A lucrative contract to help manage San Francisco’s $2.6 billion in business taxes has imploded and a top city manager has been suspended after The Standard launched an investigation into whistleblower allegations of conflicts of interest and bid-rigging at the tax collection agency.
Officials for the city attorney and controller’s offices confirmed they are initiating an independent review after San Francisco’s chief assistant treasurer, Tajel Shah, was placed on paid leave Thursday. The suspension came one day after Mechanical Orchard, a self-described “AI-native technology company,” walked away from a nearly $10 million contract to replace the business tax system used by the office of the treasurer and tax collector.
The fallout comes after The Standard requested interviews with Mechanical Orchard executives regarding whistleblower allegations about Shah’s personal relationships with company officials, as well as decisions she made in favor of Mechanical Orchard during two and a half years of discussions over contracts.
Treasurer José Cisneros, who had said Shah would not be suspended before city officials reversed course, acknowledged to The Standard in an interview Wednesday that the cancellation of the contract “is a setback for our office’s work to modernize our business tax system.” There is urgency in finding a new contractor, as the technology the city uses to process taxes for roughly 90,000 businesses could be inoperable in several years.
Regarding the potentially rigged bidding process, Cisneros said, “I intend to investigate and make sure we get to the bottom of how everything was done.”
Late last year, The Standard received a copy of a whistleblower complaint sent to the city’s Ethics Commission alleging that Shah failed to disclose her close friendship with Roque Versace, who at the time was Mechanical Orchard’s chief revenue officer. The complaint also alleged that Mechanical Orchard’s sister company, Ratio PBC, hired Shah’s niece just weeks before the city began accepting bids to replace its business tax system.
The Standard subsequently filed a public records request for all communications involving the city and Mechanical Orchard, resulting in the production of more than 1,100 emails and internal documents. A review of these documents and additional internal records appears to show that Shah, who oversees contracts and negotiations for the treasurer’s office, took steps that helped Mechanical Orchard win the bid to replace the business tax system.
“Equally concerning is Treasurer Jose Cisneros’s role in this matter. If he was unaware of Ms. Shah’s actions, it reflects a serious failure of oversight. If he was aware, it suggests complicity.”
Whistleblower complaint
More than a year of discussions between Mechanical Orchard officials and the treasurer’s office culminated in an open bidding process in the spring of 2024, in which companies submitted proposals and were ranked based on experience and pricing. Only the top three scorers were supposed to move on to the final round. One company finished in first place, three tied for second, and Mechanical Orchard finished third — or technically fifth, as a rival bidder, Vynyl, noted in a November 2024 letter to the city protesting Mechanical Orchard winning the contract. (Vynyl came in second overall in the final bidding process.)
According to the whistleblower allegations, Shah’s efforts helped Mechanical Orchard advance out of the first round of the competition, and she also instructed staff to revise the bidding process in order to reduce the scores of all finalists except Mechanical Orchard. An internal cost-assessment report obtained by The Standard shows that last-minute changes to the price of cloud infrastructure and IT support added roughly $1.7 million to proposals from all finalists — except Mechanical Orchard.
In an interview Tuesday, Shah said she was not aware that Ratio PBC had hired her niece, and only vaguely recalled that Ratio PBC was involved in the process that led to Mechanical Orchard’s winning bid. Shah said Versace was a friend but compared him to any employee for a company that has had longtime dealings with the city. However, a Facebook post from 2017 shows that Shah commented on a photo of Versace’s family, “My favorite peeps!”
Joan Harrington, a former director and current fellow at the Markkula Center for Applied Ethics at Santa Clara University, called Shah’s alleged dealings and lack of transparency throughout the contracting process “extraordinary.”
“At the very least, she violated her duty as an employee by not being transparent in the process, and it obviously had an impact,” Harrington said.
Mechanical Orchard was supposed to begin the work of replacing the city’s business tax system in January. However, this process has been mired in protracted contract negotiations that appear to be a mystery even to Cisneros.
“I’m not aware of a single reason [for the delay],” the treasurer said. “I didn’t inquire about a particular thing, because I don’t suspect there’s a failure here.”
The whistleblower complaint alleged that Cisneros’ leadership is “concerning.”
“If he was unaware of Ms. Shah’s actions, it reflects a serious failure of oversight,” the complaint states. “If he was aware, it suggests complicity.”
An email from Feb. 16, 2023, shows that Shah initially tried to help Versace and Mechanical Orchard get a contract to help manage the city’s property tax system by emailing Simone Jacques, who handles contracts in the assessor-recorder’s office.
“My friend and I were chatting about the company that he just joined,” Shah wrote to Jacques. “As we geeked out on old mainframe and new cloud issues, he told me about what his company does in that space. … I think it might be worth discussing your efforts with them.”
Shah then forwarded the email to Versace and wrote: “FYI.”
“At the very least, she violated her duty as an employee by not being transparent in the process, and it obviously had an impact.”
Joan Harrington, ethics expert
The assessor-recorder’s office did not contract with Mechanical Orchard, but Shah quickly pivoted to discussions with Versace about subcontracting with a vendor in her shop and replacing San Francisco’s business tax system. Shah and staff in the treasurer’s office shared numerous meetings and emails in 2023 with Versace and Ratio PBC CEO Eric Guroff.
Guroff would give Shah’s niece, Anjali Mehta, a glowing LinkedIn endorsement just 12 days after the June 2024 deadline for companies to submit proposals to replace the city’s business tax system.
Attempts to reach Roque Versace, who no longer works for Mechanical Orchard, were unsuccessful. Guroff did not respond to requests for comment.
In an email to staff this month, Shah wrote that she had been enlisted by Mayor Daniel Lurie to help handle contracting with OpenGov, a software company that was recently given a sole-source contract to overhaul San Francisco’s labyrinthian permit system.
The mayor’s office did not respond to a request for comment on Shah’s suspension or her role in the OpenGov contracting.