Wallace responds to accusations at South County sanitation meeting

Former South San Luis Obispo County Sanitation District administrator John Wallace addressed the district board of directors Wednesday to refute accusations he mismanaged the district during his 27-year tenure.
Former South San Luis Obispo County Sanitation District administrator John Wallace addressed the district board of directors Wednesday to refute accusations he mismanaged the district during his 27-year tenure. kleslie@thetribunenews.com

John Wallace addressed accusations of malfeasance and mismanagement during his tenure as district administrator of the South San Luis Obispo County Sanitation District at a standing-room-only district meeting, calling a report making those claims “unfair” and “false.”

“I’m here to tell you tonight that those allegations are untrue, that they never happened,” he told the district’s board of directors Wednesday.

Wallace appeared before the board of directors two weeks after the same board unanimously voted to send a report investigating his management practices to the county district attorney, the state attorney general and the FBI to review for possible criminal charges. As of Wednesday, the report had not yet been sent because of delays in getting all of the exhibits and because the district’s administration was busy with other duties, officials said.

District secretary Amy Simpson said on Thursday that the report would be sent by the end of the day.

The 124-page report, prepared by Knudson and Associates of Thousand Oaks, claims Wallace mismanaged the district during the latter part of his 27-year tenure and used his position as district administrator to gain work for his own company, the Wallace Group. Among the allegations: Wallace used his district position to deny permits for RV sewage dump stations at Oceano Dunes State Park on two occasions after the permit applicants — a private company and the state Department of Parks and Recreation — refused to use his company for design and engineering work.

“Mr. Knudson never asked me about any of the allegations he came forward with in his report,” Wallace said at Wednesday’s meeting. “Everyone is entitled to their own opinion, but people aren’t entitled to their own facts and that’s where I think Mr. Knudson missed the boat.”

Wallace’s lawyer, Dennis Law, also spoke at the meeting Wednesday night. After alluding to a possibility of litigation against the district for harm to Wallace’s reputation, Law addressed the dump station permits.

“Through the enforcement powers of the pretreatment ordinance, the Wallace Group and staff members of the district both were attempting to get their arms around the problem with RV dumping, because it posed a unique problem,” Law said. “We were trying to get our arms around how to permit them, what costs were to be recovered, and how it was to be done. There were studies that were being done, and it took a long period of time. That’s the context in which the events took place that are the subject of the investigators report, and you get no hint of that from the report itself.”

Wallace also said claims that he mismanaged the district’s finances were false, and attributed a decline in its reserves and increases in spending to “unusual events” like earthquake damage, a large 2010 sewage spill and a series of employee disputes that were “expensive for the district,” he said. He added that a number of large capital projects were approved by the board of directors during that time, contributing to increased spending.

The Knudson report found that between 2003 and 2012, the district operated at a deficit each year as the district’s overall revenue declined while expenses steadily grew. The report also found that between 1999 and 2009, the hours billed to the district by the Wallace Group for administrative and engineering work increased eightfold, with monthly invoices reaching a high of $70,000.

Wallace asked the district’s board of directors not to forward the Knudson report to law enforcement, because he believed there was no evidence of wrongdoing.

“It’s clear that you — the board — and I probably disagree on the value of our services for the past 20 years,” he said. “I believe we have provided an outstanding history of service to this community, both myself and to the professionals that work at Wallace Group.”

The board of directors heard about 90 minutes of public comment following Wallace’s presentation.

About 60 people attended the meeting, with about a dozen speaking on Wallace’s behalf, praising his character and longstanding involvement in the community.

“I’ve known John Wallace for 25 years, since the time he first started his business,” said Jeff Buckingham of San Luis Obispo. “As all of this has unfolded, and I’ve kept up on the issues, the stories that are coming out seem very inaccurate to me compared to the man I know.”

Another dozen or so spoke against Wallace — many who had spoken at the last board meeting regarding the Knudson report — asking why the board was hearing Wallace’s response when it had already voted to forward the report to authorities for review.

“This isn’t about character — this is about you having a fiduciary responsibility to the ratepayers who live here,” Colleen Martin of Arroyo Grande said. “Don’t let this association or that association sway you. You voted, it’s moving on. And let the facts speak for themselves.”

After public comment, the board asked Wallace to send his response and presentation to the district and took no further action.

“I feel giving Mr. Wallace the opportunity to respond tonight was the right thing to do in this process,” board Chairman John Shoals said at the end of public comment.

In an email statement to The Tribune on Thursday, Wallace said he was disappointed the board did not allow him more time to state his case.

“I appreciated the opportunity to address the investigator’s findings,” he wrote. “But it bothers me that the investigator had 530 hours to prepare his 100-plus page report and I was given only 10 minutes to state my side.

“My main point is this: The investigator’s report contains many exaggerated, unfounded and misleading claims. Worse, it excluded readily available facts that would make it very clear there was no misconduct by the Wallace Group. I am, however, grateful for the many community leaders who spoke in our behalf. Their support means the world to me and to our employees.”

Kaytlyn Leslie: 805-781-7928, @kaytyleslie

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