Sanitation district served notice for violations

May 10, 2011


The South San Luis Obispo County Sanitation District has been slapped with a notice of violation for the 12-hour raw sewage spill that occurred in December, 2010, according to an April 18 enforcement action that CalCoastNews received through a Public Records Act request.

California water pollution enforcement officials can levy fines of up to $10 a gallon, or in this case as much as $30 million, for sanitation plant sewage spills as well as financial penalties for failing to comply to testing and management requirements of the State Water Resources Control Board.

The state board is requiring the sanitation district to put together a lengthy technical report about the sewage spill, the operations of district and the adverse impacts the untreated sewage that spilled into the community of Oceano and the Pacific Ocean has had and is having on the local environment.

The bulk of the 36-page notice of violation, a total of 34 pages, is filled with questions the district needs to answer by May 31 before the state levies fines or takes further regulatory action.

John Wallace is the chief administrator of the district that provides services to about 38,000 customers in Arroyo Grande, Grover Beach and Oceano. He is also 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.

The district is overseen by a board comprised of Arroyo Grande Mayor Tony Ferrara, Grover Beach Councilman Bill Nicolls and Ocean Community Service District Board Member Lori Angelo.

Failure to comply or accurately respond to the state mandated report by late May could result in criminal action to be taken by the San Luis Obispo County District Attorney’s office or the State Attorney General against Wallace or board chairman Nicolls, according to the notice.

The district faces a cease and desist order and fines of up to $1,000 per day if it does not complete the report by the end of May, the notice says.

The technical report requires the district to attach documents or provide answers to 223 questions.

Wallace and Ferrara have repeatedly claimed at public meetings, either at City Council sessions or sanitation district meetings, that allegations that the spill was inaccurately reported or the plant is mismanaged were rumors being allegedly spread by CalCoastNews and former “disgruntled employees.”

Tony Ferrara

Wallace and Ferrara claim that there are no problems in the operations of the plant.

In an odd twist, Wallace hired his own firm, the Wallace Group, to prepare the bulk of the report with some technical reports being provided by interim plant manager Bob Barlogio and outside qualified professionals, Barlogio told CalCoastNews.

State laws require any expenditure of more than $5,000 to be approved by the district manager and expenditures of more than $25,000 to receive district board approval.

However, in the case of this report, it appears Wallace has given his private firm the job of putting together the mandated technical report without board approval.

Angelo, a sanitation district and Oceano Community Service District board member, said she was aware of the notice of violation and order for further information, but did not know how the expenditure for Wallace Group to prepare the report had been approved.

“We did not discuss it in closed session,” Angelo said.

In addition, the board members and Wallace have been accused of keeping the public in the dark about the April 18 notice by not mentioning the state enforcement action to their fellow board and city council members or the public.

Wallace, Nicolls, Ferrara and the attorney for the district Michael Sietz did not return calls asking how the cost of doing the report was approved or if the Wallace Group agreed to prepare the report for under $25,000.

At a news conference on Monday about another issue in Arroyo Grande, Ferrara encountered a CalCoastNews reporter, whom he called “illegitimate.”

He added: “You have lied and twisted things in the past and I have nothing to say to you.”

Meanwhile, plant manager Appleton has been out on sick leave since January when state regulators determined he operated the plant “using fraud and deception,” according to a letter of proposed disciplinary action. Appleton contends he was following Wallace’s direction.

Following the December spill, Wallace argued with Appleton over the amount of the spill and who would sign the reports, according to emails between Wallace and Appleton obtained by CalCoastNews. Multiple reports put the spill anywhere from 50,000 gallons to more than three million gallons.

Following a report by Appleton that was supported by computer readouts that placed the spill at about three million gallons, Wallace elected to hire staff at the Wallace Group to reevaluate the spill amount using an approach that focused on the height of sewage spewing out of manhole covers throughout the community.

It did not take into account the amount of sewage shooting up through toilets, bathtubs and showers in homes near the plant, according to Wallace’s methodology.

