FEMA disallows $2.7 million in Atascadero relief funds

July 11, 2013

atas city hallThe Federal Emergency Management Agency (FEMA) is asking the city of Atascadero to return $2.7 million in funding it received illicitly following the 2003 San Simeon Earthquake.

In April 2012, nearly eight years after the San Simeon Earthquake damaged the Printery Building and Atascadero city hall, the Office of the Inspector General (OIG) recommended that FEMA ask the city to return $8 million in relief funds because of issues with conflicts of interest and unsupported requests for monies.

FEMA officials, however, elected to take action on two of the four funding issues mentioned in the report.

OIG investigators 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, the report says.

“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 OIG 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.”

In addition, FEMA agreed that cost to one project had been overcharged by $1,312.

Atascadero has until Sept. 2 to submit a written appeal that is required to include what federal law, regulation or policy supports its keeping the funding.

Mayor Pro Tem Brian Sturtevant said the Atascadero City Council disagrees with the investigator’s determination and that city plans to file an appeal.

“We are greatly disappointed to learn that FEMA has reversed its long-held commitment to the city for temporary relocation assistance,” Stutevant said. “The city followed the proper channels and relied on the approval received from FEMA. It is unfortunate and frustrating that we are now seeing a reversal of this decision.”



So does this mean that FEMA and the feds will also recoup the hundreds of thousands of dollars that John Wallace/The Wallace Group charged the South San Luis Obispo County Sanitation District for relief funds that were given to the District?

John Wallace (owner of The Wallace Group, a local engineering firm) was the District Administrator of the Sanitation District. The company he owns, The Wallace Group, performed, literally, hundreds of thousands of dollars of billable work for “earthquake response”.

Hmmmmmm, somehow I just don’t think his relationship with his personally owned engineering company could be called “at arms length”.


Well, well. The chickens come home to roost. I’m surprised FEMA didn’t take back more money. Maybe they will when they learn about the secret Gearhart transfer of the Printery back to the city AFTER the earthquake. The A-town good ole boys have no shame.

Mr. Holly

WOW! Somebody else also knows about that. I’m surprised that FEMA didn’t catch on to the McKinney/O’Malley deal that was made with Gearhart concerning the Printery. Normally they call it fraud.


Bingo! We can only hope McKinney and others get some jail time.


QUOTING THE ARTICLE: “Mayor Pro Tem Brian Sturtevant said the Atascadero City Council disagrees with the investigator’s determination and that city plans to file an appeal.

The Atascadero City Council’s stance against FEMA made me think of something in an LATimes article (7/11/2013, Business Section, http://tinyurl.com/pq63kam) about the folly of arrogance when dealing with the Federal government.

It also made me think of the folly of CAPSLO in taking on the federal government in a case where there appears to be abundant evidence to convict CAPSLO.

The article ( “Apple Loses Ruling in E-Book Case”) is about the e-book price-fixing conspiracy scandal, the federal government’s lawsuit against Apple, and Apple’s plans to appeal up to the U.S. Supreme Court. Originally the federal lawsuit was against Apple and four other book publishers. However, the four other book publishers have already settled with the government, admitting guilt, leaving Apple as the sole scandal member in the case.

To no one’s surprise, Apple claims it will file an appeal. That is what made me think of the arrogance of the Atascadero City Council in taking on the federal government in a case where there is not only loads of evidence supporting the charges against Atascadero, but other possible charges that have just not yet been filed by the government.

In the LATimes article about Apple, there is a quote which I think terrifically sums up the problems one takes on when arrogantly taking on the federal government:

“David Balto, a former attorney in the antitrust division of the Justice Department, said Apple’s determination to push the case in the face of long odds and its continued insistence that it has done nothing wrong could cause the judge to grant some of the harshest penalties

“(quoting Balto) ‘Arrogance sometimes comes with great peril, and they failed to recognize that. I think that arrogance is going to count against them when the judge imposes a remedy.’ “


Good pull. As a side note, Apple has very close ties with other agencies that “supersede” the DoJ; in essence, they have the ultimate ace-in-the-hole. The case will whither and die, or be dragged on and reduced to next to nothing.


The government giveth…and the government taketh away.

It’s unbelievable just how creative municipalities / agencies got when FEMA announced that funding would be forthcoming. It’s too bad they forgot to read-up on the rules and regulations, regarding the application process.


Jorge Estrada

FEMA won’t spend the money to collect.


David Balto, a former attorney in the antitrust division of the Justice Department, believes differently. See my post, above (7/11/2013 at 2:59 pm).

Jorge Estrada

I read the opinion but that is a comparison between Apples and Mud Hole City.


It isn’t a comparison.

It is taking the opinion of an experienced litigator with the Department of Justice about how a federal judge will react to arrogance in appealing the the federal judge’s decision, especially when the decision could have been so much worse, and there could have been criminal charges filed–and applying that litigator’s opinion to Atascadero’s decision to appeal the feds-demanded return by Atascadero of the “inappropriately” used FEMA funds.

The government has not (yet) filed charges for any of the BS pulled by the City of Atascadero and its contractor(s).

Atascadero’s city officials got a good deal because there is no prosecution involved. However, that could change on the decision of the feds.


Also, Apple has more investors in more key places than A-Town will ever have. FEMA has to decide: easy target (A-Town) or hard targets (Apple). Public sector employees ALWAYS opt for the easy road.


I don’t think McKinney leaving town was a coincidence.

I wonder what other financial improprieties McKinney has left in his wake?


Amazing how Mckinney just skipped town, amazing or convenient.

Mr. Holly

Where is O’Malley on this one. Usually you can’t shut the guy up as he takes credit for everything that happens in Atascadero. McKinney and O’Malley have been connected at the hip for years. I think McKinney knew what was happening since he orchestrated it and choose to leave town with his $141,000. What will Tom now do? Loosing McKinney O’Malley may be on his own. Most everyone is starting to get tired of O’Malley with is discertations on what a great guy he is. Eventually the truth is going to come out about the McKinney, O’Malley and Gearhart relationship. That may be the final cleansing that Atascadero needs and deserves.


Sturtevant wasn’t even on the council back then; I’d rather hear from O’Malley or McKinney. Looks like Wade blew town just in time.