Atascadero filched FEMA funds

April 2, 2012

Printery Building


Prompted by a 2008 investigative report by CalCoastNews detailing how Atascadero city officials conspired to bilk taxpayers out of  millions of dollars in disaster aid, a FEMA investigation has determined the city received $8 million illicitly.

Nearly eight years after the San Simeon Earthquake damaged the Printery Building and Atascadero city hall, the Office of the Inspector General (OIG) is recommending that the Federal Emergency Management Agency (FEMA) ask the city to return $8 million in relief funds because of issues with conflict of interest, unsupported requests for monies, and expenditures for a building the city fraudulently called an active youth center.

Following the 2003 San Simeon Earthquake, Atascadero city officials conspired to bilk taxpayers out of millions in disaster aid to construct a replacement youth center under the guise the previous center had been rendered unsafe during the earthquake.

In an April 28, 2004 letter to the Governor’s Office of Emergency Services (OES), city staff requested an “improved project” to build a replacement youth center. The city went on to say, “The youth center is currently located in the … Printery Building that was severely damaged during the San Simeon Earthquake,” the state agency acknowledged the city’s claim in a May 12, 2005 letter to FEMA officials.

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 youth center then stood approximately a half-mile away, at 5493 Traffic Way.

Atascadero Mayor Tom O’Malley, Councilman Jerry Clay, and San Luis Obispo County Supervisor Jim Patterson repudiated CalCoastNews in 2008, claiming CCN reports about the illicit request for FEMA funds were untrue, or that the results justified the fraud.

Asked at the time if he was aware of the youth center deception by the city, Councilman Jerry Clay replied, “I didn’t know if both buildings were being used or just what. But it’s pretty neat; we have both facilities now, a community center and a skate park.”

So how did city officials pull this off? The OIG report says that city officials provided FEMA with inaccurate information by claiming that the Printery Building was the city’s youth center, and that the city had planned to continue using the building.

However, city records  show the city had moved the youth center to a building a few blocks away and was in the process of selling the Printery Building to former North County developer Kelly Gearhart.

Youth center number one began to materialize in 1994, when owners of the historic Printery Building, the Freemasons, donated it to the city – with the agreement that the city would maintain and renovate the building into a youth center.

Three years later, the still-structurally unsound facility opened its doors to the city’s youth. Immediate concerns surfaced regarding the structure’s condition and the cost of improvements. Following an accident in 1999 resulting in a claim against the city, the council opted to find new digs for the city’s after-school programs.

In 2001, the Freemasons asked the city to return the building due to the city’s inability to abide by its contract, according to the minutes of numerous city council meetings. In August 2003, the city council agreed, with the understanding that Gearhart would be the eventual owner. (Four months later, when the quake hit, the property was in the final days of escrow.)

Shortly after the city’s abandonment of youth center number one, city officials elected to purchase and transform a one-time animal feed storage building into youth center number two. To fund the conversion, officials used state grants and per capita funds awarded to the city in 2001. (Following the quake, the city morphed the non-insulated aluminum building into an indoor skate park.)

City officials agreed with the OIG’s findings that the Printery Building was not fully occupied at the time of the quake.

“City officials agreed that the building was not fully occupied at the time of the earthquake and that there was no intent to reoccupy,” the OIG report says.  “FEMA was unaware that a portion of the building was not in active use at the time of the earthquake.”

Investigators also found numerous unlawful acts in the city’s use of funds to transform a former bowling alley into a temporary city hall building while the former city hall was slated to be renovated. In addition, city officials blended their redevelopment staff and city staff, creating a conflict of interest.

“This transaction was less-than-arms-length because the same city officials with responsibility to manage FEMA’s disaster assistance funding were executive officers of the city’s redevelopment agency, thus creating a conflict of interest,” the report said. “As a result of this overlap, the transaction lacked independence because City officials were able to substantially influence or control the actions associated with the transaction. Costs incurred under less-than-arms-length transactions are eligible for federal disaster assistance funding only on a limited basis.”

City officials disagree with the investigators’ findings “on the basis that FEMA’s funding of the second temporary city hall implied concurrence with their action.”

FEMA has until June 20 to provide a written response to the OIG’s audit. If FEMA agrees with the OIG that $8 million in relief funds should be returned, the city will then be provided a chance to respond.

See the original 2008 article here.


FEMA Public assistance grants awarded to City of Atascadero, California.

Update: added document and link to original article.


What first comes to mind is wow, can’t believe someone thinks they can get away with this kind of behavior.

Second thought is,if we know this, what is it we don’t know that they have done?