Two district employees, who complained to state and local regulators that the district had been violating laws meant to protect the public and the environment, were terminated during the past year.

Former shift supervisor Scott Mascolo and former lab technician Devina Douglas began reporting incidents of suspected misuse of public funds and problems with the plant complying with safety and health requirements to local and state regulators more than a year ago. Douglas has since filed a wrongful termination lawsuit against the district, Wallace and Appleton.

The ex-employees accused Wallace of using his position as administrator of the district to funnel hundreds of thousands of dollars to his Wallace Group while concealing environmental violations.

For example, Wallace Group has been paid to do studies about plant inefficiencies, in several cases every five to eight years, and then placed the item on the plant’s list of needed repairs.

The state’s notice of violation orders Wallace to provide information about all proposed improvement projects and what type of funding was to be used since 2000.

The Dec. 19 sewage spell occurred because storm water flowed through electrical conduits at the sanitation plant into pump motors which shorted out the plant’s electrical system, shutting down the plant’s intake pumps forcing untreated sewage to leak out into homes, roadways, rivers and the ocean.

A sewage spill several former and current employees said could have been avoided if Wallace managed the plant for the benefit of the public and not to provide work for the Wallace Group.

In 2004, the district paid the Wallace Group to conduct a study on the plant’s electrical system. It noted that the bulk of the plants electrical system was more than 40 years old, according to district reports.

The report goes on to say wiring “has begun to deteriorate due to being submerged by groundwater. . . .As a result, there have been several instances where the wiring has failed and either caused an electrical fire or a loss of power.”

However, while the Wallace Group had been paid for the study, the repairs, which Wallace Group could not do, were never started, Mascolo told CalCoastNews.

According to the 2010 major budget items report, Wallace would put a bid out for subcontractors to do the job early in the 2010 fiscal year.

And as every year since the study was completed, the repairs were not done and the capital improvement project was moved over to the next year’s major budget items report.

The state is also asking Wallace to provide copies of the plants operating and fiscal budget reports along with how major budget items are included in the budget as part of the mandated technical report.


Tony is going down with Wallace. The State Board already has the scoop on the poop and the report is going to sink them regardless of which way they attempt to spin it. They can lie or finally tell the truth, it doesn’ matter, what occured and has been occuring is criminal.

I have to laugh about all the people who were complaining about how terrible and stinky the flood water was and about what they were finding in their toilets that didn’t belong to them! They were told that flood water naturally smells bad and that their was no poop in it even though people said that they clearly smelled poop. Wallace and his cronies tried to pull the wool over everyone’s eye’s but the nose, knows.


Incredible that the District can collect ten of thousands of FEMA dollars to cover the expenses related to event but the ones who suffered damages with sewage in the house cannot collect anything from Wallace or the District who is responsible in not preventing outage which led to the spill . Seems every other responsible agency that creates a mess like this is willing to provide at least some type of service to assist the homeowners in these matters, I know Pismo dose as well as some others. I guess that would mean admitting partial guilt in the spill and thats not likely. Another “good will” gesture on the part of responsible government.


Tony Ferrara is an idiot. I attended a recent sanitation board meeting and he insulted every member of the public by stating “the only reason why you are here is because of the hype generated by a blogger who has mislead the public.” A direct reference to Cal Coast News and Karen Vilie.

I got news for you Tony. It is you that I strongly distrust and suspect you as the one who is lying to protect your buddy Wallace and what ever interests or relationship who have with him. It is you that I feel is acting illegitimate towards the public good.

For the record I sent a letter of concern regarding the operations of the satiation district over 8 months ago to the Grover Beach City Council in regards to news reports in both the Tribune and Cal Coast News.


Good for you, Bob! I did the same but haven’t heard back from either of them (not that I expected to.) Strangely enough, Montereno (sp?) of OCSD *did* respond and I hope other affected community leaders will start taking notice as well.


Ferrara also seems to have an anger managment issue as you can see him turn red,become very angry and clench his fists as he leans forward in his throne and tells the public not to interrupt king Tony when he’s speaking.


