Lawsuit alleges Wallace intentionally mismanaged sewage plant
December 31, 2012
By KAREN VELIE
EDITOR’S NOTE: See a claim filed by six Oceano homeowners against South San Luis Obispo County Sanitation plant administrator John Wallace at the bottom of this story.
Six Oceano homeowners filed a lawsuit on Dec. 18 that claims sanitation plant administrator John Wallace’s financial motivations led him to intentionally mismanage the sanitation plant.
During a 2010 spill, sewage flowed into approximately 40 homes in Oceano. Unaware of allegations of mismanagement, none of the residents filed suits against the South San Luis Obispo County Sanitation plant before the six-month statute of limitations to make a claim against the public agency ran out.
However, that does not bar the homeowners from suing Wallace.
The Dec. 18 lawsuit filed by Santa Barbara based attorney Eric Woosley claims Wallace consciously elected to disregard public safety in an attempt to build his personal financial portfolio. Even though there is a two-year statute of limitations for filing suits against private contractors, Woosley said homeowners may still be able to seek reimbursement for their damages.
“Anyone wanting to sue should contact an attorney,” Woosley said. “The statute of limitations for a private contractor can be extended if facts had been concealed. It is conceivable people can sue now.”
In addition, Woosley asserts that there is no real financial separation between Wallace and his engineering firm the Wallace Group, and as such they should be treated as one entity by the court.
“There exists a commingling of funds, a failure of the shareholder to acquire insurance for the corporation despite a contractual duty to do so, and a complete sharing of the office and employees between the shareholder (Wallace) and the corporation (The Wallace Group), so as to make one the mere shell or conduit for the other,” the lawsuit says.
In late 2009, following reports of environmental abuses to local and state water authorities from sanitation district employees, the company that carried insurance for Wallace said it was canceling his coverage. Wallace’s failure to maintain errors and omissions insurance during the 2010 sewage spill could leave him financially responsible for the damage from the spill.
At a Central Coast Regional Water Quality Control Board hearing in September, another client of Woosley, former sanitation plant superintendent Jeff Appleton, testified that he had told both Wallace and the board prior to the 2010 spill that outdated wiring had led to two fires and needed to be repaired.
“Wallace would tell me, ‘We are continuing to look into it from an engineering standpoint,’ ” Appleton said at the hearing. “No work was actually done.”
In their complaint, water board prosecutors accused Wallace of not properly maintaining or operating the plant and failing to properly report incidents to regulators. Wallace is the owner and president of the Wallace Group, a private engineering consulting firm located in San Luis Obispo that receives from $50,000 to $80,000 a month for plant administration and engineering services. He, however, is not reimbursed for non-engineering related plant maintenance.
A month later, in October, the Central Coast Regional Water Quality Control Board voted to levy a $1.1 million fine against the district because the 2010 sewage spill was because of Wallace’s mismanagement.
The plaintiffs in the Dec. 16 claim are seeking an unspecified amount in punitive and compensatory damages along with court and attorney fees.
John Wallace Complaint: