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John Wallace’s attorney threatens sanitation district

February 4, 2016

Wallace signs

By KAREN VELIE

An attorney for former South County Sanitation District administrator John Wallace asked the district board Wednesday to rescind their decision to send allegations of criminal malfeasance to multiple law enforcement agencies and then alleged the district faced legal liability if it did not cooperate.

Two weeks ago, the board voted to send the 124 page Knudson Investigations report of mismanagement and malfeasance to the FBI, the San Luis Obispo District Attorney and the Attorney General. Carl Knudson has worked for more than 40 years as a fraud investigator and has testified as a certified fraud expert in more than 50 federal and state trials and proceedings.

However, sanitation district staff said Wednesday they had been busy with other tasks and had not yet taken the report to law enforcement.

John WallaceOn Wednesday evening, the sanitation district board provided Wallace time to respond to the allegations in the Knudson report.

Wallace asked the board to reject the report and not to send it on to law enforcement. In support of his request, Wallace said the allegations in the report were untrue, it was based on hearsay not facts, and that the bookkeeping under his leadership was meticulous.

Approximately 75 people attended the board meeting forcing some to listen to the meeting from an adjacent room. In addition, three Arroyo Grande Police officers stood at the entrance to City Hall.

Following Wallace’s speech, the board allowed the public to respond. Of the 24 speakers, 10 asked the board to send the report to law enforcement and 14 spoke on Wallace’s behalf.

Wallace supporters were made up primarily of Wallace Group employees and service club members.

Several local Rotarians spoke of Wallace’s impeccable character before asking the board not to send the report to law enforcement.

“I have known John Wallace for a decade,” attorney Bill Herreras said. “My experience with John is honesty, integrity and good moral character.”

Wallace Group employees also touted Wallace’s community service work. Wallace Group principle Kit Carter said the rate payers who pushed for the investigation did not have the intellect to understand what was going on.

Several rate payers who supported the investigation said that the San Luis Obispo Grand Jury had come to the same conclusion as Carl Knudson and that it was important to let law enforcement either verify the allegations or exonerate Wallace.

“This is not about character,” Coleen Martin said to the board. “This is about your fiduciary duty to the rate payers.”

Attorney Dennis Law with the San Luis Obispo law firm of Andre, Morris & Buttery, said Knudson’s investigation was inadequate, did not include sufficient interviews with Wallace Group employees and should not be sent on to law enforcement. Law said he represents Wallace and the Wallace Group.

“You made a reference to law enforcement that has appeared in the newspaper,” Law said. “There is harm happening today, now, immediately to him and his business. So, what I feel needs to happen, you need to rescind the decision regarding the references to law enforcement. If their was a technical approval of the report, as a part of you action, you need to rescind it.”

After public comment, the board asked Wallace to provide it a copy of his response and took no other action.

When asked about Laws allegations of liability to the district, San Luis Obispo based attorney Stew Jenkins expressed surprise. Jenkins said that California Civil Code Section 47(b) provides an absolute privilege for matters brought up in proceedings such as sanitation district meetings.

In addition, the California Supreme Court had held in the 2004 Hagberg case that it is absolutely privileged to refer a government audit to law enforcement specifically to assure the open communication between citizens and public authorities responsible to investigate and remedy wrongdoing, Jenkins said.


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In hos top-of-page piece in this morning’s Trib Mr. Wallace attacks Mr. Knudson and his investigation. If anyone hasn’t had the opportunity to review Mr. Knudson’s backround, take a look then decide which man you trust. https://www.linkedin.com/in/carl-knudson-7701315


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After watching the entire video, the one thing that stands out to me was that it appeared that there were many individuals who were there in attendance, but not interested in hearing Wallace’s rebuttal.


The report was 100+ pages long and only 10 mins was originally allotted-seems a bit short given the gravity of the matter and the amount of money in question.


I don’t know who the elderly woman is that complained that he spoke for 20 mins, but having participated in similar public hearings many times in the past, you typically want to give an adequate amount of time to the accused to make their case in a public forum.


Why you ask, because then you know how they will defend themselves if it goes to trial, and you can plan accordingly.


Very poor strategy by the Board and the District’s Legal Counsel to have not let Wallace complete his entire presentation “on the record”.


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Whether something does or does not go to trial isn’t a matter for the sanitation district board to decide. They received an investigative report recommending, among other things, that it be referred to law enforcement to determine if there was any criminal activity. Whatever happens beyond that point isn’t within the purview of the district so spending a lot of time to discover Mr. Wallace’s defense strategy would be meaningless. That’s a matter for the authorities not the folks who run the sewer plant.


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The San District is done with this.


Mr. Wallace should have presented his side of the story in 2011 when the Grand Jury said almost the same thing. Too late. Too late.


Many of the attendees have spent countless hours studying the San District – as many as Mr. Knudsen. They did not have any need to listen to his 20 minute profile.


Like him showing a photo from when the San District was created until now. Silly John, Give us a photo when you started at the helm.


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Spin, spin, spin.

Did Verdin Marketing create Wallace’s Wednesday night ad campaign?

Irrelevant, misleading and meaningless slides. Only the employed faithful were convinced.

The facts remain.

The SSLOCSD reserves were wiped out by Wallace.

