Shortly after the State Water Resources Control Board opened an investigation into a December 2010 sewage spill in Oceano, state officials determined they might have more than a civil case on their hands.
About a month after starting its work, the water boards Office of Enforcement received information that led officials to believe the South San Luis Obispo County Sanitation District may have fraudulently misreported and underreported the volume of the spill.
As the case has developed, we have found what we believe may be criminal conduct, Julie Macedo, senior staff counsel in the water boards Office of Enforcement, said at a recent court hearing in Sacramento, according to a copy of the transcript from the proceedings.
Reached Tuesday, Macedo said water board prosecutors have not yet decided whether to proceed with criminal charges, which could be filed against sewage treatment plant administrator John Wallace; his firm, Wallace Group; the sanitation district board; or other parties.
We are still considering and investigating all appropriate remedies, including criminal penalties, Macedo wrote in an email. We are not ready to file charges at this time; we have chosen instead to proceed with the administrative action and take things in order.
If charges are filed, Macedo could refer the case to a number of agencies, including the state Attorney Generals Office. A spokesman there declined to comment.
Michael Seitz, attorney for the sanitation district, said he hadnt been informed of any potential fraud allegations.
He said in an email, From my clients view and their outside counsels view, there is no basis for criminal liability and that this is a red herring being raised to take away from the focus of the case.
Wallace referred questions to Seitz.
The district serves about 38,000 residents in Arroyo Grande, Grover Beach and Oceano.
In June, the state water board issued a proposed fine of more than $1.3 million for the sewage spill.
A civil liability hearing before the Central Coast Regional Water Quality Control Board will be held Sept. 7. State water board prosecutors and sanitation district attorneys will present evidence.
The Central Coast water board will then decide whether to adopt, modify or reject the proposed penalty.
The sanitation district and state water board reached an impasse after negotiating for months on the amount of the spill, the fine and other details.
On Dec. 19, 2010, following heavy rain, floodwater flowed into the wastewater treatment plant and caused an electrical short that shut down four influent pumps about 10:30 a.m.
An emergency standby pump was also inadvertently left closed. Though sewage treatment plant operators were able to open it part way, sewage overflowed in the plant and from manholes in a neighborhood near the Oceano Airport.
Spill amounts later reported by the sanitation district varied. Then-chief plant operator Jeff Appleton initially calculated the spill from 2.2 million to 3 million gallons, according to the water boards proposed administrative civil liability complaint.
On Dec. 22, the sanitation district submitted a spill volume of 898,600 gallons, according to the state water board.
The numbers changed after district staff reviewed data recorded during the spill, studied sewage line storage capacity and interviewed local residents. The spill volume was estimated at 384,200 gallons in a report to the regional water board in January, and modified again in May to 417,298 gallons.
The state water boards investigation concluded the volume of the spill was more than 1.1 million gallons.
The sanitation district, in its response to the proposed civil penalty, argues the state water boards calculations are flawed and the fine is drastically inconsistent with fines levied in other communities for similar events.
A discussion over possible criminal sanctions was raised during a hearing in Sacramento last week.
The hearing focused on whether the state water board should have to produce certain records requested by the sanitation district under the California Public Records Act, according to a transcript of the hearing and other court documents.
The records included internal emails and other correspondence between the state water board and local residents and whistleblowers, according to court documents filed by the state Attorney Generals Office on behalf of the water board.
The water board attorneys argued the documents should not have to be released because they are part of the boards investigation into a possible criminal prosecution, and therefore protected from disclosure.
Macedo, the state water board attorney, said whistle-blowers and local residents began to contact the state water board in January 2011, according to a transcript from the hearing.
Seitz wondered whether the water board formed its argument specifically to shield certain documents from the district.
My question is, are they saying that in order to hide those documents, or are they seriously considering (criminal sanctions)? he said.
On Aug. 15, Sacramento County Superior Court Judge Michael Kenny largely agreed with the water boards argument, noting it also appears to the court that there is a concrete and definite prospect of a criminal prosecution, according to the transcript from the proceedings.
However, Kenny added, that doesnt mean such a prosecution will be pursued. He ordered the state water board to turn over one document to the district.
The ruling had no impact on whether or when a criminal action will be forthcoming, Macedo said.
The Sept. 7 civil hearing will start at 8:15 a.m. at the Central Coast Regional Water Quality Control Board office, 895 Aerovista Place, Suite 101, in San Luis Obispo.