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Federal investigation into Atascadero shifts into high gear

July 27, 2010

By KAREN VELIE

Federal agents from several agencies including the FBI and FEMA were in the city of Atascadero a few weeks ago asking questions about the Printery – the city’s former youth center – and searching through records related to the alleged theft of FEMA funds by the city of Atascadero, city officials said.

“He asked me when the last time the Printery was used actively by the city,” said Kevin Campion, the director of the Atascadero Skate Park who told the investigator that he was not involved in youth activities until a few years ago. “He was pretty aggressive.”

Campion said he called City Hall to report the agent’s question and was told that federal investigators were going through offices and interviewing staff there also.

A city employee, who asked to remain unnamed to protect his or her position, said City Manager Wade McKinney claimed the federal “audit” was a standard yearly event.

“Anytime any agency deals with FEMA, once the projects are completed, the office of the Inspector General inspects the project,” said Marcia Torgeson, Atascadero city clerk and assistant to the city manager. “The audits are routine and expected.”

In 2008, City Attorney Brian Pierik announced that FBI investigators were conducting a probe into activities at Atascadero City Hall. It was suspected that the inquiry centered around the city’s unconventional and questionable procurement of FEMA funds to build a replacement youth center at 5493 Traffic Way.

FBI public relations officials have declined to confirm or deny any investigation.

CalCoastNews first revealed the apparent sleight-of-hand by city officials in an early 2008 article. The story revealed how city officials bilked taxpayers out of more than $4 million in disaster aid to construct a replacement youth center under the guise the previous center had been rendered unsafe during the 2003 San Simeon earthquake.

Those officials alleged the historic Printery Building was the city’s youth center at the time of the quake, according to state and federal records.

However, at the time of the quake, the Printery Building, located at 6351 Olmeda Avenue, was not functioning as a youth center, but as a meeting hall for the Freemasons. The city’s actual youth center stood a few blocks away, at 5493 Traffic Way, the site of the city’s current skate park.

Responding to allegations of improper actions, McKinney developed his version of a “timeline” to bolster his claim that funds for the city’s youth center were acquired appropriately. McKinney said that city agencies were sponsoring events such as volleyball, cheerleading, “Mommy and Me” classes, and Friday Variety Nights at the Printery Building during the month of the quake.

However, during a city council meeting, Community Services Director Brady Cherry said the only ongoing activities at the Printery Building in December 2003 were Masonic meetings and private karate classes. Neither of which would qualify the building for taxpayer funded repairs.

In addition to attempting to procure funds for the Printery, city officials have requested federal and state aid to help repair the historic City Hall rotunda building because of damage they said was caused by the 6.5-magnitude quake, including sinking of the foundation, bricks that popped out of the building’s façade, new cracks throughout the building and water pipes that began to leak.

However, there is evidence in Atascadero – the recollections of former elected officials, city employees, and previous reports – that shows that some leading city officials may have purposely lied when they reported that the historic City Hall’s foundation substantially sank during the 2003 San Simeon earthquake.

The disinformation was part of an attempt to get more than $30 million in federal and state disaster relief funds. Of that, approximately $8 million was slated for repairing the un-level foundation.

In April 2010, FEMA denied a second appeal for funding for city hall repairs noting that local news publications had reported on the building’s sinking prior to the December 2003 earthquake.

“The city did not present conclusive evidence that differential settlement of the site was a direct result of the disaster,” said Michael Baldwin, public assistance officer for the California Emergency Management Agency in a letter to the city on April 14, 2010. “Therefore, FEMA denied the city’s second appeal.”

FEMA has agreed to pay for disaster related damage and for strengthening the masonry walls and the foundation of the city hall building.

“I have always believed that something unethical and probably criminal occurred with the acquisition of federal funds for the Printery,” said former Atascadero mayor Mike Brennler. “I hope these investigations bring those who are culpable to justice,”

Updated at 4 p.m. on July 27 to add a response from Marcia Torgeson, Atascadero city clerk and assistant to the city. manager.


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I guess I wanted to start by thanking CalCoastNews.com for the work they do.


I am happy to see that “people with authority” are now being questioned.


There are many different situations here on the Central Coast that are being looked at.

With the amount of ghosts in each of the cities closets, you would think everyone would be running around screaming “Trick or Treat!”.


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This is sort of like when Joey down in Brooklyn told Big Al they only got $50k from that heist. Yah Big Al came down and made sure Joey was doin thing, if yaknowudimean. bwahaha


thieves investigating thieves for stealing stolen money which originated in OUR pocket.


