‘A just resolution’: Plea deal reached in John Wallace conflict-of-interest case

Former South County Sanitation District chief administrator John Wallace reached a plea agreement with prosecutors on the second day of his preliminary hearing for felony conflict-of-interest charges that will call for him to plead to misdemeanors and pay about $60,000.

Wallace, 73, pleaded no contest at the Santa Maria Courthouse on Tuesday to two misdemeanor counts of a penal code section prohibiting public officials from negotiating contracts in which they have a financial interest.

Accused of steering work to his engineering firm, The Wallace Group, while serving as the head of two local special services districts, he was facing two felony counts of conflict of interest and four misdemeanor counts of public official interference.

The charges are alleged to have occurred between Jan. 24 and Feb. 28, 2013, at the South County Sanitation District and between June 6 and Oct. 31, 2013, at the Avila Beach Community Services District.

Under the deal, Wallace will have to pay a total of $59,724 in restitution. About two-thirds will go to the Avila Beach Community Services District, and the remainder will go to the South County Sanitation District.

Superior Court Judge Timothy Staffel also sentenced Wallace to three years of bench probation, but that will be terminated once Wallace pays restitution.

His attorney, Kenneth White, told Staffel that Wallace will pay the restitution directly to the two districts within three weeks.

“We’d like to do it quickly,” White said.

Also part of the deal, Staffel entered a factual stipulation to the plea that says Wallace’s conviction was not substantially related to his duties as a professional engineer, and that the crimes did not include fraud, deceit or recklessness.

Those stipulations will prevent the convictions from affecting Wallace’s engineer license.

Before adjourning, Staffel said the plea agreement was in the best interest of all parties and said the prosecution’s case had “significant statute-of-limitations issues.”

“I think this is a just resolution,” Staffel said.

White said outside the courtroom that he and his client are “pleased to resolve this.”

“This was a case where the DA was very forthright that there was no malfeasance,” White said. “We’re happy now to put this behind him so he can go back to what he does in the community and move on.”

In response to Tuesday’s agreement, District Attorney Dan Dow said, “This prosecution illustrates the very technical nature of California’s conflict-of-interest law and serves to place special districts statewide on notice that this business model poses an inherent conflict of interest and puts ratepayers’ money at risk.”

Tuesday’s hearing was scheduled as the second of a two-day preliminary hearing in which the prosecution’s witnesses testify to the basic facts in the case and Staffel was to rule whether there was enough probable cause to take the charges to trial.

On Monday, Deputy District Attorney Michael Frye called a former South County district accountant, an Avila Beach board member, and the district’s former legal counsel, Mike Seitz.

Only Seitz, who advised the South County board on Wallace’s contracts, testified that that he didn’t see a conflict in Wallace’s dual roles, citing a 1993 SLO County Grand Jury report that found no conflict in Wallace’s similar role with the San Simeon Community Services District.

Staffel strongly scrutinized the district attorney’s case, indicating he didn’t see probable cause for felony charges and saying he thought the case likely belonged in civil court.

Before Tuesday’s surprise plea agreement, Staffel was scheduled to hear testimony from at least two more witnesses, including San Luis Obispo Superior Court Judge Matthew Guerrero, who previously served on the Sanitation District Board of Directors. The case was transferred to Santa Barbara Superior Court after Guerrero’s appointment to the bench late last year in order to avoid a judicial conflict of interest.

This story was originally published March 6, 2018 at 10:40 AM with the headline "‘A just resolution’: Plea deal reached in John Wallace conflict-of-interest case."