'Prenuptial Agreement' Stops Investigation of Met Chairman

First posted June 5, 2012

By John Earl

Surf City Voice

The Fair Political Practices Commission has cleared the chairman of the Metropolitan Water District of Southern California (MET), John V. Foley, of allegations that he violated the Political Reform Act.

The allegations were made in a complaint filed by Merle Moshiri, a Huntington Beach resident, last March, alleging multiple income reporting and conflict of interest violations by Foley. The FPPC ruing is dated April 17.

Moshiri alleged that Foley failed to disclose at least $640,000 of income from his wife’s consulting business from 2004 to 2011 and another $15,000 that he earned as a private consultant to the Moulton Niguel Water District since he retired as that agency’s general manager in 2008. Moshiri claimed he also violated the Act by voting on issues that affected his wife’s financial interests.

Public officials are required by the Act to disclose all reportable income on financial disclosure (700) forms that are filed as public records with their local public agencies or the state. They are also required to disclose conflicts of interest and to recuse themselves from any votes that could result in financial benefit for them or their spouses.

The foundation for the complaint’s dismissal is a prenuptial agreement between Foley and his wife, Mary Jane Foley, which provides a loophole that arguably tests the effectiveness of the Act in protecting the public from conflicts of interest held by public officials.

Foley has been the paid and appointed representative of the Municipal Water District of Orange County (MWDOC) to the MET since 1989. He was elected by other MET directors as its chairman for the second time in 2010.

Mary Jane Foley and husband, John V. Foley

The MET holds considerable influence over water programs and policies within its jurisdiction, which includes all of southern California. As MET chairman, Foley appoints all members to all standing committees and chair persons for special committees.

Moshiri is president of Residents 4 Responsible Desalination, a locally based citizens group that opposes plans for an ocean desalination plant in the southeast portion of the city – an issue that intertwines with the complaint.

Foley’s wife founded MJF Consulting and contracted with various southern California water agencies and private water related businesses until she retired March 17 of this year.

Moshiri complained to the FPPC after reading reports published in the Surf City Voice and the Voice of OC in January and February documenting Foley’s failure to report income his votes on issues that arguably – at least indirectly – affected his wife’s income.

The FPPC decision followed receipt of a six-page response letter from Foley’s attorney, Lance H. Olson, and the accompanying copy of the prenuptial agreement with his wife, signed on January 1, 1999. The couple married on March 17, 1999.

The Act defines “any community property interest in income of a spouse” as reportable income. In theory, the Foleys’ prenuptial agreement keeps their incomes and property separate, avoiding the community property clause of the Act.

Chairman Foley, thus, did not have to report his wife’s income and, therefore, had no conflict of interest in voting for contracts or on issues that could affect her financially—not that Foley’s attorney concedes to the existence of any such conflicts without the prenuptial agreement.

In a short, one paragraph response, FPPC Chief Investigator Gary S. Winuk wrote to Moshiri that “As far as Mr. Foley’s wife’s income, there is a prenuptial agreement such that Mr. Foley has no community property interest in the income.”

Case closed, mostly.

On the point of Mr. Foley’s failure to report his own consulting income, he earned that income as a consultant as defined by the Act and consultants are considered public officials. “Therefore, his salary is considered to be governmental and neither reportable nor disqualifying,” Winuk wrote.

Moshiri is disappointed by what she thinks was the cursory investigation done by the FPPC.

By e-mail she told the Voice, “That the FPPC let Mr. Foley’s attorney write their findings for them is to the detriment of the reputation of the FPPC. When it takes the FPPC one paragraph to explain their opinion and takes legal counsel six pages of single spaced legalese to extricate Mr. and Mrs. Foley from a mess of their own making….that tells me something else.”

Background

Foley might have prevented the controversy if he had revealed the prenuptial agreement from the start. Instead, he was evasive.

Last September, he told the Voice that he didn’t know he had to report his wife’s income, stating, “I never felt it was required. You know, I don’t have no problem with it.”

His wife’s financial interests were too remote for his votes to constitute a conflict of interest under the law, he argued, without alluding to a prenuptial agreement separating income and property.

