DA reaches settlement with Grace Environmental Services LLC
– District Attorney Dan Dow announced today that the San Luis Obispo County District Attorney’s Office has reached a settlement with Charles Grace and his company, Grace Environmental Services, LLC (GES). This settlement and resulting judicial order have resolved the lawsuit filed by the DA on Sept. 28, 2021, that alleged nine violations of unfair competition laws and false advertising laws based on facts concerning the contract between GES and the San Simeon Community Services District. This settlement was the result of a day-long mediation held on May 26.
“Public officials such as city council members, county supervisors, appointed officials including general managers must exercise their authority in a way that upholds the public’s trust,” said District Attorney Dan Dow. “For this reason, California law forbids even the perception of self-dealing in contracts between these officials and government agencies they serve. As such, elected officials and the attorneys advising them must be vigilant to ensure that they follow the law and earn the trust of the people they serve. In this case, both parties agreed that this contract created a financial conflict of interest that violates the laws of California.”
The parties stipulate that GES will not seek to continue working for the district as either the manager or providing the operations function. Additionally, GES agrees not to enforce the remaining time of performance or indemnification rights under the existing contract. This means that the company will not seek to renew its contract and may not seek reimbursement from the district for the legal costs associated with this litigation. The district had already reimbursed GES over $125,000 in legal expenses as a result of the joint investigation by the DA’s Office and the Fair Political Practices Commission. The commission and Charles Grace entered into an agreement in 2021 that included Grace admitting to violating conflict-of-interest law and paying $4,500 in civil penalties.
As soon as the district replaces GES by retaining the services of other entities pursuant to the district’s recently issued requests for proposal, the company will stop providing services to the district. The district’s May 2023 requests for proposal separate the responsibilities of general management from the wastewater and water operations services. Going forward, this new arrangement will help to remove the perception of self-dealing by a public official that existed under the contract with GES.
Under the current contract, Grace provided management services, administered financial matters, and served as the district’s general manager, both day-to-day and during official district board meetings. Grace’s company GES simultaneously provided the bulk of operations services for the district’s water and waste-water facilities. The district has no employees of its own. The contract provisions placed Grace and his company in a position to self-deal. California law prohibits public officials from self-dealing and from holding a position that would create even a perception of self-dealing.
This is the second time in recent years that the DA’s office has stepped in to address private contracts between public officials with government agencies. In 2018, John L. Wallace pleaded no contest to two misdemeanor counts of conflict of interest stemming from his tenure as the district administrator of the South San Luis Obispo County Sanitation District and general manager of the Avila Beach Community Services District.
Since forming in 2015, the Public Integrity Unit has worked to increase the public’s level of trust and confidence in local government. In addition to addressing the contracts between Grace and Wallace and the public governments they served, the Public Integrity Unit has also addressed dozens of other issues. The unit conducted an extensive investigation into the Integrated Waste Management Agency resulting in the issuance of a public report and charging the former secretary of embezzlement.
The DA’s office has also addressed dozens of suspected Brown Act violations. The Ralph M. Brown Act is a California law that requires local government agencies to conduct their business with transparency and guarantees the public’s right to attend and participate in meetings of local legislative bodies.
This case was prosecuted by Deputy District Attorney Ken Jorgensen who is assigned to the special prosecutions unit that includes consumer protection, environmental protection, public integrity, and major fraud.
