John Wallace arrested on felony conflict of interest charges

January 24, 2017

John WallaceEditors Note: “The criminal complaint against John Wallace is attached below the article.


The San Luis Obispo County District Attorney’s office has filed felony conflict of interest charges against 73-year-old John Wallace, the former administrator of the South San Luis Obispo County Sanitation District. The announcement came Tuesday.

After conducting a 10-month investigation into allegations that Wallace was funneling money from the sanitation district to his private engineering company, The Wallace Group, the district attorney filed two felony counts. Wallace is accused of having financial interest in a contract that he made in his official capacity. Wallace is also charged with two misdemeanor counts of using his government position to influence a decision in which he has a financial interest.

“The public has the right to expect that their elected and appointed officials and their administrators will carry out their duties in a lawful, ethical and professional manner,” said District Attorney Dan Dow. “The District Attorney’s Public Integrity Division will thoroughly and fairly review all matters referred to us and will pursue charges such as these whenever appropriate.”

In 2010, CalCoastNews exclusively reported on accusations that Wallace had been funneling millions of dollars from the sanitation district to his private engineering company without proper oversight. 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.

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. Both ended up losing their jobs shortly after they became whistleblowers.

In 2011, the San Luis Obispo County Grand Jury, prompted by the CalCoastNews investigation, mounted an investigation into Wallace and the sanitation district board of directors.

Following its investigation, the Grand Jury recommended that the district board consider hiring independent management and that it evaluate and compare organizational and operational alternatives for the district. The San Luis Obispo County Auditor Controller’s Office was tasked with looking into the conflict of interest allegations.

“The Grand Jury finds the district is in a state of denial regarding the conflict of interest and, as a result, the district has taken no effective steps to mitigate the conflict,” the report says. “The Grand Jury concluded that, as a result, the board and the district are exposed to a number of financial, legal and public trust issues.”

Ex-mayor Tony Ferrara

Ex-mayor Tony Ferrara

At that time, former Arroyo Grande Mayor Tony Ferrara, Arroyo Grande Council Woman Caren Ray, Grover Beach Mayor John Shoals, former Grover Beach Councilman Bill Nicolls and former Oceano Community Services Director Matt Guerrero supported Wallace and claimed the allegations were unfounded.

In Oct. 2011, the SLO County Auditor Controller’s Office provided its investigation report to the sanitation district board saying, “there are reasonable controls in place and operating adequately to mitigate the perceived conflict.”

Nevertheless, former Grover Beach Mayor Debbie Peterson and Arroyo Grande Mayor Jim Hill battled to have an investigation launched into the allegations and to remove Wallace from his administrative position at the sanitation district.

In 2015, the district hired Carl Knudson of Knudson & Associates who confirmed conflict of interest allegations and asked the sanitation district board to send his report to criminal investigators.

On March 4, the sanitation district sent the SLO County District Attorney’s Office the Knudson report and asked county prosecutors to investigate the allegations of criminal misconduct.

Wallace’s is slated to be arraigned within the next couple of weeks.

People v John Wallace-Complaint by CalCoastNews on Scribd

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While the DA may have filed charges against Wallace, I don’t see where he was arrested and booked at the County jail for anything.

Yes, I am waiting for Wallace’s perp walk, but knowing Sheriff Parkinson and his policy against taking even his own deputies in for booking and photos I won’t hold my breath waiting for Wallace. Likely he will be given a special deal and the special private arrangement reserved for fellow LEO’s, politicians, and other special people.

Thank you CCN. This would not have happened without your excellent work.

You’re next Tony!

Awww! Big Tony and his LLC Arroyo Consulting…. they will be coming to get you…

Can’t wait!

Someone may want to check the Palm Springs area real estate for sales signs. Maybe Big Tony is trying to sell his house quickly and run there like he did with is Berry Gardens house in Arroyo Grande.


I happen to like John Wallace, I know nothing of his business dealings but have witnessed his willingness to help a special interest group who needed professional backing. I know that this does not make bad into good but get real. In this county if doing business with government was a S.T.D., contractors and government employees alike would be infected. I have dealt with local government for 41 years, have learned more than I would ever care to repeat and know that the system is self correcting. Unfortunately it is the non-government agencies that seem to take the fall for failures in the public trust. When I hear conflict of interest, I think of how government employees get paid so well. The last thing I want to hear is their need to afford housing. Everyone has that need.