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Interesting that the LaPlaza theater was the greatest thing to hit town when it was presented by John Rousch to be combined with the entire block it had prior approval at the joint city council/planning commission meeting and formal approval at the planning commission meeting. Then when it appeared that the development of the entire project was not going to happen then the theater became an albatross.

Well what changed between the theaters? With or without the entire development of ECR you still had 2 theaters in town. This just smells more and more when you start thinking about. I wonder what was up with all of the back room meetings between that lady from the bank and O’Malley? What’s in it for O’Malley and his buddy Mckinnie?


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Probably no stinky conspiracy. However, it is right now a poorly timed business decision. Rousch has probbly got all his digits crossed because he is banking on an industry that is currently reeling – discretionary entertainment.


As far as the investigation by the FBI. There is too much work for special agents in the area of terrorism for them to be assigned to routine checks. If they are interviewing people locally, there is a potential crime. That being said – if one is found, nothing will come of it unless one or a few people profited. Worst case scenario for A-Town is that that have to repay money over a couple of decades.


Your and my taxes at work. Another reason not to visit Pismo North.


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I agree with your last paragraph. I don’t think anyone profited from the FEMA allocation, apart from the fact that the gov alway’s seems to pay inflated prices for everything to begin with. The Fed’s aren’t only asking question’s about the Printery. There have been questions about other projects mostly those projects where Gearhart was involved. Hard to say if anything will come out of all this but I do suspect that at this point, we have a big problem with the FEMA funds the city received. We may have to pay it back.


Yes, everyone loved the LaPlaza project when it was first unveiled, that includes me. Roush never submitted any detailed plans just a lot of flash, smoke and mirrors. Say what you want about free market driven competition and merchandising, the CC has a fiduciary responsibility to protect our city from blight. PROTECTION FROM BLIGHT, get it? A LEGAL right to protect from blight and give thumbs down to any project that threatens the stability of our local economy. The citizens have a vested investment in the Colony Square project. We needed that project and still do.


If you think that I believe our CC has a clue, your wrong. I supported Brennler, Beraurd and Luna. I don’t like what Clay and O’Malley’s hecklers did when they disrupted every meeting for an entire year or how they “tried” to recall the elected candidates. Talk about a group of screwed up idiots. Regardless, it’s time to move on and do the best we can with what we’ve got.


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Yea Cindy their really screwed up. Almost as screwed up as your 3 amigos who were so critical of Walmart that they casued it to be delayed for all these years. Great job liberals! You supported all the overpriced mom and pop stores for a couple of years at the expense of those of us trying to save a dime anywhere we can.


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I have been hearing a commercial on the radio this week, touting the City of Atascdero and it’s willingness to work with businesses to speed up and streamline the permiting process for tenant improvements and signage.

I find it ironic that the city is dictating who can have what type of business, then turn around and claim they want to encourage more improvements and new growth.

Too much overhead and not enough production…


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Ha, People have a lot of nerve talking about Atascadero after what SLO did to the Ernie Dalidido project. Talk about telling people what they can and can’t build. Worry about your own city and the ducks no one can feed because it makes them poop.


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Looks like O’Malley and Fonzi have become Siameese twins connected at the hip and Clay is a close cousin. The good old boys and gal have regrouped and it’s business as usual in Atascadero.


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It’s better than no business in atown due to your liberal friends.


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Right, it’s all my fault and that of my so called liberal friends. Atascadero has been going down the drain for the last 15 years while Luna cautioned against over building the residential sector without consideration for commercial development. The CC got in bed with the developers and built out the residential while burdening our abilities to provide the services necessary to support the residential growth. Then they decided to bring in a super Wal-Mart to save the day. WM was held up for 18 months, it would have taken 12 months for an EIR at the time anyway. The fact that they changed their plans many times even after they got a green light is all my friends fault though. WM will only transfer the majority of revenues from other merchants. Paso has a WM, lets see how many people drive up the grade to shop at our WM, good luck.


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liberals : destroying everything in their path since 1776.


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“liberals : destroying everything in their path since 1776.”


Um, dude, most of those who founded our country, especially those who wrote the Constitution and Bill of Rights WERE liberals. I know that most of them had slaves, some had “relationships” with their slaves, but even by today’s standards (regarding their politics) they would be considered LIBERALS. Thank goodness they did what they did.


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the damned liberals have stolen my sarcasm again,


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Zaphod if it weren’t for liberals, we would never see cleavage, a belly button, slim fitting provocative clothes, a bathing suit without stripes, Liberals have a better view, you should see my wife in her pajamas, liberals sometimes don’t wear anything to bed, conservatives need to pull their heads out of the buckets of water they are soaking them in and wake up to a world of vision.


