Sanitation district attorney misled ratepayers
January 30, 2015
By KAREN VELIE
Confidential documents obtained by CalCoastNews reveal a long-term plan by South San Luis Obispo County Sanitation District officials to delay fines and findings of mismanagement by mounting a legal battle against the state — a fight they did not expect to win.
In 2010, failures at the sanitation district resulted in 384,000 to 3 million gallons of raw sewage flowing into Oceano homes and the ocean. The Central Coast Regional Water Quality Control Board then determined the spill was the result of mismanagement.
In March 2012, the sanitation district sent a confidential settlement offer of $50,000 along with an agreement to spend $100,000 on repairs to the state water board. The sanitation district serves the residents of the Oceano Community Service District, Arroyo Grande and Grover Beach and is governed by a three-person board consisting of one representative from each community.
On April 20, 2012, the state rejected the district’s settlement offer. Instead, the state proposed a settlement that included a $400,000 fine and the requirement for the district to spend $375,000 on specific plant upgrades.
On May 16, 2012, the three sanitation district board members, Oceano Community Services District President Matt Guerrero, Grover Beach Councilman Bill Nicolls and Arroyo Grande Mayor Tony Ferarra, rejected the state’s settlement offer in closed session.
On June 6, 2012, in a sanitation district closed session meeting that wasn’t properly noticed on the agenda, the board discussed an anticipated timeline and a proposed strategy developed by then district administrator John Wallace, district legal counsel Mike Seitz, and outside legal counsel Melissa Thorme.
In their timeline, Wallace, Thorme and Seitz do not consider winning their battle against the state.
The timeline notes that after the district loss of a hearing in Sept. 2012, the district can appeal to the state water board in a process slated to take about a year. After the district loses the appeal against the state it can then file a lawsuit in San Luis Obispo County Superior Court, which will take up to two years, the timeline says.
“The district does not have to pay fine until matter is settled in Superior Court,” the timeline says.
The district then paid about $750,000 to Wallace’s engineering firm, the Wallace Group, and a team of lawyers to argue against the allegations of mismanagement and the proposed fine. And as predicted in the timeline, the sanitation district lost the case and appealed to the state.
On Oct. 24, the state water board rejected the sanitation district’s petition for an appeal of the fine. In turn, the district board voted to file a lawsuit against the state in superior court, again as predicted in the sanitation district’s timeline.
State and federal laws provide for sanctions against firms and attorneys affiliated with legal actions that are taken primarily to “cause unnecessary delay or needless increase in the cost of litigation.”
During a Dec. 17 district board meeting, Seitz said that reports that the district had been offered a $300,000 settlement were untrue, and that the district had offered significantly more, a statement water board officials said is untrue. Several years ago, CalCoastNews reported that the state had offered the district a cash settlement of $300,000, an amount stated by Oceano Community Services District Director Mary Lucey.
“I can tell you that from my knowledge from those days that the water board never was below, well, let me back up, settlement discussions are confidential, so how anybody got information regarding a $300,000 proposed offer is kinda beyond me, but in terms of that, I can tell you that the district has never received an offer of $300,000 and the district has offered substantially more than $300,000 to try and settle it,” Seitz said during the taped meeting. “And having said that if the water board offered a settlement of $300,000 it would be my recommendation that the board take it.”
Sanitation district board member Guerrero, who was on the board during the 2012 closed session settlement negotiations, did not inform the public of the inaccuracies or challenge Seitz’ Dec. 17 statement.
Guerrero, a local attorney, recently applied to Gov. Jerry Brown to be appointed as a superior court judge.
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