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State finds fraud and deception at sanitation plant

January 27, 2011

John WallaceBy KAREN VELIE

After a lengthy investigation, the State Water Resource Control Board has determined that the director of the South San Luis Obispo County Sanitation District operated the plant “using fraud and deception,” according to a letter of proposed disciplinary action.

Specifically, the state’s investigation revealed that plant manager Jeff Appleton instructed staff to manipulate effluent release numbers in order to make it appear the plant was operating in compliance with pollution and discharge requirements. The state is proposing Appleton’s plant operator certificate be downgraded, which would make him ineligible to manage the plant.

Four of the plant’s six operations employees told the state that Appleton either asked staff to throw away poor samples or had written policies prohibiting testing samples at times they were likely to be out of compliance.

Appleton declined to respond the state’s allegations.

John Wallace is the chief administrator of the district, which provides services to about 38,000 customers. He is also owner and president of the Wallace Group, a private engineering consulting firm located in San Luis Obispo that receives about $80,000 a month for plant administration and engineering services.

Plant supervisor Scott Mascolo and former laboratory technician Devina Douglas said they told Wallace of the plant’s failure to comply with rules regarding updating operating manuals, not taking gifts from venders and manipulating testing more than a year ago. After Wallace made no changes, both Douglas and Mascolo reported the alleged abuses to state regulators.

Douglas was let go not long after she informed regulators she had been told to manipulate samplings. She filed a lawsuit against the district on January 11.

Mascolo has been on paid administrative leave for over a year. He is battling the district’s attempts to fire him.

At the same time, the district, an agency which provides sewer services to Arroyo Grande, Grover Beach and the unincorporated town of Oceano, has come under fire for allegedly under-reporting the amount of raw sewage spilled during heavy December rainstorms.

Two of the Sanitation board members have helped keep the public in the dark by not informing the city councils they represent about troubles at the plant. Bill Nichols, a Grover Beach councilman, sat in while investigators interviewed Appleton in June. However, Nichols did not report any of the districts problems to the council and when he gave his report on the district he said things were fine.

Tony Ferrara, Arroyo Grande’s mayor and a sanitation district board member, also failed to mention the district’s pending lawsuits and state investigations when he gave his sanitation district update to the Arroyo Grande City Council.

At a recent sanitation board meeting, Ferrara and Nichols rebuked a suggestion by the board’s third member, Jim Hill, to no longer allow Wallace to serve as the district administrator while his private engineering firm is contracted to do work for the district.


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Why not just bundle ALL this ongoing nonsense and send it to Gov. Brown, to show him what corners to

look into to save money. Let’s get some of this money back now!


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From the Sanitation Districts website @ http://www.sslocsd.org Keep in mind Wallace is the webmaster and source of information on this misleading bundle of lies otherwise known as “FAQ”


Why was the District issued a Notice of Violation (N.O.V.) by the Water Board in July 2010?


The NOV focused on two main areas: (1) the need to better maintain and organize the required operational and maintenance documents, and (2) the District’s water sampling methodologies needed to be better documented to meet the Water Board’s requirements.


What is the District doing in response to the N.O.V.?


The District has been diligently working with the Water Board since May 2010 to resolve the issues raised in the N.O.V. The effort to update our O&M manual had already been previously identified last year and is now nearing completion. Sampling changes have already been made and implemented.


It should read something more like CPO Appleton attempted to force his staff perform illegal manipulating samples and times to avoid a violation of their permit. Directly after this was brought District Administrator Wallace’s attention, Appleton and Wallace teamed up to do everything it took to hide the truth, intimidate those upholding the law, threaten and retaliate against them and eventually terminate one of the employees,the other still undergoing their continued retaliation while on suspension.

Once the employees realized their efforts to convince Wallace to look at the facts and discipline Appleton over his misdeeds were wasted effort, they were left no choice but to file a in depth report with the Regional Water Quality Board detailing years of illegal activity which resulted in an investigation in which multiple charges were made against the District as well as Appleton the plants CPO.


