By KAREN VELIE
The San Simeon Community Services District Board of Directors is considering having the rate payers cover another $167,773 in legal bills related to alleged conflicts of interest and mismanagement, at a cost of $800 per rate payer.
The San Luis Obispo County District Attorney’s Office filed a civil suit in Sept. 2021 against Charlie Grace and his company Grace Environmental Services, which is paid to manage the district, alleging illegal business practices and false advertising. Prosecutors are asking the court to order the district to stop conducting unlawful and fraudulent acts of unfair competition and to stop making untrue or misleading statements.
County prosecutors are seeking civil penalties of $2,500 for each act of unfair competition and for each false or misleading statement, in addition to court and investigation costs. These penalties currently add up to more than $2 million.
In a Sept. 23 letter to the district, Grace’s Los Angeles based attorney Amber Maltbie argues that the district should cover the cost of Grace’s legal defense because the board directed him to commit the alleged violations.
For example, the civil suit accuses Grace of writing and publishing an article in the San Simeon CSD newsletter that misled district residents about the mismanagement.
In her letter, Maltbie argues it is the district board’s fault for requiring a newsletter.
Prosecutors also accuse Grace of violating the California’s Business and Professions Code because he misled the public to believe he was the CSD’s general manager, according to the civil suit. Maltbie argues the district board is responsible because they referred to Grace and not his company as the general manager.
Even though Grace’s contract with the district includes an indemnity clause, it does not cover “intentional, willful, or negligent operations or conduct of Grace Environmental Services or any of its employees, agents or subcontractors.”
The district attorney’s case could take a year to play out, beginning with a case management conference scheduled for December. While the current board majority supports Grace, that is likely to change.
Three people are running unopposed for three open seats on the board: incumbent Michael Donahue, Karina Tiwana and Jacqueline Diamond. All three candidates have voiced concerns regarding Grace’s continued management of the district.
The California Fair Political Practices Commission penalized Grace last year for the “inherent harm” he did to the community by sitting on both sides of the negotiating table. Grace negotiated a contract with Grace Environmental Services, the private company he owns, in 2016 in violation of state laws enacted to protect the public.
In March, the current board agreed to pay $49,250 to Grace for legal bills he incurred while defending himself against the California Fair Political Practices Commission regarding conflict of interest violations. Even so, the board refused to pay Grace’s $4,500 fine.
On Oct. 11, the district board met in closed session to discuss Grace’s request for $167,773 for recent legal costs, even though the court has not yet determined if Grace’s actions violate the law.
In a cure and correct letter, activist Julie Tacker accuses the board of violating the Brown Act when they met in closed session because the board did not disclose the item in open session before going into closed session as required by Government Code 54957.7 (a) and because they discussed the issue as a threat of litigation even though the letter did not include a threat.
Following the closed session, district staff said the board took no disclosable action, though it is anticipated the district board will bring back the item before the new board is seated in December.
The district is primarily funded by local residents and business owners through their water and sewer bills. The home of 11 hotels, San Simeon has approximately 500 residents and a yearly district budget of almost $1 million for wastewater collection and treatment, road maintenance and street lights.
Tacker is concerned about the cost to rate payers in the disadvantaged community.
“If this board agrees to pay $168,000 in legal bills, with only 208 utility connections in the tiny district, that equals $800 per connection,” Tacker said. “Unless the court determines that Grace followed the law, he should pay his own legal fees.”