Lake Tahoe mayor who resigned was accused of theft in 2006

Years before admitting to embezzling money from the church where she worked as a bookkeeper, former South Lake Tahoe Mayor Tamara Wallace was sued by an insurance company for "theft of funds" of more than $100,000, according to records reviewed by the Chronicle.

While the records aren't specific about why she was sued, they indicate that she agreed to repay money the insurance company had paid out after discovering the theft, and then failed to repay the money -- prompting a second lawsuit from the company as it attempted to recover the money it was owed.

The revelation comes a week after the news outlet South Tahoe Now published an open letter written by Wallace in which she admitted to stealing from Lake Tahoe Community Presbyterian Church, where she was a bookkeeper.

A lawyer for the church told the Chronicle that the congregation's leaders discovered Wallace stole more than $300,000, prompting a criminal investigation by the El Dorado County District Attorney's Office. Days after her public confession, Wallace resigned.

Philip Dunn, the attorney for the church, said that if the information about Wallace's prior financial troubles had come to light earlier, "Community Presbyterian would not have suffered this loss."

Wallace said in her letter that she expected to face criminal charges in connection with the church theft and pledged to repay the stolen funds. "I must repay every cent and accept whatever punishment comes to me," she wrote.

El Dorado County court records show that Federal Insurance Co., now a subsidiary of the insurance giant Chubb -- sued Wallace twice: once in 2006 and once in 2021.

The 2006 lawsuit was dismissed a few months after it was filed, and details about why it was filed were unclear Thursday. Officials from Chubb, as well as several lawyers who handled the case on behalf of Federal Insurance Company, either did not respond to requests for comment or could not be reached.

Wallace declined to comment for this story. Her attorney, Steven Bailey, did not respond to multiple requests for comment.

Federal Insurance sued Wallace in 2021 for allegedly failing to follow a payment plan that she'd agreed 15 years before, when the company was forced to pay out an insurance claim of $122,193.16, records show. The payout arose from the alleged "theft of funds," which the company had discovered in April 2006. Records reviewed by the Chronicle did not provide details about the alleged theft.

In the 2021 lawsuit, the company included the promissory note that Wallace signed acknowledging the money she owed and promising to pay it back.

At the time, Wallace agreed to pay the insurance company $200 a month until she had paid off the balance that she owed, court records show, and that if she failed to follow through with the agreement, the insurance company would have the right to demand the remaining amount in full.

"Time is of the essence in this agreement," court documents noted. But sometime after February 2017, Wallace stopped paying, court records showed, prompting the second lawsuit. At that time, Wallace still owed more than $110,000, court records show.

In June 2022, a judge ordered Wallace to repay the company and she signed a second promissory note, this time agreeing to make an initial payment of $2,500 to the company by June 1, 2022 along with monthly payments of $400 until she had repaid what she owed.

Dana Tibbitts, a member of the El Dorado County Government Watch Facebook group that has been scrutinizing Wallace, said "the most important thing is that (the theft from the church) was not her first rodeo. She has been down this road a long time ... and we probably don't know the half of it."