Former South County Sanitation District administrator John Wallace pleaded no contest to two misdemeanor conflict of interest charges Tuesday as part of a plea deal that will allow him to avoid a trial on four felony charges.
Wallace was also ordered to pay $59,721 in restitution and serve up to six months of bench probation, that will end after the restitution is paid. Because of statutes of limitation, the restitution is based on payments made to Wallace under his administrative contracts for charges from Jan. 24 through Feb. 28, 2013 at the South County Sanitation District, and from June 6 through Oct. 31, 2013 at the Avila Beach Community Services District.
“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 ratepayer’s money at risk,” said SLO County District Attorney Dan Dow.
In Jan. 2017, the SLO County District Attorney’s Office charged Wallace, 73, with three felony and two misdemeanor conflict of interest charges for allegedly using his positions as a government administrator to funnel money to his privately owned engineering company, The Wallace Group.
Wallace’s attorney Kenneth White said during a preliminary hearing on Monday that he planned to use a statute of limitation defense. In addition, Wallace’s attorneys had also argued that because sanitation district board members and the districts legal counsel approved of the conflicts of interest, Wallace was not at fault.
“The resolution of the case was made in light of Judge Staffel’s statement regarding the statute of limitations, and equitable considerations, including the fact that attorneys for the districts had at various times indicated that a conflict did not exist and a 1993 Grand Jury finding that Mr. Wallace’s similar arrangement at the San Simeon Community Services District did not constitute a conflict,” according to the district attorney’s office.
For years, government employees, members of the public and a grand jury found conflicts of interest in Wallace using his government administrative position to generate jobs for Wallace’s private engineering firm.
In 2011, the Grand Jury found that the district board failed to recognize the conflict of interest and to eliminate or, at minimum, mitigate the conflict of interest and that Wallace’s contract had never been competitively bid as required by law.
San Luis Obispo County Auditor Controller Jim Erb was assigned to look into the Grand Jury’s conflict of interest allegations. Erb found no wrongdoing, he later reported, allowing the conflicts of interest to continue.
Several former sanitation district board members including Matt Guerrero, Tony Ferrara and John Schoals voted in support of many of Wallace’s questionable actions and verbally condemned several people who asked the district attorney to investigate Wallace.
Because of these actions, prosecutors did not file charges against Wallace until many of his conflict of interest actions were protected by the statute of limitation laws.