John Wallace conflict-of-interest case resolved with plea deal

Mar 6, 2018

John Wallace, the former head of two San Luis Obispo County special districts, pleaded no contest Tuesday to charges of conflict of interest. Wallace, 74, agreed to pay just under $60,000 in restitution to the districts, according to the San Luis Obispo County District Attorney’s Office. 

For nearly 30 years, Wallace worked for the South San Luis Obispo County Sanitation District, and served as the general manager of the Avila Beach Community Services District.

Wallace is also the founder of the Wallace Group, a San Luis Obispo County engineering and design firm. He established the firm in the mid-1980s and in the ensuing decades, Wallace’s private firm was repeatedly awarded contracts to carry out engineering work for the public agencies he managed, without competitive bidding. 

In January of 2017, the county district attorney’s office brought felony charges against Wallace, and at the time, Wallace pleaded not guilty. Wallace’s attorneys said the charges against him concerned government contracts that were publicly disclosed, reviewed and approved by the boards of the special districts.

“In our opinion it's been illegal the entire time, because it is indeed a conflict of interest,” San Luis Obispo County Assistant District Attorney Eric Dobroth said. “Historically it appears, based on our investigation, that various attorneys for the districts that were involved - Avila Beach and South County and in some other districts as well - were of the opinion that somehow any conflict of interest was mitigated because of board oversight.”

A 2010-2011 San Luis Obispo County Grand Jury report found that Wallace had a conflict of interest due to his “duel simultaneous roles with the District and the Wallace Group.”

Dobroth said the D.A.’s office wasn’t aware of or investigating similar conduct at any other San Luis Obispo County governmental agencies or special districts, but that during the course of the Wallace investigation, it became aware of several examples around the state operating with a ‘similar business model’ as the South San Luis Obispo County Sanitation District and Avila Beach Community Services District under Wallace’s tenure.

“The importance of this prosecution is to send a message to special districts that operate under that paradigm that it's not okay,” Dobroth said. “That it does indeed present a conflict of interest and puts ratepayers money at risk.”

Wallace’s engineer license won’t be affected by the plea deal, since the judge in the case made a stipulation saying Wallace’s alleged crimes did not include fraud or deceit.

Editor’s note: KCBX News’ on-air story reported the fact that Wallace had pleaded no contest to two misdemeanor charges and that the case had been settled. After our story aired, Chris Gardner, Business Development/Marketing Manager of the Wallace Group, contacted KCBX News to provide a statement: “This settlement vindicates John Wallace and the Wallace Group. It reaffirms what we have always said is the truth: John Wallace never engaged in any fraud, deceit, negligence malfeasance.”