Wallace Group loses contract, gains others

October 31, 2012

Spooked by a $1.1 million fine levied against a public entity due to mismanagement by the Wallace Group, agencies throughout the area are reevaluating relationships with the engineering firm and its owner, John Wallace.

Oceano Community Services District Board members, in the past critical of Wallace Groups’ practices at the sanitation district, were slated to review a contract Wallace Group made with the South San Luis Obispo Sanitation District in October. Before the meeting, Wallace sent a letter of resignation terminating his engineering contract with Oceano.

In the Oct. 15 letter, Wallace contends Wallace Group staff shortages prompted his decision to end the contract.

“We take our responsibility to the District very seriously and to that end we have temporarily assigned another engineer, Steve Tanaka, to assist me in handling day-to-day engineering needs of the District,” Wallace said. “Given my very active role within our organization and Steve’s existing workload, it will be increasingly more difficult for us to personally provide the time needed to provide the high level of service that the District deserves.”

In an odd twist, in late September, Wallace Group was vying for a two-year contract to serve as the Arroyo Grande’s on-call engineering consultant. Of the five that applied, city staff recommended the Wallace Group get the position.

In the contract, it states that the consultant shall maintain insurance coverage. However, if unable to do so, the city has the right to purchase the insurance and to pay the premium which can later be charged to the Wallace Group.

In late 2009, following reports of environmental abuses to local and state water authorities from sanitation district employees, the insurance company that carried errors and omissions insurance for Wallace said it was canceling his coverage.

Wallace failed to inform the district’s board of directors of the cancellation and did not acquire another insurance policy. As a result, district officials are working to increase charges and pass the cost of the $1.1 million fine to rate payers.

John Wallace is the chief administrator of the South San Luis Obispo County Sanitation District and also owner and president of the Wallace Group, a private engineering consulting firm located in San Luis Obispo.

The sanitation district, which serves the residents of the Oceano Community Service District, Arroyo Grande and Grover Beach, is governed by a three person board consisting of one representative from each community. Currently, Arroyo Grande Mayor Tony Ferrara and Grover Beach Councilman Bill Nichols vote in favor of maintaining Wallace as district administrator and allowing him to funnel engineering work to his company, the Wallace Group. Oceano’s representative Matt Guerrero is the lone voice requesting a review of Wallace and the Wallace Group.

In January, Grover Beach will have a new mayor with candidates contending they will no longer allow Nichols to stay on the sanitation district board which will likely result in Wallace Group’s termination as the district engineering contractor and Wallace’s termination as district administrator.

In June 2011, accusations first reported by CalCoastNews that Wallace has been funneling millions of dollars to his private engineering company without proper oversight were validated by a San Luis Obispo County Grand Jury report that found a conflict of interest. Then, a majority of the district’s current board decided the Grand Jury report was error-ridden and inaccurate.