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I find it ironic that Atascadero based it’s future on only residential growth and bouitique strip mall commercial development, for the building permit fees they brought in. No industry or commerce was allowed or pursued.

They allowed the building of many boutique commercial buildings that to this day are still vacant.They allowed uncontrolled residential growth out into the wild land interface where there are fee services or many roads not up to code. It gave public monies to rebuild certain areas of downtown which to this Day have a huge vacancy rate. It made demands on tenants or ownersto fit a mold that had nothin g to do with prosperity or profit, but everything to do with image.

Remember the green awnings and the quaint lamp posts?

It gave huge monies to the rebuilding of the Carlton Hotel and restaurants, which have not made it a go of it, if fact the restaurants are closed again.

It took a stand against Diamond Adultworld and forced them to move from their location downtown, today that building stands vacant.

Bringing in Walmart would have brought some minimum wage jobs and tax monies, but there is a Walmart just up the road.

The lack of industry, green, clean or otherwise would have brought in head of household jobs and much tax money. All the major players have decided to avoid Atascadero because of the less than welcome approach, even Weatherby Guns has pulled out.

Atascadero, since it’s inception has been anti business and industry. It has been pro residential growth, it is a bvedroom community for SLO, where are the jobs for those who live here? They are not in Atacadero, they all work in SLO…


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I appologise for any errors as I two finger hunt and peck and there is no edit feature here…


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During the day’s of O’Malley, Clay and Scaliese they would re-zone prime commercial property into residential. They were also allowing 10 to 1 lot splits for people like Gearhart. Both Luna and Pacas screamed all the way but no one was listening. Luna constantly cautioned them about the damage that the three of them were doing to Atascadero by giving the GOB developers a green light while they (the CC 3 and their friends) claimed personal property right’s trumped

zoning and the General Plan. What a joke. If the market hadn’t crashed they would still be doing the same thing considering that the majority CC are real estate agents.


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I heard an ad on the radio, that was about how to start your small business in Atascadero because they have simplified the process to make it business ready, just like they did for Hurst Financial , Kelly Gearhart , and all the GOB crooks like Robert M Jones, another citizen of the year, is heading, hopefully for the clink on current forgery and fraud charges! I guess they want to make it easy for small fraudulent businesses to defraud monies from the elderly.


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Here is something closely related to same arena (i.e. dealing with the city of Atas.) Along with this they are now getting themselves in a controversy over the competing movie theaters. Now that they have required La Plaza to do a study, if La Plaza doesn’t get approval and with the city involved in the other (i.e. financial backing) I see a HUGE conflict of interest lawsuit coming the cities way. Just my humble opinion.


Is it time to find some robe and an oak tree for the council?? On second thought no. Givin enough rope they are doing a good job of hanging themselves. IDIOTS!!


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I liked the robe idea, we will just give them all robes and name them monks then send their asses to china forever.


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If you look at the following sentence you will see rope. Obviously a typo. I’m not as perfect.


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BTDT, I knew that but, I liked it anyway and still do, we may differ, but, we both want one thing, their asses going to jail, agree?


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BTDT, It’s pretty much a no brainer to recognize that Atascadero can’t support 20 theater’s. LaPlaza attempts to project revenues based on drawing patronage from Morro Bay, Cambria and SLO etc. That theory is flawed. While that 25-30 mile radius may work in larger cities it doesn’t work in SLO County and it’s incorporated areas. People don’t like driving up the grade and they just plain don’t like traveling distances. They don’t even want to drive the 15 miles to Paso to visit Walmart or drive 4 miles from the North end of Atascadero to the center of town to visit the grocery store. Galaxy is close to completion and LaPLaza, as it has been presented is “if come”. The City Council has a duty to protect the city and Main Street from blight. A movie theater is a difficult structure to renovate for other use if it should fail and the likely hood of eventual failure of one or both theaters is high if both projects move forward, IMO. We sat with the Carlton Hotel in disrepair for many years, we don’t need to sit with an abandoned movie house and a half built project over an entire block of Main Street, that is, “if” LaPlaza even attempts to build the project out in it’s entirety. Their financing looks mighty shaky.


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You missed the mark entirely. Yes I understand the supporting of 20 theaters in Atas. is set for ruin and all the other ramifications you listed. My POINT was that here is another instance of poor judgement (financing one and then voting against other) on the part of the city council.


