Grand Jury finds conflict of interest with Wallace Group

June 3, 2011

John Wallace

By KAREN VELIE

Accusations that the administrator of a sanitation district in San Luis Obispo County’s South Bay has been funneling millions of dollars to a private engineering company he owns without proper oversight, has been validated by a San Luis Obispo County Grand Jury report that found a conflict of interest.

The South County Sanitation District provides sewer services to about 38,000 customers in Arroyo Grande, Grover Beach and the unincorporated town of Oceano. John Wallace is the chief administrator of the district and also owner and president of the Wallace Group, a private engineering consulting firm located in San Luis Obispo.

The Grand Jury found that the district board failed to recognize this conflict of interest and to eliminate or, at minimum, mitigate the conflict of interest and that Wallace’s contract had never been competitively bid as required by law.

During the 2009/2010 fiscal year, the report says Wallace and the Wallace Group received $836,000 for administrative and engineering services. At a similar size plant in Paso Robles, those costs ran under $200,000 during the same period.

During a 2010 interview with CalCoastNews, Tony Ferrara, Arroyo Grande’s mayor and the head of the district’s governing board, said that paying Wallace for engineering consulting, budgeting and administration has saved the district money.

“If we had to go out to bid on every job, the costs would go up exponentially,” Ferrara said. “It is not uncommon for a small group to use an engineering consultant because we don’t have the resources to handle the breadth of professional services.”

The Grand Jury also noted that Michael Seitz, the attorney for the sanitation district, said he did not believe there was a conflict of interest in having Wallace serve as administrator while giving contracts to his private firm. Seitz had instructed staff to not allow the public to view the minutes of meetings, older agendas or budgets without filing a written request, a violation of law.

Seitz’s wife, Sharon Seitz, heads the Wallace Group’s Human Resources department.

“It does not constitute a conflict of interest,” Seitz said during a 2010 interview with CalCoastNews.

Both Seitz and Ferrara have boasted during district meetings that an investigation by Richard Thomas of Thomas Consulting proved allegations by an employee that the district was paying too much for outside jobs were false.

“This investigation found no reason to suspect that (Wallace) or his firm would take advantage of the district in billing unnecessary work,” Thomas concluded in his report.

The Grand Jury said Thomas’ report was “ineptly performed.”

The Grand Jury recommends that the district board consider hiring independent management and that it evaluate and compare organizational and operational alternatives for the district.

“The Grand Jury finds the district in a state of denial regarding the conflict of interest and, as a result, the district has taken no effective steps to mitigate the conflict,” the report says.  “The Grand Jury concludes that, as a result, the board and the district are exposed to a number of financial, legal and public trust issues.”


20 Comments

  1. SLOJoe says:

    The Santa Maria Times covered the story. The reporter, who was allegedly offered a bribe by John Wallace over a year ago, wrote a story that makes it seem credible that the Grand Jury report is incorrect. http://www.santamariatimes.com/news/local/govt-and-politics/article_6fe9dede-8f40-11e0-842e-001cc4c03286.html

    Why would she continue to write positive articles about John Wallace, which she has been doing for more than a year, even though several government agencies have reported wrong doing?

    And as for the Tribune, they wrote a story based on the report the Wallace Group sent to the state water board attempting to explain the December spill, as if it was fact. I am sure they were happy they wrote it as confirmed by the state. Will they write a retraction when the state responds? Just because John Wallace is in the same rotary group as the Tribune’s Sandra Duerr, is that a reason to give him a pass?

    Like or Dislike: Thumb up 18 Thumb down 0

  2. snooky156 says:

    Jim Hill (Oceano) voiced his support for an investigation in mid-March. During that meeting, he called the district management “myopic”, to which Mayor Ferrara responded that “everyone should get comfortable” because he had a lot to say.

    At that point, we hoped that the Mayor was going to say something relevant. It was his chance to set things right. His statement was, quite frankly, short-sighted and mostly off-topic. After that, it got worse, when Mr. Nicholls said “I agree with pretty much everything the mayor said”. They offered peer review as a solution. That’s a sick joke.

    This district’s management is a quagmire. They are caught is a cycle of, “Oh, you caught us on that. Will you go away if we do something about it?” But, the public deserves as much of the blame as Wallace, Ferrara, and Nicolls. If Oceano’s new director does bring an investigation up for a vote in the coming weeks, it will be vital that the public (and TV cameras) show up this time.

    Like or Dislike: Thumb up 13 Thumb down 0

  3. slo_tgun says:

    Hidden due to low comment rating Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 4 Thumb down 41

    • MaryMalone says:

      Your post does little to refute the GJ’s report, and simply tries to pass the blame for John Wallace’s unmitigated fraud to the very folks who have tried to bring them to accountability but were impeded at every step by Wallace and his SSLOCSD board handmaidens.