Being “likeable and willing to help special interest groups” does not preclude one from breaking the law.

It always easier to be willing to help others when you are doing it with stolen money.

I can only agree with both responses. One concern that I would have, if John goes to jail, do we have enough room for the others that enabled, if perfected, this conflict of interest / federal crime charge? Can we put retired people in jail too, cancel their retirement until the trial is over? It just seems very odd that one person can hold the cookie jar and eat until caught, as in decades later?

How about Mr. Wallace repays the +/- $20m that was overcharged or misappropriated. That would go a long way toward adapting the plant for reclaiming water. And that’s what it should have been there for.

While kidholm and kayaknut make excellent points, Jorge’s comment has a ring of truth. While we are awaiting Mr. Wallace’s head “to roll” as it were, everyone has seemed to gloss over the fact that it takes two to tango (at least, in this case). What about the SLO County Auditor Controller’s office? No name mentioned. I’d like to know who the taxpayers have hired that has failed so dismally at their job. No to mention the board (as corrupt as it was with Ferraro and Ray) consistently rooting for the man while the alleged crimes were being committed.

I’m not holding my breath for any significant legal action or reform, regardless.

Now is the time for those with information to speak to Lee Cunningham, who is heading up the investigation. Now is the time for justice. You’re right. It may turn this County upside down. Speak now or be part of the collusion.

It is always the case that the most successful con artists are highly skilled deceptionists. Wallace is in the Bernie Madoff mold – everybody’s favorite uncle – the nicest guy you’ll ever meet. Who wouldn’t trust him?

I guess we’ll find out whether Seitz was providing the District sound legal advice. All those legal expenses, at least in part spent to protect Wallace during the spill and allegations of malfeasance. What a waste! Of course, a lot of the people involved have moved on. But, John Shoals is still there.

…and Bill Nicolls has installed his wife to look out for his interests. He was very clear about that when he was termed out. She has been very clear about it as well, saying so in public meetings. John Shoals has also been very clear in only allowing Nicolls’ wife to be the alternate, despite the fact that there are others on his Council who are better qualified. This warrants a very careful look into any of the agencies that Shoals and Nicolls controlled.

I wonder how Tony, John and Adam are sleeping these nights knowing that somebody, the DA, is out there to monitoring their activities?

I do hope the investigation does now stop with Wallace. John Shoals, Tony Ferrara, Bill Nichols and who knows who else most likely had good reason to allow this to go on…maybe financial benefit? How could this wrongdoing be so apparent to the rate payers and inside whistle blowers, and continue on for so many years.

Thank you Dan Dow for listening to the citizens. Let justice now be brought forward.

oops, I hope the investigation does NOT stop…bad typo!!

Take a look at the 20 or so public agencies Wallace and Seitz “administered” or “engineered”. I can just about guarantee that the malfeasance wasn’t limited to just SSLOCSD.

i bet you’re right about that, discloser!

Who did John Wallace call from booking?

Big Tony?

The Tribune?

Matt Guerrero?

No one can take away the charges even if they go no where. But what about all the money he stole?

Thank you, CalCoastNews, for the original reporting on this story and sticking with it despite massive pushback from the community.

Thank you Mayor Jim Hil and advocate Debbie Peterson for your attempts to shed light on the problem and bring much needed reform.

F you, Tony Ferrara. Be lucky this isn’t you being indicted.

Good work by the District Attorney and his staff. One down, one to go.

And thank you, Dan Dow. It takes guts to stand up to the machine.

Better late than never i guess but lets hope a standard Dan Dow plea bargain isn’t done just to be able to claim a conviction and not tarnish the DA’s record.

Oh Spork. LOL.

I hope this case goes better than the joke of arresting the two ladies from the California Valley CSD. Great fanfare upon arrest, felony charges leveled, reputations trashed, and then drop the charges? Let’s do our homework, and actually see a case through to completion!

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