I too have noticed this. Then there was his quick reaction to down play the seriousness of the cross burning that blew up in his face causing him to make a rare retreat and reversal of his actions in the face of public scrutiny and the potential for the incident to go national.

If it was not for the town hall meeting that was quickly organized in response of his ineptness that saved him and his community from further shame on the national media stage.

There must be a better candidate for mayor in Arroyo Grande out there some where. I feel fortunate that this angry clown is not my mayor.


I wonder what would happen if the person in the audience whom King Tony admonished not to interrupt him when speaking said “Blow me”?


I sent a letter to Mr. Ferraro at AG. No one will be surprised to learn that his reply was bruskly reassuring that all needed steps had been taken, that everything was being overblown, and that there is no need to worry about it.


Um, how many times have we read or seen this:

“At a news conference on Monday about another issue in Arroyo Grande, Ferrara encountered a CalCoastNews reporter, whom he called “illegitimate.”

He added: “You have lied and twisted things in the past and I have nothing to say to you.”

Shades of Kelly Gearhart. Mr. Ferrara, you have officially “jumped the shark” and I can only assume that you may not be in public office too much longer. The biggest question that comes to my mind is how many people involved in this whole mess will see the inside of a courtroom as a defendant?

On an unrelated topic, when I pasted the above quote that I had copied from the article, my spell check caught the typo “CalCoatsNews” ; whoops.


Heh, nice catch. I think Karen is quite the busy-bee working on this stuff and puts it out ASAP – perhaps to “scoop” the other media (one would think, as that’s a standard news practice).

Either way, that or calling a Public Records Act request a FOIA request is semantics at this point (this in relation to one of Catnip’s gripes).

I don’t know about others, but I’m pretty flexible with typo’s and synonyms (for lack of a better term).

..and I agree wholeheartedly with you, bobfromsanluis, shades of Gearhart, indeed!


The article says: “The South San Luis Obispo County Sanitation District has been slapped with a notice of violation for the 12-hour raw sewage spill that occurred in December, 2010, according to an April 18 enforcement action that CalCoastNews received through a Freedom of Information Act request.”

Sorry, the Freedom of Information Act is for records held by the United States Government (Federal). The correct way to get records within the state is the Public Records Act.

The article says: “Angelo, a sanitation district and Oceano Community Service District board member, said she was aware of the notice of violation and order for further information, but did not know how the expenditure for Wallace Group to prepare the report had been approved.”

Angello has been on the sanitation district board for one meeting. Of course she doesn’t know how the expediture for Wallace Group to prepare the report had been approved.”


Minor details on the info link, as far as Angello goes, she was on board long before the NOV was served and as one of the posts indicates the board members and agencies the Dist serves are also sent the NOV along with all correspondences the plant gets,problem is they admittedly don’t read them because the don’t believe any of this is legitimate or warranted. As far as the contract to provide the required report per the NOV, Angello dosent know because the awarding of this report to the Wallace group was never approved or otherwise and thats evident on the board pack of 5-4-11. You cannot do the work then approve the cost or award of contract for services, its just more of the same old same old corruption within.


ITA about the cost to the community.

But, also, I’m concerned about the cost to our environment. What happened in December 2010 is, IMO, most likely the canary in the coal mine: the sentinel song announcing there is much more than meets the eye.

I cringe to think what other damage to our environment is being done, thanks to Wallace’s avarice, greed, and selfish interest in keeping SSLOCSD as a contract, placing it ahead of what is best, long-term, for our community.

And not just at SSLCSD, either. Wallace has lots of contracts, and each one of them could have been developed, implemented and administered with the same John Wallace feces-covered stamp of approval.



I hope you have researched the fact that Michael Seitz’s wife, Sharon, worked for Wallace Group for a number of years as a senior manager in the HR department. ( Not sure if she is still there or not.) That might have influenced Mr Seitz’s decisions regarding these matters…….Ya Think !!!


This whole scam just REEKS of “CONFLICT OF INTEREST”…Jail time is appropriate for all involved!