Months later, during a Feb. 7 phone interview, Foley said that he still didn’t think he had to report his wife’s income because it was kept separate and he had no access to it. He had updated his disclosure forms on Oct. 25, a month after the Voice’s original inquiry – after receiving legal counsel – only for appearances sake, he said.

But Foley still said nothing about a prenuptial agreement, and when asked by the Voice the next day if such an agreement existed, he said no.

But on Feb. 27 the Voice of OC reported that from 2007 to 2010 Foley had voted to approve three contracts—over $9 million worth—with engineering firms that had paid his wife over $20,000 for consulting. In that news report Foley was quoted for the first time as claiming he had a prenuptial agreement with his wife.

The Voice of OC noted, however, that Foley’s 700 form updates were completed as if his wife’s income was community property, indicated by his response to the form’s requirement to “Identify the gross income received (include your pro rata share of the gross income of the entity/trust)” wherein the filer has and ownership of 10 percent or greater.

Also, Foley did not respond to media requests to show proof of his prenuptial agreement.

At a MET meeting the day following the Voice of OC report, Foley publically stated that he and his wife have an agreement [to keep their income and property separate], which led them to believe that her income wasn’t reportable.

“It was further our understanding,” he added, “that Mary Jane would never work for any agency that had any connection with Metropolitan. I now realize that it would have been better for me to have abstained from votes pertaining to contracts between Metropolitan and firms that Mary Jane may have consulted with and I plan to do so in the future.”

Moshiri remains skeptical. “Why didn’t he simply produce his prenuptial agreement right off the bat? Why did he tell a reporter that he did not have an agreement,” she asks. Foley did not answer attempts by the Voice to get an answer to that question.

The Law of Love

In his response to Moshiri’s complaint, Foley’s attorney notes that the agreement provides that each party will have “exclusive rights to their own separate property, including all future income” and claims that, “the Foley’s have strictly abided by this agreement and maintained separation of their assets through the duration of their marriage. All income is deposited into their separate accounts. Mr. Foley has no access, management or control over Mrs. Foley’s accounts.”

But love is often stronger than the law. And the terms of the Foleys’ prenuptial agreement, as well as a look at the Foleys’ public property records, suggest that no law can completely separate the financial interests of spouses whose hearts have been co-mingled by the act of marriage until death does part them.

There no indication that the FPPC made more than a superficial attempt to see if the Foleys have lived up to the terms of their agreement – or if it could have made a difference.

The authenticity of the prenuptial agreement was not verified, Winuk told the Voice, and when asked if investigators had checked if the Foleys had lived up to the terms of their agreement – separate bank account records and documentation of separate trusts would be persuasive proof – or if they had even read the terms of the agreement and were satisfied with them, Winuk wrote back, “Nothing you mention changes our analysis of the case.”

The Foleys’ agreement stipulates that each party will retain control of and “shall have sole and exclusive rights” to their respective personal and real property.

Both spouses can manage or dispose of their separate properties and incomes as they see fit, the agreement says, including bank accounts, annuities, pensions, investments, etc., without consent of the other. And “[E]ach party does consent that the estate of the other shall descend or be disposed of by will to the heirs, legates or devisees of that party.”

But the Foleys’ agreement also states that “Neither party intends this agreement to limit or restrict his or her right to receive a transfer, conveyance, devise or bequest from the other.”

In fact, Mary Jane Foley transferred two of her properties to her husband, property records filed with the Orange County Recorder’s office show.

On the first occasion, May 9, 2003, almost 4 years after their marriage date, Mary Jane transferred her Laguna Niguel property over to her husband. Seven years later, on October 25, 2010, John Foley placed the property in a trust under his name. They both still live in that house, which Mary Jane Foley listed as the business address for MJF Consulting.

On September 11, 2003, Mary Jane Foley transferred another property, this one located in Fullerton, over to her husband who quickly used it to take out an $80,000 loan. A few days later he placed the property in a trust under his name. The terms of his trusts have not been disclosed.