FEMA may want Paso Robles earthquake monies returned

October 13, 2011


The city of Paso Robles is getting a double wave of bad financial news — not only is the city already facing a $2.1 million budget shortfall, but the feds may be looking for the return of more than $1 million in disaster relief money.

Nearly eight years after the San Simeon Earthquake caused a sulfur springs to erupt in the City Hall parking lot, the Office of the Inspector General (OIG) is recommending that the Federal Emergency Management Agency (FEMA) ask the city to return $1.1 million in relief funds.

The OIG recently completed an audit of four large projects and two small projects resulting from the earthquake, totaling $5.8 million. Federal inspectors concluded that the city did not get competitive bids, and as a result overpaid a local engineering firm for design and engineering work.

“City officials awarded these contracts non-competitively to the same contractor they employed before the disaster,” the OIG says in their Sept. 13 audit report. “Full and open competition increases the opportunity for obtaining reasonable pricing from the most qualified contractors and allows the opportunity for minority firms, women’s business enterprises, and labor surplus area firms to participate in federally funded work.

“In addition, full and open competition helps discourage and prevent favoritism, collusion, fraud, waste, and abuse.”

City officials signed a contract with Michael Nunley of Boyle Engineering to provide design and engineering services through Boyle Engineering, Wallace Engineering and Furgo West. City officials claim they selected Boyle Engineering in full compliance with federal and state laws.

“The City acted in full consistency with federal and state rules, the city’s purchasing procedures, and in close consultation and agreement with both CalEMA and FEMA officials,” said Meg Williamson, Paso Robles assistant city manager.

Nevertheless, FEMA requires that contracts must be of “reasonable cost and must comply with federal, state, and local procurement standards.” FEMA rules say engineering and design services should run no more than 12.4 percent of construction costs.

City officials shelled out as much as 63 percent of construction costs for engineering and design.

In addition to questioning approximately $1 million for non-bid engineering work, the OIG wants $100,000 back for ineligible work and unsupported costs.

The OIG is recommending FEMA ask for $43,125 in construction management costs for library improvements to be returned because it was not part of “the approved scope of work.”  City officials disagreed with the OIG investigators finding, but said they understood its position, the report says.

However, city officials agreed with the auditor that $51,882 in unsupported costs the OIG says occurred because of accounting errors and additional funds paid to an engineering firm without any details of the charges relating to disaster work should be returned, the report says.

FEMA has until Dec. 12 to provide a written response to the OIG’s audit. If FEMA agrees with the OIG that $1,110,952 in relief funds should be returned, the city will be provided a chance to respond.

“The city will have the opportunity to respond formally to FEMA before any determination is made by them,” Willamson said.  “The city will work through CalEMA to respond, if necessary, to the audit findings.”


I find this rather odd actually. I would think that Paso Good Ol’ Boys would hire other Paso Good O’l Boys. Boyle Engineering is actually owned by AECOM, a huge global super megacorp. Wallace is based out of Vail, Colorado I think and Fugro West is another global super megacorp. I have a REALLY hard time believing that FEMA of all people disapproves of this contracting. There is DEFINITELY something else going on here and the public is getting played. They may be using the guise of investigating improprieties but that is not what’s going on.

Be careful what you wish for, because you just might get it.


Can someone please tell me if I’ve got the wrong firms? And if so can you direct me to the right firms website or anything you know about them, thanks.


The issue with the contracting and FEMA, according to this article, wasn’t the quality of work the engineering companies provide, but the way it was non-competatively bid out, leading to FEMA overpaying one of the local engineering companies for design and engineering work performed. In addition, 63% of the money paid by FEMA went for design and engineering, which is a very high percentage.

I’m familiar with Boyle and Fugro. I’ve not worked with John Wallace, but I have worked with his staff on a few projects.

I didn’t have a problem with Boyle or Fugro, although I didn’t work closely with either group, but interacted with them when they were on site for other projects. Mike Nunely is very competent and gives the impression of being ethical. Also, when working with Boyle/AECOM, you don’t get the feeling that they are working behind your back to get your job contracted out to them.


Wallace is out of San Luis Obispo. There are numerous articles on CalCoast News about that group. Just search the site and you will find plenty of information about their corruption and dealings with the South San Luis Obispo Sanitation District. More of the same dealings as this. Just plain wrong. And everyone looks the other way.


“In addition, full and open competition helps discourage and prevent favoritism, collusion, fraud, waste, and abuse.”

Are you kidding me! This is nothing more than Washington DC. There they call it politics. Waste and abuse. Let me know when our government is going to take some of their own advice!