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I would question anyone that the OCSD hires. On the hand, I also feel sorry for anyone the OCSD hires. The city manager is horrible and not be trusted. The last attorney they had was good but they bullied him relentlessly. The OCSD continues to make one bad decision after another. So who knows about Wallace, he works for the OCSD so that automatically makes him suspect.


I wonder if anyone knows what happened regarding the latest OCSD drama. Lucey used to be BFF with the other board members. All of a sudden they’ve turned on each other and she’s on the outs. They are punishing her by putting her on silly committees and they were going at it the other night. Does anyone know why?


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I think this group retaliates against any member that isn’t lock-step with the rest. Remember Dean and Dahl? Montemurrow may be next, but oh yeah, they gave him a raise and a 5 year contract.


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I can’t believe that they hired Monty in the first place. As soon as he got hired he turned around and hired the person that he used as a reference to get his job, they ole ‘you scratch my back’ thing. Then he spent something like 290,000.00$ on a new computer system a few years ago without getting other bids,,,but there’s still no computer system, wonder where that money is. Paid big bucks for an audit right after he got in office, still no audit, then he brags every meeting about how he saved 9.99$ on paper or paper clips. But Lucey was really in tight with them. I remember when Lucey was running for her seat in the elections, Hill had a big sign on his car for her. Hill and Lucey ganged up on Dean and Dahl constantly. I’m really surprised that Lucey is on the outs with them. They were all buddies just a few weeks ago. I was really surprised at this weeks meetings that things had changed so fast between them.


I don’t even live in Oceano but I watch those meetings every week, they are just amazingly dysfunctional. Anyone that hasn’t seen them needs to watch (Sat. 6:00PM ch. 21), it’s the best thing on TV, would make a great sitcom or reality show, beats Jersey Shore.


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I just watched the OCSD meeting that you suggested. UNBELIEVABLE! Lucey may be on the right side of the water issue, but never have I witnessed a member of a committee act as she did…..but maybe the others, including an audience member, deserved it?


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Much to do about nothing. Another round of bureaucrats lining up at the trough. By the way, that’s precisely where John Wallace made his connections, as a bureaucrat.


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Heres a quick list of facts to consider.

1. March 2009, the former Shift Super is placed on suspension pending an investigation into misdeeds which are proven untrue by coworkers.

2. Apr 2009 Appleton orders Douglas, the now fired grade IV lab tech who holds state and national CWEA awards to partake in illegal activity, she refuses. Wallace and Appleton are confronted by Mascolo and Douglas with the concerns of illegal activity, Douglas and Mascolo are singled out and the retaliation begins. Wallace, Ferrara and Nicols turn the accusations on the two employees who refuse to commit crime, they terminate one saying its economic and out sourcing the lab duties will save tens of thousands annually. They continue hope to outspend Mascolo with your tax dollars on their lawyer fees in hopes Mascolo will go broke, give up and quit .

3. July 21 2010 The District is issued a NOV from the State water Quality Control Board, Wallace and Ferrara lie in a public forum telling us its handled and nothing to worry about, just a few minor details related to documantation, even the Districts website who Wallace serves as webmaster for misleads the public in the NOV and its severity .

4. Mascolo files a complaint with the Sheriffs dept there’s stealing of public monies taking place. Wallace for decades has allowed a BBQ fund as an unwritten policy. Funds are gathered from formally declared surplus items and scrap iron from old pumps and valves which are recycled, maximum agreed amount to keep in this Wallace approved hidden/gifting of public funds account is $150. A couple employees get greedy and now its BBQ fund gone wild, and Rodriguez and Appleton lie to Wallace and the Board about the actual amounts returned which is $700 collected in August of 09. Although Wallace himself and several of his staff have indulged in the BBQ festivities, he now claims he knows no details of this BBQ fund and its something Appleton and Mascolo arranged without his approval. Wallace turns the reporting of this stealing of public funds on Mascolo insisting his filing of the report to the Sheriffs dept was a false accusation against another employee. this other employee, Rodriguez is actually the individual who collected the funds, signed his name and put his home address on the receipts, then hid them in his desk drawer and not the BBQ fund box.