      Did you not read the article, or the GJ report? There are major conflicts of interest, and the only accountability is what, when and where John Wallace chooses to give.

      Wallace has been caught in trying to hide the cost-over-years of projects by just dropping the previous years’ expenditures, giving an impression that the project is still under-budget when it is, in fact, NOT under budget.

      Two members of the board–Ferrara and Nicolls–fought against the third member of the board (who is no longer on the board) because the third member, Hill, wanted a real investigation and audit. The other two didn’t, and John Wallace didn’t, so they got a cohort of one of the group to do a sham “investigation,” which the GJ called “inept” and “not credible.”

      NOBODY in the administration/oversight of SSLOCSD apparently knows what a “conflict of interest is.” IMO, that makes them ALL ineligible to have anything to do with administration or oversight of a WWT facility OR oversight of a city.

      Tony Ferrara should be immediately recalled. The Lord only knows what fraud has gone on in AG under his watch if he is so uneducated and unable to learn on his own to the level of knowing the meaning and impact of a very simple phrase: “conflict of interset.”

      I don’t know why the GJ decided to give the SSLOCSD board members a free pass, but I am not pleased with APPOINTED oversight board members getting away with, at the very least, being co-conspirators with John Wallace.

      That leaves the good people of AG having to start from scratch with a recall of him. If he had been cited for the issues with which he has clearly aided with a coverup, it would be a lot easier. Now, we will have to educate the part of the public that has not been following this before we can effect a recall.

      Meanwhile, Ferrara is free to coverup in Arroyo Grande the same kind of fraud–and other kinds–of fraud he helped cover up in SSLOCSD.

      Like or Dislike: Thumb up 26 Thumb down 4

    • SanSimeonSam says:

      Slo_tgun,

      My guess is you are one of the high priced PR folks that Wallace brought in to do damage control on this situation. And boy is he overpaying you. Wallace is officially retired from the Wallace group and the only reason he might be at work on Sunday is to confer with the other criminals in his cabal, like Seitz and Ferrera to figure out how to keep themselves out of jail. Of course with idiots like O’shea as our DA and the other elected politicans on the payroll I am sure he wont go to jail.

      Like or Dislike: Thumb up 20 Thumb down 2

    • oto says:

      I agree with you that making an accusation of “fleecing” should be investigated and today, Sunday, I would be happy to drive to Wallace Group to view the facilities and get a handle on what it costs to run a wastewater treatment plant. Problem is, all records relating to the cost of maintenance are “at the plant,” and though they are public records kept in the normal course of the Oceano District’s business–as well as the public water treatment plant–they are not accessible to the public, and requests for those records have been denied, both by Wallace and the OCSD,–and the Davises, who used to be in charge of maintenance of water billing and delivery on the OCSD’s side of the town’s responsibility to provide and maintain that service. An objective analysis of whether Wallace Group is “fleecing” the public begins with a look a specific charges, like $57,000.00 for the cost of painting a roof. So, here’s your homework: what kind of paint was used; how much of it was required; who bought it; get copies of receipts; find out where it was bought; what was the square footage of the roof; what were the names of the persons who painted the roof; and how much were they paid for the work? These should all be public documents, accessible to the public during normal business hours. Since you are no idiot, and are speaking in behalf of Wallace, here is one way to vindicate him. Go get the documents, then post the information here, okay? Otherwise, you too, are an idiot and a hypocrit. Should you accept this mission, and the mission is successful, I will kiss your stupid ass. Forgive the perjoratives, but I am using your vernacular…

      Like or Dislike: Thumb up 19 Thumb down 2

    • RU4Real says:

      Right, slo_tgun! Wallace is no doubt sitting in his office right now attempting to write yet ANOTHER CYA LETTER! It’s not gonna help him THIS TIME!

      Like or Dislike: Thumb up 14 Thumb down 2

  4. Vallybear says:

    Why was it allowed to happen? Why, the buddy system was at its very best in this case. The group that is ‘the district’ knew they had a good thing going and as long as nobody stirred the pot, no one was the wiser. Unfortunately, two great employees of the district lost their jobs at the South County Sanitation District because they stood by their principles and reported(to those that listened) this jerk (Wallace) as doing something wrong.
    Wallace is also involved in the Sewer project in Los Osos. He has his finger in every sewer in the county, it seems.
    And in case you writers didn’t know – There is another Seitz (brother of the one at SCSD) who is the attorney for the Los Osos CSD.
    What cozy arrangements…..
    Also, why hasn’t the DA looked into this? Is his name Shea? Is he related to the developers who have done business in Nipomo and also in Florida? Does Wallace have a condo in Orlando, Fla? There is a John L. Wallace, approximate age 75, who is listed as owning a home in a Shea development in Orlando, Fla.
    Just asking…………..

