State auditor says he’s cooperating with investigation

OLYMPIA — Washington state auditor Troy Kelley returned to work Monday following a week where his home was raided by federal agents and his office turned over records that were subpoenaed by the Justice Department.

But the statewide elected Democrat continued to stay out of the public eye, and issued a written statement to reporters waiting in his lobby saying that all of his actions over the years have been “lawful and appropriate.”

In the statement, Kelley said he was aware that the U.S. Attorney has questions about financial activities at a business he owned before he was elected, and said he has fully cooperated but remains “puzzled by their interest.”

“I do not know any specifics about their inquiry, despite repeated requests for information, and cannot comment further,” he wrote. “I can assure you that all of my actions over the years have been lawful and appropriate.”

Kelley cancelled a planned speech at a conference in Olympia Monday afternoon, and doesn’t have plans for any public appearances in the coming days, according to his spokesman, Thomas Shapley. He said that the auditor is limited in what he can say do to the investigation.

“It’s my understanding if anyone were to speak about it without permission they run the risk of obstruction of justice charges,” Shapley said.

Information continues to come out about the wide net the federal government has cast around Kelley, who as state auditor is tasked with rooting out fraud and misuse of public funds. The records range from an FBI request seeking Kelley’s expenses from the years he served in the state House of Representatives that House administrators released over the weekend, to a separate federal request by another as-of-yet unnamed agency to the state Department of Revenue that was confirmed by the governor’s office.

Late Friday, Kelley’s office released a Department of Justice subpoena that sought documents related to a part-time employee at the auditor’s office who was a longtime business associate of Kelley.

The federal grand jury subpoena, dated March 5, sought material related to 46-year-old Jason J. Jerue, who used to work for the auditor at a company that handled mortgage filings from escrow and other real-estate transactions that was previously owned by Kelley. Those documents were turned over to the Justice Department on Thursday.

Auditor spokesman Thomas Shapley said Jerue, who still works for the agency, is a technical writer who lives in California and works remotely for the auditor’s office.

The subpoena request — which Shapley said was received by the agency March 6 — included information about his employment at the auditor’s office and email discussions between Jerue and others relating to his prior employment at Post Closing Department, as well as those relating to lawsuits involving three companies, including one Kelley previously settled before the Democrat was elected in 2012.

The subpoena also seeks emails on the “commission of any criminal offense.”

Agents with the U.S. Department of Treasury spent about five hours searching Kelley’s Tacoma home last week while he was on vacation in California. The U.S. attorney’s office in Seattle has declined to confirm or deny an investigation. No documents had been publicly filed in federal court by Monday related to an investigation involving Kelley or his address.

A phone number listed for Jerue at the auditor’s office went directly to voice mail.

During a contentious campaign in 2012, details emerged about lawsuits involving Kelley, including a federal case brought by Old Republic Title, a former business customer of an escrow-services company owned by Kelley. The title company claimed Kelley fraudulently transferred funds, evading taxes and hiding millions from creditors. The case was ultimately settled.

Later that year, the state Public Disclosure Commission fined Kelley $200 for not being fully forthcoming about his financial dealings. The PDC’s investigation, conducted in response to a Republican complaint, found Kelley had not disclosed his ownership of a company called United National in 2008, the year that company was dissolved.

Kelley later filed disclosure forms that said United National did business as Post Closing, which employed both Jason Jerue and his then-wife, according to court filings. The lawsuit Smith handled against Kelley was settled a month before it was to go to trial in 2011.

Shapley noted Monday that there’s not much in the subpoena to indicate what the investigation is actually about.

“It’s probably been a matter of frustration for him, because they’re not forthcoming,” Shapley said of federal officials. “They’re not telling him what, if anything, they’re looking for.”

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