…provided proof of guilt is established in a court of law. I’d hate to hang ’em high without giving them their day in court. I do agree, this is beginning to stink!

“Sire, sire! The peasants are revolting!”

“You got that right: they stink on ice!


This violation was served to the District on 4-18-11 and yet no indication was made in the agenda or board package for 5-4-11, nor did the Board members or legal council say a word about this at the meeting when they were well aware of this new violation when they were all CC’ed by the Regional Board upon it being served. If this dosent present itself as blatantly hiding the truth from the public then what would? Why are we allowing the guilty party(s) in this continued mess to provide the investigation and documents into their own management practices, all the while charging us tax payers a small fortune to boot. Wheres the ethics of ones practice when an attorney, Mr Seitz, who’s sworn to serving in the public as Districts legal council continue to allow this to questionable activity to take place and clearly take the side of the individuals who are under fire. Its pretty clear the best interest being served here is that of his friends ,Wallace, Ferrara and Angelo, not the public there sworn to serve. This is an outrage people and it need to stop now.


I guess it’s time to rally the troops and all storm the next board meeting again.


The ethics of Mr Seitz are very clear. Mrs Seitz was a very highly paid executive with Wallace group.


Mike Seitz has always been “crooked”…He’s part of SLO County’s GOOD OLD BOY NETWORK.


Why all the green marks-what do you people know about Mike?

I wonder if he is the son of the historical Seitz of Shipsey (sp?) and Seitz law firm in SLO. Before the laws changed I was sued by dear old dad many years ago… Now, isn’t that special?

And if Mike is in SLO, why didn’t they hire local (south county?).


Why? Because Wallace Group is in SLO, and although I do not know if it’s true, there have been postings here before that stated that Seitz was also the attorney for Wallace Group. Wallace probably called in his buddy to help protect his own interests.


Hotdog, Yes indeed! That is the SAME Mike Seitz we’re talking about! LONG TIME County ties! He’s alway the FIRST lawyer to accuse another of playing “HIDE THE BALL”, when he doesn’t exactly have “clean hands”…


As the Church Lady would say, “My, isn’t that CONVEEEEEENIANT!!” (


While I am not defending nor attacking, perhaps the board wanted more than two weeks to figure things out before bringing it up in the meeting (and thus, the minutes). In all likelihood, they are probably getting their ducks in order. Or in this case, their sh!t straight.


…Yet they have an OBLIGATION to share this with the public so the public can respond and offer their thoughts. These leaders are supposed to represent the public’s interests, not their own. Shame on them for not bringing this to light. They are only digging their own graves, though. Slowly undermining the public’s trust.

I hope all you South County folks go to the next meeting and speak your minds.

BTW, has surfrider been alerted to this NOV as they were so active in SSLOCSD matters earlier in the year?


I don’t care what the board “wanted.” I want immediate public disclosure. I’m paying for this cluster-you-know-what that Wallace is leading. I want the information immediately, before they have a chance to do their dirty work behind closed doors, cutting off avenues of addressing this problem which might actually not include His Holiness, John Wallace, making $1million off of.


It sounds bad on the surface, but on the other hand, in any valid investigation, the persons being investigated are usually given the opportunity to answer the charges that have been made against them. The answers are then compared to information/allegations received from other parties.

So, this may be OK (or it may not). We will have to wait and see.


They may have the right to answer charges, but they don’t have the right to have it occur behind closed doors, specifically keeping the information from the parties who are funding the WWT facility.

I think they are very afraid. And that is good.


I agree with you, Mary, but at least this is a start, and I think they are definitely afraid. Wallace has been alleged to be tied a number of things in this county that people have raised major questions about. An investigation like this may, if we are lucky, lead to more.


Thanks for reminding me to take a long view of the situation. The arrogance of Wallace and his handmaidens on the SSLOCSD board is irritating as all get-out. It makes me impatient. My bad.


I wonder if these ex employee whistle blowers are suing.

Wallace has been getting over paid for a long time, he had better be prepared to give back a lot of that stash.