I have to confess, I am somewhat confused about the comments being posted about this story; some have jumped on the “bash Atascadero” bandwagon, but the article clearly states: “The city of Paso Robles is getting a double wave of bad financial news — …. ” and then the article goes on to state: “City officials signed a contract with Michael Nunley of Boyle Engineering to provide design and engineering services through Boyle Engineering, Wallace Engineering and Furgo West.”, and everyone seems to be focusing on Wallace Engineering (who is certainly going to be indicted sometime in the future, IMO) but still the underlying problem that FEMA is having with the way Paso has gone about awarding a no-bid contract. That does smack of cronyism for sure and the “good ‘ole boys” in Paso may be in for a very rude awakening when the feds finalize their decision on how to proceed.


Everybody looks at ethics differently. In this type of a situation, if no-bid contracting was performed, then both PR and Boyle/AECOMO are to blame and should be held accountable.

Whether or not it’s an issue with Wallace and Fugro, who apparently worked through Boyle/AECOM to do the project, depends on the specifics of the contract. If there was a specification that all contractors (including subcontractors) had to be competitively bid, and Boyle/AECOM didn’t do it, then PR, Boyle and the subcontractors are to blame and should be held accountable.

It looks like Boyle was used to funnel work to Wallace and Fugro, providing one step between those two and PR, who I am assuming actually applied for the FEMA funds and contracted with Boyle.

I don’t think FEMA would be spending this much time with PR if it wasn’t a pretty flagrant contract breech if it wasn’t. It could also be that FEMA knows there are more investigative government agencies coming to SLOCounty for more investigations, and FEMA doesn’t want to be seen as soft on fraud for the money it issues following disasters.


I’m looking forward to the time when the contractors who pad their bills are the ones who have to pay it back. Instead, it seems like the local officials just vote among themselves to increase assessments and fees to the community instead. There ought to be a law against that.


I wouldn’t count on any contractors be held to the fire as far as payback of funds goes. I guess because the FEMA funds were used in the gov sector, the entity that had the repairs done will be held accountable for payback, Paso’s situation is an example as they want Paso to pay back the funds regardless of who didnt apply for them correctly. If Paso of whoever wants Boyle,Wallace or Furgo to be held responsible the city probably would have to go after them in court which means a long costly lawsuit again at the tax payers expense. The tax paying public cant win on this one and the reason is pretty evident why isn’t it ,yet things never seem to change.


ITA, and John Wallace’s heinously self-serving, conflict-of-interest-laden “management style” for the SSLOCSD is an example of how, thanks to HIS failures in management, the citizens of AG, Grover and Oceano will have to pay the fines levied by the state for sewage spills.


By Jove, I think he’s got it (bobfromsanluis!)


Mary, I’ve been meaning to read more about that project. Do you know when they awarded Wallace with the contract? As hard as it is I’m trying to give him the benefit of the doubt, could he have been awarded this contract before the dirt came out about his company? There needs be more investigation into Wallace. Wonder who’s in on pushing his services, are they getting something out of it?


1. The waterline project bringing in water from Santa Maria was approved on 4/12/2006.

2. (http://ncsd.ca.gov/cm/News_and_Info/Supplemental%20Water%20Project.html) – link to the NCSD page with info about the waterline project. In my opinion, from “Objectives” title down is the relevant information.

(http://ncsd.ca.gov/Library/RateStudy/2011/FINAL%20NOTICE%208-01-11.pdf) – link to the information about the water rate increase; this was published for customers attending a meeting on the water rate increase.

The agendae, meeting staff notes and minutes also have a lot of information. Unfortunately, there is no site search engine.

3. The part about Wallace doing the cost study is in an SLOTribune article, 10/9/2011, “Nipomo revs up pipeline efforts” I’m sure its several other pages, but that’s the most recent reference in my files. [The “they’d” is not a typo–that’s how it is published in the Trib.]

In the next six to nine months, the parcel owners will likely have a chance to vote on whether they’d support forming a property tax assessment to fund the construction cost. LeBrun said Wallace Group, a district consultant, is updating the cost projections for parcel owners based on their property size, land use and other factors.


4. NCSD has contracted with Wallace throughout the years. I thought they had stopped; apaprently, not.

5. Did I mention NCSD’s district counsel is Jon Seitz?

6. Did I mention that NCSD’s board of directors knew about the situation with the aquifer starting in 2008, but elected not to institute a tiered rate structure for customers water bills (a pretty good bet to decrease water consumption is to raise how much the water costs)? They would not even allow staff to communicate to customers the risk of saltwater intrusion into the aquifer. The board actually said that was a scare tactic. How things change.