This is only the beginning, more cities will see more cuts and more fraud will surface with this situation.

2. California

> Increase in personal income tax: more than 5%

> Expenditure per capita (2008): $4,196 (25th lowest)

> 2009 budget shortfall: 36.7% (2nd highest)

> Home price decline from peak: 46.7% (3rd largest)

Read more:


I love California and didn’t pay a dime more in California income taxes than last year. Take the Faux News references with you when you leave the state…assuming you’re so unhappy that you are leaving.



Atascadero Mayor Tom O’Malley, Councilman Jerry Clay, and San Luis Obispo County Supervisor Jim Patterson repudiated CalCoastNews in 2008, claiming CCN reports about the illicit request for FEMA funds were untrue, or that the results justified the fraud. Asked at the time if he was aware of the youth center deception by the city, Councilman Jerry Clay replied, “I didn’t know if both buildings were being used or just what. But it’s pretty neat; we have both facilities now, a community center and a skate park.


Mr. O’Malley is a corrupt douchebag. He apparently doesn’t even know that, once someone commits fraud, they shouldn’t then deny it, then claim ignorance whether it occurred or not, and then top it of by claiming how “pretty neat” it is that the fraud occurred.

Not only does it show him to be dishonest, but it also shows him to be really stupid.


This story encourages me to not lose hope. Here in Paso, it seems that corruption among city officials is sprouting up left and right.But maybe like with this A-town FEMA fiasco, an investigation in Paso could take a few years but hopefully the truth will prevail.

And Dear Trib employees: We know you read these posts so watch and learn how investigative reporting really works. Stop mocking your competitors and try to emulate them instead. Nice job, CCN!

Daniel Blackburn

Karen and I will be on Dave Congalton’s Home Town talk radio show, 920KVEC, at 3:05 p.m. today to discuss this report.


It’s no wonder govt. entities hate CCN. They don’t like it when their mischief/illegal activity is discovered and publicized. The solution is to be honest. Throw them all out. Patterson has a worthy opponent. That seems like a good place to start.


Stealing from the govt makes strange bedfellows. Who’da thunk O’Malley, Clay and Patterson would collude on *anything*.


That’s not why they hate them.


Please elaborate…


Nope, can’t do that.


Then I’ll stick with my theory, and my sources are pretty darn legitimate.


The amount of government coruption in our small county is amazing! Thanks to Cal Coast News, there is a new sheriff in town. Hopefully the local governments wil think twice before attempting an underhanded deed knowing that there is a good chance they will get caught and the public will find out!


This story tastes particularly sweet to me.

If I’m not mistaken, this is the story that launched CalCoastNews. And the backlash was swift. The Trib balked and I remember hearing about Patterson making snarky comments aimed at CCN at parties locally.

And look how The Trib is today still cleaning up after the Solomon debacle and CCN is on to something else. Love it.


Huh??!! Patterson…making snarking comments?? Noooo….say it isn’t so! LOL

His days in office are numbered. This incident should be the nail in his political coffin.


Yup, It is the story that launched the original UncoveredSLO which expanded to now include CCN. If I’m not mistaken, its also the story (one of) that Ryan Miller wouldn’t let Karen Velie write for the New Times !


Hey Atascadero..may I recommend the defiance office of Ferrara & Nichols. Their located in 5 cities and are quite proficient t at defending local GOB partners against the likes of any state or local governing organization who found them guilty of corruption,fraud of conflict of interest issues. Sure has worked to good to bury South counties corruption.


Doggin, don’t give them any ideas. WE know you’re being facetious, but I’m guessing, based on their past idiocy, they don’t.


Ah the flip side of Paso Robles. The escrow thing on this is what always REALLY pissed me off at the city. It was more than in final days. The earthquake hit the day before escrow was due to close!!!! The city never did have ANY intention of using that building. I have said going all the way back to 04′ that this was a fraud on the taxpayes committed by city officials of Atascadero.

Jerry Clay to you I say about your comment, isn’t it neat we have two buildings. Hey dumbass is it neat that you SCREWED all your citizens?? They ought to throw your ass out next election.

The part that is screwed is that the citizens will pay for their officials greed and theivery.


If the feds would lock up those who are responsible for the fraud, it would discourage from similar behavior those who cringe to think what they might look like in an orange jumpsuit.

As long as no one is prosecuted and sent to prison, there’s really no reason for the pathologically corrupt to do anything but continue to commit fraud.

When did Bernie Madoff stop? When he went to prison.

The Gimlet Eye

Why did it take the SEC 10 YEARS to get Madoff? I still have not heard a credible explanation for that from anybody in the government.

1 2 3 4