John Wallace left the South San Luis Obispo County
Sanitation District in 2013
New report claims Wallace mismanaged the district over his
27-year career
It also claims Wallace used his position to gain work for
his company, the Wallace Group
Blog note: this article references a 2011 San
Luis Obispo County Grand Jury report that investigated alleged
conflict-of-interest issues in the sanitation district. In 2013, the California
Grand Jurors’ Association recognized that report with the association’s
Excellence In Reporting Award.
An independent
investigation of the South San Luis Obispo County Sanitation District concluded
that former administrator John Wallace mismanaged the agency for close to a
decade, prompting its board of directors to unanimously vote Wednesday to send
the report to the county district attorney, the state attorney general and the
FBI to review for possible criminal charges.
The investigation also
found evidence of a conflict of interest and said Wallace misused his position
to hire his own private company to do engineering and administrative work for
the district.
The district board
authorized the investigation last year in an attempt to put to rest lingering
public concerns over the rash of controversies that has plagued the district
over the years. In addition to the conflict of interest, concerns included
lawsuits filed by former employees, notices of violation from state regulators
and a massive sewage spill in 2010, for which the district was fined $1.1
million. The district is appealing the fine.
“I’m very happy to see that
it’s finally come to fruition,” Arroyo Grande Mayor Jim Hill said on Tuesday,
before the sanitation board’s vote. “I’m glad that we are finally able to get
this out there for the public.”
Hill is one of three
members on the district board — with Grover Beach Mayor John Shoals and Oceano
Community Services District director Matthew Guerrero — and has long been
critical of management practices at the district.
On Thursday, Wallace told
The Tribune he was saddened the board would not give him more time to correct
“discrepancies in the report and factual information,” before sending it to law
enforcement.
“Obviously we are
disheartened because we thought it was a fair request to give us more time,” he
said. “This report took about seven months to prepare, and we just got it on
Sunday.”
Wallace said he and his
legal counsel will review the report over the next few weeks and present their
findings at the next sanitation board meeting.
The report, prepared by
Knudson and Associates, claims Wallace mismanaged the district during the
latter part of his 27-year tenure and used his position as a district
administrator to gain work for his company, the Wallace Group.
The 124-page report
includes an in-depth study of the district’s financial operations between 1986
and 2013, as well as interviews with more than 30 individuals involved in the
district and the Oceano Wastewater Treatment Plant’s operations during that
time span. Approximately 23 pages of the report were redacted from the
published version because they contained sensitive plant and personnel
information.
Much of the remaining
report focuses on the district’s relationship with Wallace’s firm, the Wallace
Group, which provided engineering services to the district under one contract
for 25 years — an arrangement the San Luis Obispo County
Grand Jury in 2011 also criticized as a conflict of interest.
According to the report,
between 1999 and 2009, the total hours billed to the district by the Wallace
Group for administrative and engineering work increased from about 81 hours per
month to more than 663 hours per month, and monthly invoices increased from
$3,600 to a high of $70,000. The number of people employed by the Wallace Group
charging hours to the district also grew from seven in 1999 to 28 in 2010.
During that time, Wallace was the only person with the district, besides the
board of directors, who reviewed and approved his company’s billings to the
district for administrative and engineering work, the report states.
The tangled relationship
included Wallace having business cards made for his Wallace Group employees
with the district logo on them and had the district pay for the cards,
investigators found.
“In our opinion, there was
a clear lack of controls related to the accounting of the district’s payments
to Wallace & Associates and the Wallace Group, and an apparent conflict of
interest in Wallace as district administrator approving billings to the
district for administrative, engineering and other services provided by the
Wallace Group,” the report says.
The investigation also
found that between 2003 and 2012, the district’s overall revenue declined while
expenses grew steadily, so that it was operating at a deficit each year during
that same time span.
On Thursday, Wallace said
the hours billed to the district by Wallace Group employees increased in the
latter part of his tenure because of a number of large projects and regulatory
items started at that time. He said more information will be included in his
response to the sanitation board.
The Knudson investigation
additionally cited two incidents in its conclusion that Wallace misused his
position as district administrator to obtain work for his company:
According to investigators,
in 2009 Wallace told an administrator with the state Department of Parks and
Recreation that the sewage dump station at the Oceano Dunes State Park
Recreation Area violated discharge regulations, and suggested the department
hire the Wallace Group to draw up new engineering plans.
The administrator pointed
out that the state department had its own engineers. The report stated that the
administrator “recalled at the meeting (with Wallace) that she felt Wallace was
threatening to close down the dump site if she didn’t use his firm.”
Wallace subsequently denied
the dump station permit but the state continued to operate it anyway.
In the second case, the
owner of Yo Banana Boys, a business servicing campers at Oceano Dunes, wanted
to build a sewage dump station in 2008 as one its services. The owner told
investigators that Wallace suggested using the Wallace Group to design the
station while the owner was pursuing a discharge permit from the district. The
owner declined, but after he obtained the necessary permits and opened the
station in 2009, Wallace shut it down a month later “without giving a real
reason,” owner Dave Kraus told investigators.
In 2013, Kraus met with
John Clemons, who succeeded Wallace as acting district administrator, and
Clemons authorized reopening the dump station. Clemons told investigators that
in both cases, he saw no reason why either dump station was denied a permit.
On Thursday, Wallace said
the two incidents were “a huge misunderstanding,” that he would explain in his
response to the sanitation board.
“I feel confident that we
will provide information that will exonerate a lot of this,” he said.
District board members and
the public reviewed the investigation at Wednesday night’s meeting over several
hours.
“What happened here is Mr. Wallace did what
Mr. Wallace could get away with,” said Arroyo Grande resident Beatrice Spencer.
“He took advantage of people who were not paying attention.”
Wallace was not present at
the meeting, but Wallace Group business development and marketing manager Chris
Gardner spoke on his behalf, to ask the board to continue the discussion to
another meeting.
The board instead directed
staff to forward the report to District Attorney Dan Dow and other law
enforcement agencies to determine if charges should be brought against Wallace.
The board also said it would be open to hearing Wallace’s response during
public comment at its next meeting.
“I
think we all have really strong feelings, and I echo the sentiment of the
public regarding this particular report,” Guerrero said Wednesday night. “A lot
of it — I read it a couple of times — a lot of it was very troubling.”
January
21, 2016
The
Tribune
By Kaytlyn Leslie
No comments:
Post a Comment