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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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John Wallace usually steps in shit and comes out smelling like a rose. Let’s hope that’s not the case this time. I think there’s enough public attention now and people are FINALLY realizing that he is a crook. When it’s only your employees and good ‘ol boys supporting you at these meetings, you’ve got to open your eyes at some point and realize you’ve done wrong and this time you’ve been caught. He should be nervous!


John Wallace’s employee, Kit Carter said “the rate payers who pushed for the investigation did not have the intellect to understand what was going on”. What folks don’t know is that John Wallace is THAT good. He’s got his employees convinced that he did nothing wrong, that the facts are being misconstrued. I feel sorry for Kit Carter and other employees standing up for JW – they truly believe that he’s a good guy. I hope they someday realize how naive they’ve been. It’s the employees of WG that don’t “have the intellect” to realize they’re working for a snake, and that JW can twist things around like a clown making balloon animals at the circus.


John needs his employees to stand up for him – hardly anyone else will. When you work for Wallace Group, if you don’t jump on board, you’re not long for the WG world, you won’t have a job.


This man is a wolf in sheep’s clothing. He does community service and such to make himself look good, so that nobody will suspect anything. His attorney, Dennis Law is a member of the “good ‘ol boys club” in SLO – John and Dennis have been close friends for over 30 years and they’re going to scratch each other’s back when necessary. I’m confident John will get what he deserves, he’s gotten away with this for so long, it’s about time!


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Mr.Byrd, I would have thought you smarter than this.

Anytime you can get a legal or political opponent on the record about a hot topic, you do so. It limits their options upon the eventuality that it becomes necessary to manipulate the overall narrative, and could provide you a valuable resource if something is said in conflict with the original statement.


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Maybe. But I suppose I’ve already proven my inadequacy as a politician. It just seems to me that though immense political pressure may have been required to get to this point, once the report was referred to law enforcement it moved from the political to the legal arena. Now it’s up to the investigators and attorneys to deal with any criminal aspects. The board’s role now should be assuring procedures are in place to assure this cannot ever be repeated.


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Exactly, the kangaroo court system of SLO co buddies has run its course, its time for those with no gains to be had to take the ball and run with it. Hopefully a touchdown at the go to jail line comes with one play.


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Let’s not forget that Kelly Gearhart went on the Dave Congalton show to berate CCN, Velie and Blackburn for their reporting on the over financed Paso golf course. Gearhart’s comments on the radio helped sink him in court., and now he’s spending 14 long ones in fed lockup.


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