P.S. There are two different issues:

1. The water line project, which will be paid by an assessment district (customers usually, with assessment districts, either pay a large lump sum or it is amortized over years).

2. The water rate increase, which reportedly is to go towards paying off the $600,000 deficit (deficits are unusual for NCSD). However, the grant funding they are applying for will only get them about $2.5million. The cost for the pipeline project is about $25million (and rising).

If the cost for the pipeline stays at $25million, and we subtract $2.5million from that, dividing the result by the approximate number of customer accounts (4200), that leaves an assessment (not counting interest) of about $6000 for each customer account.

After this water rate increase, I don’t think the customers will take it lying down.


Thanks for the info, a friend of mine directed me to that Trib article but I never got to it.


Perhaps NCSD uses Wallace because Don Spagnolo, former long time City of AG Public works director is now the Nipomo CSD director. Don’t forget the City of AG and Ferrara’s close long time personal ties and friendship with Wallace himself. Id suspect Mr. Spagnolo is right in there to. Damn W/G and gang must be good, guess that’s why everything in this county works so well huh?


Wow, you might be right. Good point. It’s all so disgusting, politicians can be so slimy.


Spagnolo was general manager of NCSD from July to November 2010. At that time he left NCSD and Michael Lebrun (who had served as a temporary GM before Spagnolo became GM, became GM of NCSD.

The $600,000 “deficit” occurred under Lebrun’s watch.


In the entire state of California, with it’s thousands of miles of roads and bridges, dams, aqueducts, and buildings situated on every type of movable foundation you can think of (mudslides, shale, earthquake faults, etc.), why is it so hard to find an alternative engineering firm to Wallace? I don’t get it. Are his administrative, consultant and engineering skills that good? Are his rates that good? Are his rates competitive? If they are not then why does he keep getting hired?

Someone on this blog once said that if a contractor/builder did not go with Wallace, “the Planning Dept.” would not sign off at various stages in the project. If that is true, then Wallace is not the biggest problem. If that is fact, and not just mere opinion, then every one bitching and moaning about Wallace should be spending a few days going through “the Planning Dept.’s” permit files for every project he has been involved with.

When the Feds decide to take on that task, they show up unannounced with a truck and just start loading up boxes of every paper file in the building. Of course, that was how they did it twenty years ago. Now, they can crawl around your computer and just upload everything without a warrant. (Thanks to you, George W….)


Some time back during the period the San Dist and Wallace were under fire for terminating the lab tech for whistle blowing Karen V was on with Douglas the former lab tech. I recall several callers stating if you didn’t use Wallace for permits etc in this county you’d never get anything thru. Ive also personally spoken with business owners who have stated similar problems.

There are government agencies that have wised up in years gone by and will not use Wallace, however Wallace and the Slitz bros have the market on local CSD’s etc. Are they cheaper, by the hour perhaps, but guaranteed if you witnessed the incompetence and lack of knowledge resulting in cost over runs to the tax payers you would be outraged. Wallace has no clue what some of his people are doing or have done, he’s a professional at covering his ass and with the help of Seitz and several local politicians he’s been untouchable so far, perhaps the end is now near with the Feds knocking on the door.


“recall several callers stating if you didn’t use Wallace for permits etc in this county you’d never get anything thru.”


And what did County Planning have to say about that?

I’m not doubting the veracity of that comment…especially since, IMO, it is pretty clear that, at least for Wallace, the Trib will simply print a self-serving press release from John Wallace as if it was golden tablets handed down from on high by Moses himself

But I do think Planning should be given an opportunity to answer that accusation. The reason Wallace’s stuff goes through more quickly than others is because Wallace Group has more experience in submitting requests to Planning, so Planning feels they don’t have to review them so thoroughly.

That’s a terrible excuse…but I think someone should ask Planning. If they will answer, at least they are on record then.


It would be of interest how FEMA funds were used at the Sanitation District in Oceano after the Wallace Group submitted the claim for damages resulting from the San Simeon Earthquake. Plant employees and Local contractors performed the actual repairs, however the Wallace Group provided the engineering,on site construction management, proposals etc etc. It is possible the two were divided and Wallace tacked the associated fee’s onto their outrageous monthly rate, but is this is acceptable, as these FEMA funded repairs could not have been done without engineering etc..

Looks like FEMA may be busy in SLO county for a while.


That information should be publicly available, no?