5. The Sanitation Dist has their certification by ELAP certification revoked because they fired the lab tech and now have no competent employees who can legally perform reportable tests required under their NPDES permit.

6. The District has a massive sewage spill which along with rain floods some 30 homes with human waste because of an oversight by Wallace who is the Districts $80,000 per month engineer. After water entered ground level electrical conduits which then migrated into the plants under ground influent pump motors shorting the entire system out and rendering it useless. After literally hundreds of thousands of your dollars in FEMA repairs, upgrades and the purchase of a massive stand by pump to prevent a outage if the Levee breeches and a hole in the round leading into a 480 volt pump is overlooked? Its called gravity Mr. Wallace.

Various individuals including the manager of the OCSD say Wallace is full of what the plant treats with his 384,000 gallon spill estimate. The regional Board disputes the numbers and Wallace and Zhender, Wallaces COO, for the 6th time contemplate another power point presentation about how much really spilled, how about giving one on why it spilled instead? Fines can run up to $10 per spilled gallon, More of your tax dollars at work folks when the Regional Board probable fines .

5. Douglas files a lawsuit on the District and Appleton for retaliating against her. The following Board meeting does not indicate this nor was any public notification made. What are we hiding here folks?

6. The SWQCB cites Jeff Appleton for violation of the Calif Code of regulations title 23,chapter 26 3670 ET SEQ and Calif Water code division 7 chapter 9 section 13627 ET SEQ, they revoke his Grade III operators certificate and issue him a grade II for a year, he now can no longer legally serve as plant CPO yet Wallace does not remove him from his position placing a documented liar in charge of our oceans health and your good health. Appleton begins to retaliate against those Wallace and Appleton haven’t terminated yet and are still at work. The burning question, will Wallace and the District defend Appleton’s and his appeal to the charges using your tax dollars to defend him from this breaking of the law and violation of public trust?

This scratches the surface folks, there’s documentation of Wallace being notified of the illegal activity and still he refuses to act on it but chooses to terminate those who are upholding the law . How much are you willing to waste in lawsuits and legal fee’s while Wallace lies to the public about whats taking place under your noses?

What more do you need? What will it take to get you to attend Board meetings and demand Wallace’s resignation and accountability into this incompetence and deliberate attempt to hide the truth from the public so he can continue to feed $80,000 per month into his pocket.

I urge you to make your voice heard and demand better for your tax dollars you deserve it.


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To correct a couple typo’s, item #1 Mascolo was placed on suspension in March of 2010, not 2009. Also item #2, “Appleton orders Douglas” was also April of 2010.


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This disgusts me, that our elected officials are circling the wagons to protect people who are blatantly endangering our public health and thumbing their noses at environmental regulations. It is my experience that deceit it like an iceberg, you can only see about 10% of what is really there. Why, dear god, are Ferrarra and Nichols risking their reputation for liars? Misters Wallace, Appleton, Nichols and Ferrarra: YOU SHOULD BE ASHAMED OF YOURSELVES, but I’m guessing you have no shame as you likely sold your integrity and ethics years ago.

Mr Hill, please keep fighting for the right thing.


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Don’t be fooled by Mr. Hill’s motives in this. He personally wants to discredit Wallace, who did Oceano’s master water plan, in order to sell a large portion of Oceano’s water at bargain prices, even in the face of growing opposition by the people against such an action. That being said, I agree that being the district administrator while his private firm is doing engineering work for that district represents a conflict of interest, and should not be allowed to continue.


