The former administrator and general manager for two San Luis Obispo County special districts pleaded no contest to conflict-of-interest charges involving engineering services provided to the districts by a firm in which he was a major stockholder.
John L. Wallace entered the plea to two misdemeanor counts Tuesday morning before Santa Barbara County Superior Court Judge Timothy Staffel, who indicated the case showed the boards and staffs of public agencies across the state need more training in conflict-of-interest laws.
Wallace had previously pleaded not guilty to the charges. As part of the no-contest plea, Wallace agreed to pay $59,724 in restitution.
The charges, filed following a yearlong investigation by the San Luis Obispo County District Attorney’s Office Public Integrity Unit, stemmed from Wallace’s terms as district administrator of the South San Luis Obispo County Sanitation District and general manager of the Avila Beach Community Services District.
Charges in the criminal complaint were similar for each agency, alleging that as the manager of a special district, Wallace had a conflict of interest in permitting Wallace Group, of which he was a major shareholder, to provide engineering services to the district.
However, the investigation did not find there was any misappropriation of funds on the part of Wallace or Wallace Group but did find the payments to Wallace Group had been approved by the boards of the respective districts.
In addition, investigators determined the attorneys for both districts had, at various times, advised Wallace and their boards that a conflict did not exist.
A 1993 San Luis Obispo County grand jury investigation also concluded a similar arrangement Wallace had at San Simeon Community Services District did not constitute a conflict.
The criminal complaint asserted the misconduct extended as far back as 1995 for the Avila Beach district and 2011 for the Sanitation District, and because of those time frames, the statute of limitations became an issue raised at the start of the preliminary hearing Monday.
The question raised was whether the four-year statute of limitations should limit the evidence to be presented by the prosecution.
Staffel expressed doubt about whether the statute of limitations should be tolled, or suspended, which would allow the District Attorney’s Office to prosecute Wallace for conduct prior to 2013.
However, the prosecution presented evidence showing allegations that Wallace had a conflict of interest at the districts were well-publicized prior to 2011.
After considering all the facts, both sides agreed to the no-contest plea to two misdemeanor counts.
Of the total restitution, Wallace will pay $18,097 to the sanitation district and $41,626 to the Avila Beach district.
After accepting the change of plea, Staffel said the agreement was a “just resolution” to the case.
But he also asserted the case showed that “public entities across the state need some training.”
District Attorney Dan Dow said the case should serve as a warning to other special districts, managers and legal counsels.
“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,” Dow said.