The State Water Board determined Wallace was responsible for the spill, another great cost to the district.

The ratepayers funded Wallace’s defense, those expenses continue.

Ratepayer rates are scheduled to increase.

The plant MUST have a redundancy plan and is making more progress in that direction than during the 27 years of Wallace.

There were once funds to build the system, now a significant rate increase and outside funding is needed.

Mr Wallace, nor one member of his well paid entourage attempted to explain exactly how the plant is operating currently–not just within budget, but slowly managing to build a reserve IN SPITE OF THE FACT THAT OUTSIDE FIRMS ARE HIRED TO DO WHAT WALLACE GROUP EMPLOYEES ONCE DID AT “A DISCOUNTED RATE”.


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Mary Verdin was at the Wednesday night meeting, and being she is not a SSLOCSD ratepayer and did not speak for Mr. Wallace, it is a good guess she did have a hand in the creation of Wallace’s fictional presentation. Another company not to do business with and should we prevail in November and change the council makeup dropping them and their big $$$$$$ contract should be done.


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Remember this tangled web?


Mary Verdin’s husband was Nick Tompkins’ pilot.


NKT was the recipient of many AG deals while Ferrara was in charge.


Bringing Verdin onboard with a proposed 5-year how-to-save-water contract was only cut to ONE because Councilmember Brown asked.


Ferrara pushed for the contract as a favor to Nick.


However, much to the dismay of councilmember Barneich, the AG gravy train for Verdin ended this year. Harmon got one right when she voted with Brown and Hill not to renew Verdin’s contract.


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What was it? $75,000 contract and we got 1 newsletter (I think?), a banner and a poorly set up facebook account telling folks to “save water”.


It was a bad deal from the very beginning, and not an effective campaign in my opinion.


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No bigger admission of guilt than trying to keep the facts from LE.


Kevin Rice nailed it at the meeting! Rice for president!


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Do you think the FBI is not already investigating? Do you think that they are waiting to be sent a report that they already have? Do you think that they will suspect the members of the board of being dirty and being blackmailed by Wallace for not turning over the report and recommendation to investigate? Sounds like the poop is getting ready to hit the fan.


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The next Great CCN Story…

Tracking the Political $$ of Wallace!

You just know the political kickback game was being played!!


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Which is why many suspect Ferrara rolled out of town.

Why Guerrero and Shoals have been obstructionists to an investigation.

Why Shea never lifted a damn finger.


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Don’t forget Nichols and Seitz. Quite a line up!


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Threatening the District, how classic, funny stuff right there. Same intimidation tactics from the same schmucks used on the employees Wallace fired for standing up to his big man crap. Considering Wallace is so well versed at clearing things up, it should have been pretty straight forward explaining the real facts of the allegations of former employees,the findings of the Grand Jury and Mr. Knudson’s report, but were they or more excuses and lies. Did he have facts to dispute the charges? Did Kelly Gearheart and Al Morarity, oh sure they did. And how thoughtful of the Wallace employees and brother gang…oops, I mean club members of his to back him. No doubt Kim Jong Un has friends as well who would tell us of his integrity and honesty. So did you get to hear why EVERY project Wallace administered or managed failed, did ya? Discount rate for services? You cant really sure that oh say $20 million in charges give or take over 25 years is a discount rate bargain, and still you’re at square one with an antiquated plant still in need of Millions of upgrades is honest or effective management? For you Kit Carter, your correct about not understanding things, however I wouldn’t use the words lack of intellect. Its more a case of trying to comprehend the arrogance and greed of some.


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Kit Carter even got Sholas goat!


What an arrogant ass!


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The Rats are in a Panic.


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It has been 15 days and counting since the January 20 SSLOCSD meeting where the board accepted the Knudsen Audit Report and voted to send it to the District Attorney, the State Attorney General and the FBI! Stop the foot draggin’ and send the Knudsen Audit Report to them NOW!


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John Wallace was taking advantage when people WERE paying attention.


Unfortunately, the elected representatives – Tony Ferrara, Jim Guthrie, Caren Ray, John Shoals and Bill Nicholls refused to listen to the rate payers sounding the alarm.


The elected officials were casting aspersions on the public outcry and even the Grand Jury report.


The elected officials were consumed with running defense as their only play option.


The elected officials cleared a path and put up a velvet rope down the driveway of the Sanitation District, for John Wallace and his wheelbarrow.


Just like last night, the elected officials stacked the deck in favor of John Wallace at every single opportunity.


Wallace – $6.8 million

Rate payers – Zero

Sanitation District – MINUS a redundancy system


Where is THAT math in the Rotarian Code of Ethics?


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For 25 years the San Board used the same 3 pg contract for Wallace


Ferrara said they “reviewed it regularly” Yet Guthrie admits they should have looked at it and not let 25 years go.


Both of these were said at the same June 2011 AG City Council meeting.


Someone’s not telling the truth: Tony?


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Guthrie is only trying to do damage control of his past in actions, guessing he is planning on running for re-election


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I cannot WAIT for that announcement, if it’s true.


Guthrie has been phoning it in for years, and I can prove it.


As an elected official, he should be taking his committee responsibilities seriously. Even as an alternate. It’s his elected (self-sought!) job to look out for and represent the taxpayers.


He has not been doing his job.


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