EVERETT — A spectacular nighttime fire that destroyed the Stewart Title Co. building is playing a key role in a federal investigation into state Auditor Troy Kelley’s business dealings.
Kelley, 50, a Democrat serving his first term, is being investigated for unpaid taxes in connection with an escrow-services business he owned, according to a report in the upcoming edition of Seattle Weekly.
Kelley has said little about the federal probe, other than stating that he is puzzled by the inquiry. In 2012, he contended that he’d paid all taxes he owed.
In 2010, Kelley, then a state representative from Pierce County, was accused of theft and fraud in a federal civil lawsuit. He settled the claim out of court without admitting wrongdoing.
His business partner, Old Republic Title, used Kelley’s escrow company to collect fees from customers who paid off their mortgages. Old Republic claimed that Kelley pocketed $1.2 million which he should have returned to their clients.
Kelley, a former federal prosecutor, claimed he could have proved the allegations were untrue, but all the records from his Tacoma business were destroyed in the 2008 fire at the Stewart Title building, where he kept an office. The cause of the fire has not been determined.
The 2010 court files, along with other evidence and testimony, are the core of a federal investigation to determine whether Kelley broke the law in past business dealings, the Seattle Weekly reported.
At the time, Kelley admitted under oath that he hadn’t paid taxes on the disputed amount and other earnings, totaling $3.8 million, which he earned from three title companies: Old Republic, Stewart Title and Fidelity.
That’s how much he moved from bank to bank in what Old Republic called a plan to hide the money with a tax-free trust in Belize.
Federal prosecutors, using a grand jury, have been looking into the transactions since Kelley’s 2012 election.
Earlier this month U.S. agents with the Department of Treasury searched Kelley’s Tacoma home. Last week, the auditor’s office turned over subpoenaed records involving a part-time employee who is one of Kelley’s longtime business associates.
According to court records obtained by Seattle Weekly, the fund transfers began on June 12, 2008, with money from Kelley’s company, United National, doing business as Post Closing Department, being wired to different banks. He had shut down PCD and created a new entity called Blackstone International.
On June 25, fire gutted the Stewart Title Co. building at 2721 Wetmore Ave. in Everett. In his deposition, Kelley said the fire destroyed PCD records that showed he properly charged Old Republic’s customers.
Scott Smith, Old Republic’s attorney, told the Seattle Weekly that Kelley’s office was actually next to the title building and was closed two weeks prior. Important records he sought from Kelley were electronic spreadsheets and should have been saved elsewhere.
Kelley admitted in a 2010 deposition that his office suffered only smoke damage and was unable to clearly explain why electronic records weren’t retrieved. Kelley said he wasn’t much of a record-keeper, Smith said.
“I asked about his (personal) computer, and he said, ‘Well, I don’t have the computer. It had a glitch, and I gave it to Goodwill.’ OK then, how about emails? He said he didn’t save them either. What about data from your website? ‘Cleaned that out before I shut it down.’?”
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