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You’re getting ahead of yourself BTDT. People aren’t following what’s going on, they think they know and they don’t. LaPlaza wants the CC to give him a CUP and he hasn’t submitted his detailed plans. He wants the CUP to guarantee him a movie theater without any plans to complete the rest of his proposed project or even the movie house plans. The CC has every reason to be concerned about all his game playing and special requests. They are saying that if he wants a CUP, he has least has to prove that the theatre is viable as a stand alone. Why should they allow LaPlaza to chase a viable, solid merchant out of town who is already near completion of their project? All his plans to develop a block on Main Street amount to nothing more than a pretty sketch on paper. No plans, no property acquisitions, just a pretty sketch.


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Again you missed the mark. Not getting ahead of myself at all. It is REALLY quite simple in two words. FREE MARKET!! I’m sorry but in the U.S.A. in which I live captilism works as free market. You let the market (i.e. buyers) decide. Is it always perfect? No but that is how it works. Paso at one point in the eighties had two theaters. Fox on Spring and the theathers out by Senior Sancho’s. Fox went belly up. Free market. Oh and PLEASE save me the, “oh and the Fox building is ugly”. Yes it is but living in Paso I support the decision of having let the free market work.


Same in Atas. LaPlaza has EVERY right to build as the others. It’s not a case of who is first. That again is not how captilism works. Not on the principle of FIRSTIES!


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Cindy-What do you mean people will not drive 15-25-30 miles for entertainment. The people of Atascadero have been doing it for years. And it appears that they will continue doing it for years with this city council’s actions.

Galaxy is not close to completion. Wade McKinney has been telling us everything is on schedule and then the PR woman for Galaxy told us there 4-5 months behind.

There is no future for Colony Square after the theater. They barely got it out of the ground and needed the city to give them $1.5 million. At least the LaPlaza would have planted the “seed” for further commercial growth along the ECR corridor.

What ever happened to American principals of free enterprise and competition. Where does the city council, except for Kelly, think they have the right to pick and choose which business comes to town based solely on economic competition?

And where is it their (city council) right to check into the financing of any project if they are not a partner to that project. There lies the answer in that they are partners with Colony Square which boils down to a conflict of interest and this whole thing makes the mud hole even stink worse that it already does. Amen


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I mean that Atascadero isn’t going to be the only place with a movie house. When a new movie comes out do you think Atascadero is going to be the only venue to feature it, or get it first? People will travel for a unique experience, but not to see a movie they can catch close to home; no doubt some will but in the the numbers that Roush projects, not even close.


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Atascadero obviously doesn’t need two theaters, but there could be a bride side to all this in the long run. If and when one of the theaters goes belly up, the space could most likely by renovated and rented for a special events / meeting / performing arts venue (akin to PR Event Center), and right downtown where it ought to be anyway. There could be enough parking and the neighboring businesses could benefit from the street traffic, as well. Thoughts?


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To the fraud capital of the united states of America,

“I hope these investigations bring those who are culpable to justice,”I also hope this!

Good old boys gone forever! Crooks, the lot of them.


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Interesting timing of this post. I say that only because just yesterday I ran into an old friend who is among Gearhart’s hardest-hit victims and he told me about some of the questions federal investigators have been asking him. My friend said he was kinda caught off-guard when some of the questioning strayed from Gearhart and targeted McKinney – and even went on to include what my friend knew about the Printery. I know some people are growing impatient with the delay in charges being filed, but rest assured, investigators are being diligent in collecting information and the delay is actually bad news for the likes of Gearhart, McKinney, Clay, O’Malley and the other crooks back up in here.


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I noticed that the story was updated, “Updated at 4 p.m. on July 27 to add a response from Marcia Torgeson, Atascadero city clerk and assistant to the city. manager.”


According to Marsha, (she added) – “Anytime any agency deals with FEMA, once the projects are completed, the office of the Inspector General inspects the project,” said Marcia Torgeson, . “The audits are routine and expected.”


Is it also expected that an FBI agent will seek out employees and ask questions like “He asked me when the last time the Printery was used actively by the city,” said Kevin Campion, the director of the Atascadero Skate Park”? That doesn’t sound like FEMA and the FBI were closing a file on a job well done and confirming that the funds were spent accordingly. A visit to the youth center and confirmation of the expense allocations seems more like a follow up visit and the intent to close the record.

Asking the type of questions that were asked of the director of the skate park (which wasn’t a part of the FEMA allocations) sounds more like an investigation to me?


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Asking those types of questions have nothing to do with closing a file. Those questions would be moot at the closing of a file, not even a consideration. They were re-visiting allegations of fraud. The story line is correct, this investigation has shifted into “high gear”, make no mistake about it.


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