Audit findings put Santa Clara council, former convention center manager at odds

When Santa Clara councilmembers asked City Manager Deanna Santana to find an auditor to look into potential mismanagement of the city’s convention center, officials already knew who would get the contract.

Public documents show that Sacramento-based TAP International submitted a “project approach” for the audit in 2018, nearly a month before the council ordered the probe of the convention center manager.

Two weeks after councilmembers approved an audit of the Silicon Valley Central Chamber of Commerce, then known as the Santa Clara Chamber of Commerce, a contract with TAP International was signed without a competitive bid process. Over more than two years, the contract ballooned to $287,093 and grew into three audits related to the chamber’s management of the convention center — all of which are being disputed by chamber officials, who allege the audits have inaccuracies.

City officials say they got a jump-start on hiring an auditor because councilmembers had more questions than city officials could answer during closed-door meetings. But a review by San José Spotlight revealed the company’s principal, Denise Callahan, had previously worked with Santana on another audit that was also under dispute, raising questions from some about a potential conflict of interest.

Santa Clara leaders failed to conduct a competitive bid process for the initial $83,620 contract, even though city rules require formal solicitations of three bids for contracts exceeding $50,000. Councilmembers approved three contract extensions, as the costs soared beyond Santana’s power to sign without council approval.

Deputy City Clerk Simrat Dhadli said the city bypassed a formal bid process because Callahan “has expertise in convention center performance audits” — a specialized skill. Santa Clara’s city code allows skipping a bidding process for “specialized services from licensed professionals” or contractors providing a service few others offer.

When asked what skills TAP International has that other auditors — including those that have audited convention centers in San Jose, San Francisco and San Diego — did not, Santa Clara officials pointed to Callahan’s experience in auditing convention centers. The city also needed to move quickly because payments to the chamber to manage the convention center were suspended in the wake of the mismanagement concerns, Assistant City Manager Ruth Shikada said.

“We needed to move fast, we needed to tap somebody that had convention center experience and we wanted to tap somebody that could deliver on the audit,” she said.

Previous working relationship

Callahan worked with Santana more than a decade ago on an audit in San Jose over whether the Police Department misclassified complaints about officer misconduct. Santana was the San Jose deputy city manager at the time.

San Jose Independent Police Auditor Barbara Attard in 2007 found that officers had downgraded complaints to inquiries to inflate the department’s positive statistics at a time when San Jose proudly called itself the “safest big city in America.” The San Jose City Manager hired Macias Consulting Group, where Callahan worked, to analyze the findings.

Callahan’s analysis contradicted the audit done by Attard, who later called Callahan’s report “not accurate or complete,” in a memo to councilmembers.

San Jose Mayor Sam Liccardo — who was then a councilmember — pointed out during a heated public meeting that Callahan’s report didn’t address the “heart” of Attard’s audit.

“I’m concerned that we missed the big issue that everybody here is wondering about, which is: Is there a misclassification?” Liccardo said. “Why didn’t you address this issue?”

Callahan responded that her company was not “asked to look at that.”

Attard told San José Spotlight that she believes Callahan “was hired just to have some kind of voice of authority to come in and undermine my report, but not look at the facts.”

Attard was not reappointed as San Jose’s Independent Police Auditor, due to changing leadership and city politics, she said.

Callahan did not respond to a request for comment.

More than a decade later, officials from the Santa Clara Chamber of Commerce — now the Silicon Valley Central Chamber of Commerce — have raised red flags about the TAP International audits, which allege the organization owes the city hundreds of thousands of dollars and mismanaged millions more.

Nick Kaspar, president and CEO of the chamber, told councilmembers in 2018 that the past professional relationship between Santana and Callahan should have been disclosed before Callahan was hired without a bidding process.

“We believe this threatens the independence of this audit,” he said. “The City Council and the public was never given the opportunity to decide for themselves if this was a conflict of interest.”

