TACOMA — Jurors got their first detailed look at the government’s case against indicted Washington State Auditor Troy Kelley on Tuesday, with prosecutors alleging that in his prior business life he lied to mortgage title companies to obtain and hide $3 million in other people’s money.
Kelley’s attorneys countered that the government has a fundamental misunderstanding of the real estate industry he worked in.
“Really what this case boils down to is a contract dispute,” defense attorney Patty Eakes said during opening statement in federal court. “There wasn’t any theft. There wasn’t any cheating. There wasn’t any lying.”
Kelley, a 51-year-old Democrat and former state representative, is the first Washington state official to be indicted in 35 years. He faces a range of charges, including possession of stolen property, money laundering and tax offenses, stemming from conduct that began in 2005 when he ran a real-estate services firm called Post Closing Department.
Kelley was elected in 2012 to be Washington’s auditor, tasked with rooting out fraud and waste in government operations. Allegations of impropriety surfaced during that campaign, leading federal investigators to examine how he ran his old company.
Prosecutors say that to obtain business from the title firms, Post Closing Department promised it would collect fees of $100 to $150 for each deed-of-trust transaction it tracked; keep $15 or $20 for itself; use some of the money to pay county recording fees or other fees as necessary; and refund any remaining money to the customer. But in the vast majority of cases, Kelley just kept the excess fees, assistant U.S. attorney Andrew Friedman told the jury.
“He stole that money $100 at a time from tens of thousands of borrowers,” Friedman said.
One of the companies Kelley worked with, Old Republic Title, sued him for not paying the refunds. Kelley settled the case for $1.1 million after making what prosecutors contend were false statements about his practices under oath.
Kelley’s attorney noted in a court filing last week that of that settlement money, just $171,000 made its way back to homeowners, with the company using the rest for legal fees and possibly operating expenses.
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