I’ve seen parts of the inside of that plant, it’s a joke. Raw sewage right next a creek that flows right into the ocean. What a mess.


I believe the Employee’s are suing. Wallace claimed that their complaints were dismissed but that isn’t true. The Employee’s also filed complaints with the CA Labor Board and the Labor Board said that the Employee’s can not file a complaint with the board if they are also pursuing a civil suit, it has to be one or the other. The Employees opted to move forward with the civil suit and Wallace took the opportunity to tell everybody that the Labor Board dismissed the complaints as unfounded! This guy is such a lying “TURD”.

Hey there Karen, how does it feel to be “illegitimate”? Funny thing is that every time someone calls you a liar, they end up in jail or under investigation with their tail between their legs!


So true. The gearhead saga is the best example, and we all look forward to how the dumpy little fat bastard will look in his orange suit.


This whole thing stinks…

OK, could not resist.

If the Wallace Group maintains the plant and engineering, it shouldn’t be too much of a stretch for them to draft much of the report? Or am I missing something here? Perhaps that was part of their job (contracted) to get that juicy government gig? CalCoast should try to “obtain” the contract with the Wallace Group; it’d probably be easier than obtaining private e-mails… just saying.

The whole thing stinks… there I go again, but it does. I always love when one regulatory body “fines” another regulatory body. My left hand wants to sue my right hand… yeah, “they are doing something” about this. Sure. Will any of those typical, draconian fines be used to clean up the damage or fix the plant? No, it will just be local dollars flushed down another government toilet.

Oh, let the puns flow!


Theres a copy of the 1986 Wallace/ San Dist contract available and many have reviewed it. It tells us Wallace has very limited powers to self direct work to his own company and its the authority of the Board members to delegate work to whomever they see fit, Wallace naturally being their #1 choice for decades. The contact also says “however because professional services are separate and distinct from other types of services provided by the District, strict bidding requirements are NOT required by government code”. Wallace’s contract also says the District will defend,Indemnify, and hold harmless from any and all claims,lawsuits or controversies the Wallace group makes unless its proven “willful negligence” and this is why Wallace and the Wallace group should NOT be allowed to investigate their own activity. Considering the wording of the contract the Board of directors should now be held partially responsible and need to be investigated as well for their part in this being they have allowed this to continue for years.


Thank you for clearing this up. I was curious about the limits and allowances the Wallace Group had… it’s only starting to stink worse.


It seems to be normal practice when a government employee or manager is under scrutiny to put them out on admin leave until an investigation is complete. This was the case with Mascolo who was repeatedly denied a return back to work while the non criminal allegations against him were investigated, and at that dropped or reduced to a level of non issue and yet no return to work. The investigation into illegal operations,allegations against the two employees was also performed by a proven non bias long time associate or friend of Ferrara and Wallace’s. Wallace on the other hand hires his own inside investigator to investigate him and naturally finds nothing wrong yet the state has on three instances served notice of violations for fraud, mismanagement, misleading investigators and other significant charges and Wallace remains on duty and has the balls to provide the reports to the public telling us he innocent, even Seitz to the public the embezzlement allegations are dropped and all who were supposedly involved were proven innocent. I say to you Seitz, your a proven liar at this point in the game as the investigation is still ongoing by county agencies. I say again as an lawyer bound by ethics in which you took an oath to serve, you should be disbarred and surely a multi person complaint against you will prove successful in doing so.


Correction on the “proven non bias”words as its more a case of bias as in likely fed only what they wanted the investigator(s) to know or look into who had long standing ties to Ferrara and Wallace and this area.


I’m not so surprised he’s a liar.

I am surprised, however, that so many people continue to be apparently shielding Wallace and Seitz from their just desserts.

It didn’t go well for the City of Bell folks who took part in the coverup of the embezzlement, fraud, and other crimes of Rizzo and three other Council members. One woman, a lower level assistant, did just a few things–to keep her job, she said–and she is going to be involved dealing with this for a long time now..