I would think pursuant to the Ca Public Records Act one could request all the documents associated with the FEMA funds used at the San Dist, Paso and whoever else. Id have to say good luck with the San Dist as far as transparency. Sources say Jim Saad, the Wallace Groups controller is now the San Dists book keeper, creative paper work keeper, etc,etc. Good timing as Sibbachs office does the audit per the Grand Jurys directions as well as this FEMA issue is sorted out..


The County’s former right-of-way agent Tim Smith now works for John Wallace. It’s the Dept. of Public Works, in my opinion, which has guys that use their office to curry favor with private contractors and developers. I’m not saying they all do it, but a few of them are in a position to make decisions on behalf of one contractor over another in order to receive a benefit in return. I actually overhead one DPW supervisor negotiating with a contractor –on the site of the project–on behalf of a builder who had to get the employee’s approval for an encroachment permit.

This article leads me to the conclusion that if anyone wanted to see the actual figures involved, the documents would be matter of public record and easily obtained–from the Feds and the OIG. Both the state and the Federal OIG have specific rules to follow for the bidding process. It ain’t all that complicated. It’s the adding and subtracting that seems to have the bookkeepers stumped. And figuring out where the invoices went….(Go to the store, buy me a cubic yard of concrete at 56 bucks a cubic yard. Here’s a hundred dollar bill. Bring back the change with the receipt….No, I can’t go to the store and buy it because my job as the general contractor on this project is to watch you work, not drink beer while I’m gone…)

As for awarding contracts to minority firms, that job went to a Hastings Law Schoolmate of Judge Roger Picquet. Her name is Collins, and she used to work, or still works out of a little office in the same building where The New Times has it’s office. One of the women in her office once complained to me that “they used to get some minority businesses applying for contracts. But now, they hardly have any.” Someone must not be getting out the news. They ought to advertize here. Bring in some extra dough for the Fearless Investigative Reporter types. At least enough to keep them in coffee and peanut butter sandwiches…..


You rock MaryMalone, run for office would you, you’ll get my vote.


Thanks, Rally.


So whats new? SOS for us here in paradise as Cronies INC suck off the public teat some more to line their pockets.


The OIG recently completed an audit of four large projects and two small projects resulting from the earthquake, totaling $5.8 million. Federal inspectors concluded that the city did not get competitive bids, and as a result overpaid a local engineering firm for design and engineering work.

Anybody else getting the impression that the feds and the state are focusing on SLOCo?


God I hope so.


“Federal inspectors concluded that the city did not get competitive bids, and as a result overpaid a local engineering firm for design and engineering work.”

“The OIG recently completed an audit of four large projects and two small projects resulting from the earthquake, totaling $5.8 million. Federal inspectors concluded that the city did not get competitive bids, and as a result overpaid a local engineering firm for design and engineering work.”

Nothing new here, look at Atown and the unbidded $48,000 sign contract awarded to an out of town company, the Carlton Hotel fiascos,

look at any SLO County run project ie: the Naci water project, the Los Osos fiasco, the county admin building in SLO with overruns and look at the city of SLO parking structure projects with cost overruns, not meeting spec and the change to metric then back again fiasco…

The admins and managers are not this stupid, they are dumb like a fox…

Mr. Holly

Well as they say s–trolls downhill. FEMA has been investigating Atown for months. Should be interesting to see what irregularities they will find with Atowns accounting.


One of the links, above (under the article) goes to this:

Atascadero officials attempt to filch more FEMA funds


OMG, they lied about a prior report being done on the foundation? Do they think FEMA is unable to do research?


OMG, did I really see Wallace involved in this project. Non-competetive bidding, REALLY. Cronism at it’s best. Go get’um FEMA. Make them pay interest too, as “little” would be crimialized for this behavior. But then, we are only the taxpayers and don’t really count.


If you find that outrageous, you’ll love this:

For the big project for a pipeline bringing water from Santa Maria to the Nipomo Mesa, Nipomo Community Services District has contracted with John Wallace to study the costs-funding and make recommendations.

Those poor people in Nipomo. Not only will they be paying far more of an increase in rates than the commercial and agriculture water customers of NCSD, they’ll get with the bill for the Wallace Group’s chicanery.

The nerve (or stupidity) of NCSD in having the Wallace Group do the costing, after what they’ve done in Los Osos and the SSLOCSD, is beyond the pale.


Well, up to 63% of the funding having gone to designing and engineering is pretty sleezy, too.

Not to mention submitting for payment projects that had not been approved by FEMA.