But Santana said Callahan was hired by her boss in San Jose and the two women haven’t spoken in the 12 years between the audits. She added in a statement to San José Spotlight that hiring a consultant she’s worked with before wouldn’t qualify as a conflict of interest, as she had nothing financially to gain from the decision.

“The rumblings by individuals who favored the old way the Convention Center was managed are using this false claim to deflect from what TAP International’s audit found,” Santana said in the statement. “The audit findings are serious, revealing financial mismanagement, questionable accounting practices, and misuse of government resources by the Chamber.”

Mayor Lisa Gillmor told Kaspar in 2018 that if he believed Callahan’s hiring was a conflict of interest, the chamber may not “know what a real conflict of interest is.” Callahan also called the accusation a “continued pattern to distract from the audit findings in the report,” during the 2018 council meeting.

Litigation and dispute

After Callahan’s audits found the convention center manager owed the city hundreds of thousands of dollars, councilmembers vowed to get every penny back. In December, the council voted to authorize litigation against the chamber to recoup $682,950.

Kaspar says he provided the city documentation of errors in the audit the month before, but got no response.

“I don’t believe that this audit accurately represents what the chamber owes,” he said. “We found … some errors in the audit that raised concerns about accuracy.”

Some councilmembers said they had very little or no time to review documents from the chamber before voting to initiate litigation. Officials say lawmakers were given copies of the responses during the meeting.

Councilmember Karen Hardy said she “briefly” saw the chamber’s responses to the audit when she asked for them. Councilmember Teresa O’Neill said she didn’t remember seeing the chamber’s response before voting to authorize litigation, but she believed City Auditor Linh Lam would provide a recap soon.

O’Neill added that the vote for litigation was simply to advance the process, calling the prospect of a lawsuit “a very last resort.”

The most recent audit details about five years of expenses paid by the city as part of the chamber’s contract, including pricey dinners. Out of nearly $312,000 in credit card charges reviewed, $52,940 was determined to be either not allowed, questionable or not verifiable. Kaspar has pushed back on some of those numbers.

Shikada, the assistant city manager, said the city is now “triple-checking” the findings of the audit to verify its accuracy.

Preliminary information released

During the audit process, Kaspar’s organization was caught off guard at least twice when the city publicly released early audit findings to the chamber’s business members before chamber leaders had seen the results.

On June 26, 2018, days before the council would decide whether to renew the chamber’s convention center contract, city officials presented preliminary findings showing the potential mismanagement of funds by the chamber. Officials made the information public, Shikada said, because the findings required immediate disclosure.

Kaspar said the chamber was left in the dark about the findings. When he asked Callahan to discuss the report, he was told it was not ready — but she apparently wasn’t aware of the city’s public presentation and requested a copy for herself.

On Aug. 15, Santa Clara leaders again released the findings in a letter to local businesses and chamber members, alleging millions of mismanaged funds.

“The chamber was accused of mismanaging $37 million, which ended up not being the case,” Kasper said. “Businesses and members were concerned, so it definitely was detrimental to the chamber.”

A city spokesperson said officials sent the letter to clear up “misinformation being circulated.”

Digging for documents

Kaspar and Shikada both acknowledge the chamber didn’t provide all the documents requested by the city and the auditor.

Chamber officials, however, said some deadlines to submit documents were unrealistic. In one example, Kaspar responded to a document request showing evidence of how it would be impossible to print the number of documents requested by the city’s deadline. The chamber ultimately received an extension.

Shikada said the timeline was not meant to be unfair.

“From their perspective, I can see why they would think it might be unrealistic because they had to gather those things, but our expectation is that you should have them and they should be organized so you should be able to produce them,” Shikada said.

To date, no lawsuits have been filed over the money, both parties confirmed. The city and the chamber told San José Spotlight they intend to work with one another to find a resolution.

Contact Janice Bitters at [email protected] or follow @JaniceBitters on Twitter.