Jury declares Wallace has a conflict of interest 

The San Luis Obispo County grand jury has concluded John Wallace, district administrator and engineer of the South San Luis Obispo County Sanitation District, has a conflict of interest.

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In a 46-page report issued June 2, the jury found that district board members have long ignored the conflict Wallace has due to his service as both the district’s administrator and president of the Wallace Group, which handles the district’s engineering services.

The report includes an addendum that notes the jurors received unsolicited letters from district members detailing policy changes that would be made before the report was issued.

“The letters appear to be an attempt by the District to influence or modify the Grand Jury report before it is published,” the addendum reads.

Wallace has been contracted to serve his dual role for the past 25 years in the district that handles wastewater services for Arroyo Grande, Grover Beach, and the Oceano Community Services District, the report states. During that time, he has held essentially the same contract with some minor revisions to increase pay.

Grand jurors found that “approximately one-half of the district’s total labor costs in FY 2009-2010 were either paid to Mr. Wallace or resulted from his assignment of services to Wallace Group employees.”

The report acknowledges that district officials have reviewed a potential conflict in the past, specifically a report by Richard Thomas that found no conflict exists. However, “[the] Grand Jury’s review of this same investigation determined it had been ineptly performed and the investigator’s conclusions were not substantiated.”

Wallace was the only person interviewed in that investigation, the report concludes.

The sanitation district’s attorney Michael Seitz told New Times the jury got it wrong and essentially doesn’t understand how the district does business. He said Wallace has, in practice, not been able to direct work to his private firm, contradictory to the grand jury’s conclusions. Furthermore, Seitz refuted the jury’s claim that district board members are unaware of how much work or money is directed to the Wallace group for various projects.

“They just didn’t understand how the district is operating,” he said.

On June 15, the district’s Board of Directors is scheduled to review a revised contract with Wallace that will more formally put in measures to mitigate or eliminate any potential for a conflict, Seitz said. He stressed that the work toward a new contract was put in place before the grand jury began its investigation.

“We know we’re going to take some hits from you and others,” he told New Times.

Responding to criticism that his wife Sharon headed the Wallace Group’s human resources department until November 2010, Seitz said he’s obtained outside opinions for his own potential for a conflict and found none.

Ultimately, the report will likely only add to an already substantial pile of public skepticism on Wallace’s relationship with the district. Though the district is legally obligated to respond to the grand jury’s findings, it seems the response will be more of the same.

“At this point, the district board is very comfortable with this arrangement, and they’ve done what they can—custom and practice-wise—to eliminate [the potential for a conflict],” Seitz said. “Now they’re doing it contractually to mitigate it. … Right now the board has consistently viewed John Wallace and the Wallace Group as the best choice for administration and district engineering.”