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 I find odd about all of this is the blatant filching of the FEMA funds for the Printery building. Everybody knew that it wasn’t the youth center and there were minutes (on line) that clearly indicated that this building had not been a youth center for sometime except the outside lot had been used for skateboarding.

Now, as to the temporary city hall, we all knew it wasn’t intended to be temporary despite their lies but I don’t think the city actually knew that they couldn’t use the RDA as it was structured to pull off this (what Jerry Clay called) “sweet deal”. The purchase of this bowling alley wasn’t only a conflict of interest with the FEMA funding but apart from FEMA, it also included the conflict of interest with Tom O’Malley where he transferred his creekside property into his sons name so that he could vote on this purchase. Luna and Pacas didn’t want them to do this “sweet deal” and so O’Malley pulled his fast one to make certain that it got voted through, in fact Luna had a website up at the time about why they shouldn’t purchase that property. The reason I don’t think they fully understood how the FEMA program worked is because they were bragging to everybody about it. Like I said, I recall Clay during a council meeting grinning and saying what a “sweet deal” we got, yup, Wade McKinney was the man of the hour but he obviously wasn’t as competent as they thought. Now we are ALL SCREWED.

The Gimlet Eye

Play with the Devil, and he will want his cut.


Unbelieveable…another story which reflects the immoral and illegal requests for FEMA funding. A microcosim of government at large. And just whom shall be held accountable?

More than likely…no one person/’s…but we the tax payers….


Exactly, as said before..the Contractors, Engineers and administrators of corruption are paid off and long gone. The City is broke and who foots the bill? you guessed….again.


Interesting point CYNICALATBEST…

Are you inferring that FEMA could possibly be the over zealous mega FEDERAL agency that is just feeding from the top down.

Feds go after states, states go after cities, cities go after citizens… a direct result of ‘trickle down economics’ with a different twist. Those on the government gravy train are not about to give up the exorbitant pay and benefits with very little to none accountability! And THOSE in the government are in control to the point that THEY will continue to make sure it stays that way!


Well where the hell are we going to get this 8 million $$ to pay back?? Will we get it from Wal-Mart after we spend a cool million+ to build their interchange on the 101 that they have back peddled on? Talk about a bunch of blunderers and that’s putting it nice.

I MEAN IT – Where do we get the $8,000,000 to pay back? It’s already been spent except did I see something about $2,000,000 that is unaccounted for?


Calling Wade McKinney, Jerry Clay and others “a bunch of blunderers” is being too nice, Cindy. It’s not like they just bumbled their way through the FEMA paperwork, not knowing quite how to fill in the blanks… It looks like their intentionally fraudulent schemes have been uncovered and it will be interesting to see how O’Malley & the others try to spin the facts. :0


Mercy mercy miss Cindy… the sky is falling, the sky is falling…

The way I see it 8 $million to the FED is not that big on the FED scale. It doesn’t really make any difference because all that will happen in the end, worst case, is that Atascadero owes $8 mill to the FEDS on the BOOKS…no real money will change hands, but it will look like FEMA prevailed and all the GOVERNMENT employees on BOTH the FED side and the ATASCADERO side still go home at the end of the day, and eventually to gloruious retirement, with all salary and benefits and job security INTACT!

And if anybody pays at the end it will be the city, county, state and fedral taxpayer… YOU!


I hope criminal charges are pursued for everyone involved in this blatant fleecing of the taxpayer.


Atascadero is the same “good old boy” club as is Paso Robles. They are truly “Twin Cities” in many respects.

NOTHING good comes from ANY association with Kelly Gearhart.


Be sure to read the entire report by clicking the underlined word determined.

As many of you know Gearhart borrowed about 4.5 mil against the Printery and accumulated past due property taxes are about $100,000.

The city intentionally mislead the FEMA investigator about the Printery’s use as a youth center at the time of the earth quake. The council, with the exception of Mike Brennler backed up McKinney.questions from the public were ignored.

I find it outrageous that the city officials were orchestrating all the actions of the RDA and city council (same 5 people) and as long as the FEMA ATM was pumping out money those 5 people were singing praises to McKinney and giving him raises.


I must be affected by the Tribune’s Swamp Gas as I don’t remember any of this and I am a native… However, considered how the City of Atascadero and Man of the Year Gearhart were bedfellows it is not surprising. Maybe we can add this to Gearhart’s corruption file and he can spill the beans on this bozo’s and do something right.

It is unbelievable all this corruption going on in SLO County, just think ab out the big cities. No wonder this Country in bankrupt with the mentality of the likes of this Council… When are we as a society going to hold these policians accountable for their wrongdoing.

GOODBYE MR GERRYRIGGING (SP?) PATTERSON as I continue to donate monthly to Ms. Arnold’s campaign. I recommend everyone send $10 or whatever you can afford for the future of this County and honest decent representation. Join and be heard and see action – CPRN2012


Thanks, SLObird. is going strong and growing. Please join our efforts if you have not already done so.


“Maybe we can add this to Gearhart’s corruption file and he can spill the beans on this bozo’s and do something right.”

I remember this extremely well, in fact I can’t believe that its already been 4 years since CCN (UncoveredSLO) broke this story. Kelly Gearhart DID SPILL THE BEANS on these guys as he was angry at Wade McKinney at the time and he gave Velie copies of all his proof surrounding the escrow on the Printery. He claimed that Wade called him and asked him to stop the escrow (one day before it was going to close) so that Wade could claim the FEMA funds and Kelly agreed but somehow got “bamboozeled” in the deal as it was a historical site that he could have also claimed FEMA funds for its restoration. It was a mess but Kelly did “rat out” his good buddy, Wade on this deal. Talk about “dog eat dog” when there is a beefy bone to be had.


Yep. And Wade McKinney is behind this stuff. Just like Jim App in Paso, City Mgr McKinney has pulled the strings for years. If the feds press charges, I doubt they’ll go after O’Malley or Clay. No wonder McKinney wouldn’t hold his own press conference about this today! He sent his underling out to face the press instead…how cowardly.

And Mike Brennler was right when he criticized McKinney’s poor management of the city and the lack of transparency in A-town government. It took YEARS but the truth is trickling out!


Who was the project administrator? Who were the engineers?