New conflict of interest charges filed against John Wallace

John Wallace, the former administrator for the South San Luis Obispo County Sanitation District, appears in San Luis Obispo Superior Court in February.
John Wallace, the former administrator for the South San Luis Obispo County Sanitation District, appears in San Luis Obispo Superior Court in February.

Roughly five months after prosecutors charged former South County Sanitation District administrator John Wallace with financial conflict of interest, the San Luis Obispo County District Attorney’s Office announced Tuesday it has filed additional charges related to Wallace’s time as administrator for the Avila Beach Community Services District.

Wallace, 73, who is the CEO of San Luis Obispo-based Wallace Group, appeared before Superior Court Judge Dodie Harman Wednesday morning and entered pleas of not guilty to two felony counts of financial conflict of interest and two misdemeanors charges of public official interference with public policy for financial gain.

He additionally pleaded not guilty to the original conflict of interest charges filed against him in January related to his work with the South County Sanitation District. His arraignment in that case had been continued several times.

On Wednesday afternoon, one of Wallace’s attorneys, Los Angeles-based Kenneth White, issued a statement saying that the most recent complaint may be newly filed but “doesn’t contain new ideas.”

“As before, the district attorney’s charges are based on contracts and events that go back many years and were publicly disclosed, reviewed and approved,” the statement reads. “As before, we’re prepared to demonstrate that the contracts at issue were approved by the appropriate authorities, cleared by the public entities’ legal counsel, and represented an honest and forthright attempt by everyone involved to comply with the law.”

According to the criminal complaint filed Tuesday, two of the charges were allegedly committed in August 1995 and the other two were allegedly committed in June 2013. There is a special allegation attached to the complaint that allows the District Attorney’s Office to file the charges past the statute of limitations due to the alleged crimes not being discovered until October 2013.

“The most recent complaint alleges that while general manager of the (Avila Beach Community Services District), Mr. Wallace made, participated in, or influenced governmental decisions in which he had a financial interest,” the District Attorney’s Office said in a news release.

The complaint alleges that in August 1995, Wallace and his then-company, Wallace & Associates, entered into a contract to perform general manager services at the Avila Beach Community Services District on a time-and-materials basis.

That contract was extended in November 2011, the complaint states, to designate Wallace as the district’s general manager and his firm, now the Wallace Group, would perform district engineering services. Wallace was the majority shareholder of his business, according to the complaint. The firm’s contract expired in March 2015.

The complaint also alleges that between February 2002 and August 2009, Wallace was also the owner of the firm Fluid Resources Management, which acquired a contract with the district to operate and maintain its facilities and construction services.

“In his role as general manager, Wallace advised and encouraged (the district) board of directors to contract with (Fluid Resources Management) to provide these services,” the complaint reads. “As owner of (the business), Wallace benefited financially from work performed (by the firm).”

It further alleges that board members who questioned whether a conflict existed were “given assurances” by Wallace and the district’s legal counsel that no conflicts existed. One of those assurances was based on a 1992-93 civil grand jury investigation into Wallace’s similar role with the San Simeon Community Services District, in which it concluded that no conflict existed. That conclusion was used to justify the Avila Beach contract, the complaint says.

In January 2016, the DA’s Office received a report authored by Carl Knudson of Knudson & Associates and commissioned by the South County Sanitation District to investigate Wallace’s management practices while he was chief administrator of the district.

The report concluded that Wallace mismanaged the agency for close to a decade, and its board of directors voted in 2015 to send the report to the county district attorney, the state attorney general and the FBI to review for possible criminal charges.

It was during that investigation the District Attorney’s Office learned of Mr. Wallace’s involvement with the Avila Beach agency, which led to filing of the most recent complaint, the release states.

Wallace remains out on bail in his South County Sanitation District case, and Harman on Wednesday ruled that she would allow him to remain out of jail on his own recognizance in the new case.

Wallace is scheduled to again appear in court in August for a pre-trial hearing.