John Wallace facing a criminal investigation

January 21, 2016

John WallaceThe South San Luis Obispo County Sanitation District Board of Directors voted unanimously Wednesday to take reports of malfeasance by former district administrator John Wallace to District Attorney Dan Dow, the Federal Bureau of Investigation and Attorney General Kamala Harris.

Carl Knudson, of Knudson and Associates, spent almost two hours presenting his report on past management practices and providing recommendations to avoid future malfeasance to the district board. Knudson also asked the board to seek a criminal investigation into Wallace, the owner of the Wallace Group.

Board President John Shoals said he had made mistakes and let some of the wrongdoing occur. In 2010, former sanitation district employees Scott Mascolo and Devina Douglas sent letters informing Grover Beach Council members, Arroyo Grande Council members and the Oceano Community Services District Board about misuse of public funds and problems with the plant complying with safety and health requirements.

District management responded by terminating the whistle-blowers and demeaning the credibility of news organizations, including CalCoastNews, that covered the allegations.

For about an hour, during public comment, citizens asked the board to seek criminal prosecution of John Wallace. Julie Tacker noted that federal grant money was in play which could allow the FBI to also investigate the criminal allegations.

Mike Byrd asked the board to also send the report to state engineering licensing agencies and the State Bar of California regarding allegations in the report of wrongdoing by sanitation district legal counsel Michael Seitz.

Wallace Groups public relations and communications expert Chris Gardner said Wallace had not had time to read the report and develop a response. Gardner asked the board to continue the item until Wallace had a chance to address the board.

Sanitation district board member Matt Guerrero said he thought Wallace should have an opportunity to respond to the allegations and asked that Wallace’s response be placed on a future agenda.

Shoals disagreed, and said that Wallace could speak during regular public comment, and that he would give Wallace additional time to respond to allegations in the report.

Arroyo Grande Mayor Jim Hill made a motion to carry out Knudsons suggestions regarding district operations and procedures, to pay Knudson approximately $14,205 for completing the investigation and to ask for a criminal investigation. The board voted unanimously to approve Hill’s motion.


The Wallace group is a large employer on the central coast. If there was in fact malfeasance and taxpayer theft, the result could be bad for a lot of people particularly if Wallace has to shut his doors.


SO what! If he was raping the taxpayers we are to turn on backs on justice because people who knew, were part of, and benefitted from the wrongdoing might lose their job. Ask me if I can as I look at what this Company has done in this County.

You want to work for a corrupt Company and benefit and then cry baby tears when caught, too bad!


Re read the post. I have basic human concern for employees who are working hard without knowledge of corruption who could in fact lose their jobs which are quite difficult to replace on the central coast.

That’s all. You don’t?


Then they can be hired by whoever takes over.


His competitors will have job openings.


I will be shocked if Mr. Wallace offers any public comment. With the possibility of criminal investigation being started, any attorney will advise him to not make any further public comments that could be used by a grand jury or at a trial. I don’t think that we will be hearing from Mr. Wallace any time soon. People usually keep very quiet when the three letters F, B, I are mentioned.


His defense started months ago. He has huge coffers he stole from the Sanitation rate payers. Check out facebook… his SLO big wigs are already standing up for him.


SLO under the direction of Wallace going back to the 70’s the ratepayers in SLO have also benefitted from his damage.

Look at how many Sewer and Water Treatment Plant “Upgrades” came under the direction of Wallace. He’s had a lot of the right people in his pocket for a long time.

Mr. Wallace, it is now time to give back to the citizens, not the politicians!


Tony…be advised, you can run, but you can’t hide. You and your cronies will be brought to justice.


If only the LOCSD had been investigated with the same zeal and detail that the sanitation district has. Former board members would be serving time.


Once again, CCN & Julie Tacker (not CCN associate) play the role of watchdogs.

Sounds like the beginning of the end for Wallace although it may take years but have

confidence, see where Atascadero man-of-the-year Kelly Gearheart ended up.

Just finished watching the meeting. Oh my!

Mr. Gardiner must be paid a lot form Mr. Wallace. What a spin!

Twice he spoke of Mr. Wallace employ at the Sanitation District as “service”


No this was theft, extortion, misuse of public funds, conflict of interest and fraud.

John Wallace is bankrupt of morals and should resign yesterday from Rotary and go to jail.

Rotary 4 Way test

1.Is it the truth?

2.Is it fair to all concerned?

3.Will it build goodwill and better friendships?

4.Will it be beneficial to all concerned?

Wallace scores 0 for 4 on that one!!


Chris used to be a man of integrity. What a sad slide.


I thought this day would never come!

My thanks to AG Mayor Jim Hill and other staunch advocates for change for taking the political risks to force Wallace to justice.


Hill is doing great work leading the charge for rooting out Ferrara’s allies.

Ratepayers can breathe a little easier with Sweet and Seitz gone from the district. Wallace is wounded. Those south county folks are showing us they were serious when they elected Hill.

just the facts

KUDOS to Mayor Hill and Karen Velie for dogging this for so many years, however, it ain’t over yet! Need a criminal investigation to now move forward!.


I want to make the following observations.

This is a classic example of lack of integrity and greed. Both Arroyo grande and Grover beach councilmembers including myself have left their constituents in a difficult position for not asking enough hard questions. I tried to some degree to bring these issues up with Tony during meetings while he was mayor to no avail.

But I did not push hard enough, nor did Jim Guthrie. All previous councilmembers who failed in this regard are responsible. How do we now go to our constituents and ask for a $30 million bond to pay for the redundancy project? That is going to be a difficult task. I hope that the people that supported Tony and are so angry that Jim won the election will look at things in a new light . The oceano representatives continued to ask hard questions during this previous period and were shot down. In the audit Tony says basically hindsight is 2020 it is wrong for us to second-guess those decisions, that is self-serving and inappropriate. I have no faith that the local authorities will do anything. Additionally because the board approved most of these actions I’m not sure anything can be done to Mr. Wallace. In closing I hope people understand the need to continue to ask hard questions even if it makes people uncomfortable.


Does that go for the AG city manager, Tim.

Ask the hard questions there.


what is there to investigate. charge, convict, imprison, and reclaw the money.


More interesting reading:

There was a sharp decline in cash and cash equivalents of about $7 million during the ten-year period ending in 2012, the last full year of the Wallace Years. Expenses grew steadily every year and exceeded revenue by a substantial margin in each and every year from 2003 to 2012.

The report also states:

As shown by our “trend analysis” the yearly billings by the Wallace Group starting in 2000 showed modest increases, but after 2001 there was a dramatic increase in their billings that peaked in the 2009-2010 period. Our analysis showed that after the Grand Jury investigation began in 2011 and after the rewriting of the Wallace contracts in July 2011, the monthly billings decreased substantially until the retirement of Wallace in 2013.