SLO County DA lawsuit accuses San Simeon CSD management firm of ‘unfair competition’
The San Luis Obispo County District Attorney’s Office on Tuesday filed a civil lawsuit against the private company that manages the San Simeon Community Services District and its CEO, charging the firm with “unfair competition,” conflict of interest and other violations.
The agency spent a year investigating “all of the day-to-day management, operation and services” that Charles Grace and his company, Grace Environmental Services LLC (GES), performed for the district, according to a District Attorney’s Office news release.
The investigation was done in conjunction with the Fair Political Practices Commission, the release said.
The lawsuit, filed in San Luis Obispo Superior Court, seeks injunctive relief and civil penalties.
In its suit, the District Attorney’s Office lists nine causes of action addressing “several issues of unfair competition” — including allegations that Grace and GES sent threatening letters to a senior citizen who lives in the district.
That resident, Hank Krzuik, represents San Simeon on the North Coast Advisory Council. He’s been regularly critical of Grace, GES and the San Simeon CCSD’s methods and actions, and has filed numerous complaints about those.
The lawsuit also alleges that Grace and GES “sought to mislead” the San Simeon CCSD board of directors about the district’s investigation into potential conflict-of-interest violations, and “engaged in accounting practices that unfairly interpreted contractual provisions and financially benefited GES.”
As is the case with any lawsuit, any allegations therein still have to be proven in a court of law by sufficient evidence.
Management company CEO’s attorney responds to lawsuit
Grace repeated in a phone interview Tuesday what he and CSD Chairwoman Gwen Kellas have said to The Tribune for months: Their attorneys are advising them not to comment on the issues facing GES, Grace and the district.
Grace’s attorney is Greg Sanders of Nossaman Guthner Knox & Elliott in Orange County.
Sanders is well versed in North Coast community services district practices, having served on the Cambria Community Services board of directors from 1993 through 2010. He was an appointee in 2015, filling the vacancy left when board member Muril Clift resigned.
Speaking in response to the District Attorney’s Office civil lawsuit, “I’m very disappointed in Dan Dow as district attorney,” Sanders said. “This is a politically motivated and completely unwarranted action taken by the DA.”
“Over the past several months, we have in good faith worked with the DA’s office and provided all the exculpatory evidence demonstrating that Charles Grace and Grace Environmental Services have done nothing wrong,” Sanders said via phone. “Despite all of that evidence … the district attorney has chosen to file this complaint.”
“Certainly, Charles Grace will vigorously defend everything he has done as the contractor for the San Simeon Community Services District,” the attorney added. “He is proud of his record and has done nothing but good work, professional work for the residents and taxpayers of San Simeon.”
Is Charles Grace general manager of San Simeon CSD?
The lawsuit filing follows on the heels of a Sept. 21 letter sent to the San Simeon district by deputy district attorney Ken Jorgensen, who led the agency’s yearlong investigation.
Although it is not “our office’s policy is not to comment on active investigations … in this instance, we believe it is important to make an exception,” Jorgenson wrote in his letter.
“During the investigation,” he continued, “our office has spent a considerable amount of time with Mr. Grace’s attorneys attempting to understand the scope of duties” that Grace owed the district as its general manager.
Whether Grace is, in fact, the district’s general manager has been a fiercely debated topic of discussion at recent board meetings, with nobody in authority offering an official answer.
For years, many in San Simeon have assumed that Grace was the district’s general manager. He’s even referred to himself as such in high-level public meetings, such as California Coastal Commission hearings.
Jorgenson wrote that it’s “vital for the district’s board of directors and San Simeon ratepayers” to understand the complexities of that issue.
In his letter, Jorgenson didn’t directly say that the district has a general management firm, not a general manager. But he cited liberally from communications he got from Sanders, and from government codes about CSD law about what a general manager is and does.
District directors were to have held a special board meeting at 5 p.m. Sept. 28 to conduct a “public employee performance evaluation” in closed session. The agenda item identified the evaluation dealing with “general manager services.”
However, the agenda notice included two different Zoom links, so chairwoman Gwen Kellas closed the meeting, indicating that the board would reschedule it rather than risk being in violation of the state’s public meeting laws.
The rescheduled meeting was held at 5 p.m. Sept. 30. After some initial problems with the Zoom video conferencing format, the board members dealt with an unrelated issue and then went into closed session.
About an hour later, the board resumed the open meeting. Kellas said they’d had a “very productive meeting,” but that no reportable action was taken during the closed session.
Unless another special meeting is scheduled, the board will meet again next on Oct. 12.
In the meantime, it was not clear when the next court hearing for the lawsuit against Grace and GES will be.
This story was originally published September 28, 2021 at 6:02 PM.
