while the treasurer’s office could not have prevented all of her actions, “it could improve controls to prevent or detect such actions earlier.”In particular, the auditors said, the treasurer and tax collector’s office has an organizational structure without checks and balances, blocking staff from raising concerns.The office has reorganized its leadership in an effort to prevent further abuses of power.In response to the audit, Treasurer Jose Cisneros wrote a letter to the city controller auditors saying he accepts the findings of the report.“The conduct described, directing staff to manipulate a competitive procurement process to benefit a personal associate while concealing that relationship, was wrong,” he said. “It violated the city’s ethics and procurement policies and the values this office holds.”The treasurer and tax collector’s office declined to comment beyond its response to the city controller’s office.