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I don’t believe your entirely correct as Jim Hill, not Adam Hill has always questioned the services provided to the Sanitation District by Wallace and flunkies. Unfortunately he’s out numbered by two of the good old boy network, that being Ferrara and Nicols. In recent meetings Hill attempted to open discussions to curb Wallace’s reign of incompetence, both Hill and the public who attended this meeting were quickly hushed by Nicols who would have noting to do with his buddy being knocked off his throne. Nicols in a very hostile manner told the public to pipe down more less and refused to allow public comment. A piss poor example of a public servant who’s salary is paid by your tax dollars. The following meeting where Nicols is now the ring leader, he adjourned the meeting before Hill had the opportunity to even speak regarding this matter. Nicols said it would cost a fortune to allow open bidding for the services Wallace provides which is not true, its called competition and it drives companies to perform better for less. Got news for you folks, its gonna cost you a fortune in lawsuits from the two employee’s Wallace is screwing and fines from the Water Board for his lies and negligence in performance of duties, and that’s a fact.


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That last paragraph was the icing on the cake for me: “At a recent sanitation board meeting, Ferrara and Nichols rebuked a suggestion by the board’s third member, Jim Hill, to no longer allow Wallace to serve as the district administrator while his private engineering firm is contracted to do work for the district.” Apparently the only member of the board who seems to have any sense at all is “rebuked” for a “suggestion” that Wallace no longer serve as administrator; notice the wording there, Mr. Hill did not make a motion to remove Mr. Wallace, he “SUGGESTED” that Wallace not to serve. Wow. Quite the “circling of the wagons” to attempt to protect Mr. Wallace. My question; why ?


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Can anyone say “kickbacks?” Just my opinion.


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Realize that Mr. Hill has served on this board for many years, and has been fine with this arrangement until Mr. Wallace has come under fire. Like any good politician, Mr. Hill sensed a shift in the wind and changed his position. That the CCN is trying to portray Mr. Hill as some kind of defender of the truth is laughable. Mr. Hill’s reputation is in serious need of some shoring up lately given how he has been running the meetings at the OCSD (multiple brown act violations) , pushing through water sales against the people’s wishes and protecting a general manager that everyone knows is completely incompetent. Watch the OCSD meetings and see for yourself.


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Catnip: I am not aware of who is who, how long any of them have served; that said, Karen’s article did not “portray Mr. Hill as some kind of defender of the truth….” . You may be conflating what I wrote when I said that it seemed like the rebuke Mr. Hill received for his even mentioning that Wallace “maybe” shouldn’t be serving. I don’t think anyone is suggesting that Mr. Hill is somehow a defender of truth; it would seem that that is YOUR interpretation. I for one would like to see more facts come to light before deciding who is telling the truth, who seems to hiding something, and who shouldn’t be connected with the OSD in any way shape or form.


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We need a freeze on all of Wallace’s personal and corporate assets until this can be sorted out. If it’s discovered he is criminally or negligently culpable, restitution can begin with forfeiture of those assets.


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I like the way you think.


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For anyone who would like to contact their representative on the SLO County Board of Supervisors, you can find that info here: http://www.slocounty.ca.gov/bos/BOSContactUs.htm


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Supervisor Adam Hill will be interviewed friday at 5:05 p.m. on News/Talk 920 KVEC. Feel free to call in with your questions.


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Dave: I sure appreciate this amount of “heads up” for guests on your show. Thanks.


As an occassional listener, I often only find out that Karen is going to be on after the fact.


I wonder if there is a corner of this website where you could publish you on-air schedule ???


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Why does it not surprise me that the District is in hot water again? They openly allow John Wallace to double deal earning HIS engineering firm $80,000/month (which is almost A MILLION DOLLARS A YEAR) and “Administer” the District. I can’t be the only one to see the enormous savings to the tax payers by ditching Wallace and Wallace Group and hiring a dedicated, full-time Administer and engineer. Even if you paid both positions a lofty $150k/yr the rate payers would be saving almost $600,000 per year.


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