    Like or Dislike: Thumb up 27 Thumb down 1

  5. SLOJoe says:

    It will be interesting to find out how many other government bodies Wallace and his Wallace Group are fleecing. He is involved in the Morro Bay Cayucos sewer fiasco.

    Also, he runs Avila’s sewer plant and he makes big bucks off AG. Any place involving Ferrara, pays Wallace the big bucks. He has called CalCoastnews illegitimate and not real news several times at AG board meetings, while speaking as mayor from the podium. He claimed all the reporting is incorrect. What do you say now Wallace?

    Why did he not do his job and protect the people instead of allowing Wallace to overcharge and under perform? And why was he so aggressive when news of Wallace’s conflicts and over billing were reported? Why did he not at least say he would look into it?

    I wonder if Wallace and Ferrara will start turning on each other? Time to step down Tony.

    Hot debate. What do you think? Thumb up 36 Thumb down 2

    • MaryMalone says:

      I would say “follow the Seitz.”

      This ain’t his first time around the buoy on this cruise.

      Like or Dislike: Thumb up 26 Thumb down 4

    • MaryMalone says:

      I love this quote from KV’s article:

      [[The Grand Jury also noted that Michael Seitz, the attorney for the sanitation district, said he did not believe there was a conflict of interest in having Wallace serve as administrator while giving contracts to his private firm. Seitz had instructed staff to not allow the public to view the minutes of meetings, older agendas or budgets without filing a written request, a violation of law.
      Seitz’s wife, Sharon Seitz, heads the Wallace Group’s Human Resources department.]]

      ———

      Shouldn’t Seitz be turned in to the California Bar Association? If he doesn’t know that situation constituted a “conflict of interest,” then it is far too dangerous for him to work as an attorney.

      Well-loved. Like or Dislike: Thumb up 42 Thumb down 4

      • RU4Real says:

        Good point, Mary Malone! Just goes to show you what an INEPT & CORRUPT attorney Mike Seitz is, he’s a real douche bag.

        Like or Dislike: Thumb up 19 Thumb down 3

        • MaryMalone says:

          ^1 ‘ed.

          ITA. I really do feel like writing to the state board and to advise them that a practicing attorney, Michael Seitz, has publicly admitted he does not think that a WWT facility Administrator, who has had a 25-year, un-re-bid or reviewed contract, has been also sending massive $$$ of work to a group he owns, the Wallace Group, has a conflict of interest, especially when the work is, the vast majority of the time, not sent out for bid.

          It is very dangerous to have an attorney who does not know such a basic concept as “conflict of interest” let loose on the people of California.

          Like or Dislike: Thumb up 18 Thumb down 5

  6. r0y says:

    …and why didn’t the GJ forward this case to the DA for criminal prosecution? Oh yeah, it’s no longer illegal to fleece the public coffers… just a “conflict of interest” (for the law?).

    Everyone get their hands out, the slapping shall begin momentarily.

    Well-loved. Like or Dislike: Thumb up 48 Thumb down 1

  7. Typoqueen says:

    Geez, why did it take a grand jury to figure this out? Those that allowed Wallace to be put in this position are just as much to blame either for sheer stupidity or by allowing him this open door to let him rip everyone off. What’s the difference between this and lets say a mayor hiring his own company to build a new city hall? Why the grand jury, why was this allowed to happen in the first place?

    Well-loved. Like or Dislike: Thumb up 52 Thumb down 3

    • MaryMalone says:

      ITA. I don’t understand why the GJ took the “gee, the poor feebs on the Board didn’t know it was a conflict of interest” approach.

      Come on. Who are they trying to kid?

      If they didn’t know that was a conflict of interest and they didn’t realize they should renegotiate a contract more than NEVER in 25 years, they should not be holding public office. In fact, they should be on Meals-on-Wheels, because they would not have the mental facilities to handle activities of daily living and could not be trusted to operate a stove or use a knife to make a sandwich for lunch.

      Like or Dislike: Thumb up 26 Thumb down 3

      • r0y says:

        Harsh, but understood. +1

        Like or Dislike: Thumb up 14 Thumb down 0

        • MaryMalone says:

          =)

          Sorry for being harsh.

          I have issues with people who have the power to effect good change and instead effect malfeasance…and then get away with it.

          Like or Dislike: Thumb up 19 Thumb down 1

      • RU4Real says:

        It’s way past time to get rid of Wallace & all his corrupt employees & cronies. Don’t wait another minute, GET RID OF WALLACE, NOW!

        Like or Dislike: Thumb up 16 Thumb down 0

        • whosays says:

          RU4Real; without the cooperation of the county employees and local goverment cronies, John Wallace or his employees would not have the ability to be corrupt.He could never run his shell game without helping others run theirs..

          Like or Dislike: Thumb up 0 Thumb down 0

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