Settlement reached over unlawful financial conflict of interest, imposing penalties, and requiring training 

SAN LUIS OBISPO COUNTY — In a recent development, the District Attorney’s Office has reached a settlement with Charles Grace and his company, Grace Environmental Services, LLC (GES), regarding their contract with the San Simeon Community Services District. The contract was found to create an unlawful financial conflict of interest under California law. The lawsuit, filed on Sept. 28, 2021, alleged multiple violations of the Unfair Competition Law and False Advertising Law.

Following a day-long mediation held on May 26, a Judgement and Order was signed by San Luis Obispo County Superior Court Judge Rita Federman, outlining the terms of the settlement. Under the settlement, GES and Charles Grace are required to abide by conflict of interest laws, provide training to their staff on conflicts of interest and related laws, and pay $75,000 in civil penalties.

The settlement agreement stipulates that GES will no longer work for the district as either the manager or provider of operations. Furthermore, GES will not enforce any remaining time or seek indemnification rights under the existing contract. This means that Grace and Grace Environmental Services will not seek contract renewal or reimbursement of legal costs associated with the litigation. Previously, the district had already reimbursed GES over $125,000 in legal expenses as a result of a joint investigation by the District Attorney’s Office and the Fair Political Practices Commission (FPPC). Charles Grace admitted to violating conflict-of-interest laws and paid $4,500 in civil penalties under an agreement with the FPPC in 2021.

To address the conflict of interest concerns, the district will replace GES by retaining the services of other entities through Requests for Proposal (RFP). The newly issued RFPs separate the responsibilities of general management from wastewater and water operations services. This separation aims to eliminate the perception of self-dealing that existed under the contract with GES.

The case involving Charles Grace and GES is not the first time the District Attorney’s Office has intervened in private contracts involving public officials and government agencies. In 2018, John L. Wallace pleaded no contest to two misdemeanor counts of conflict of interest related to his roles as district administrator of the South San Luis Obispo County Sanitation District and general manager of the Avila Beach Community Services District.

The Public Integrity Unit, established in 2015, has been actively working to enhance public trust and confidence in local government. In addition to addressing contracts involving Grace and Wallace, the unit has investigated other issues, including the Integrated Waste Management Agency (IWMA), resulting in the issuance of a public report and charges of embezzlement against the former IWMA secretary. The District Attorney’s Office has also addressed numerous suspected violations of the Ralph M. Brown Act, which ensures transparency and public participation in local government meetings.