TACOMA — A title company worker who hired Washington state Auditor Troy Kelley’s former real estate services firm told jurors Wednesday that he promised to refund unused fees to borrowers — contrary to his claims at trial.
Prosecutors have accused Kelley of pocketing $3 million he was supposed to refund to homeowners. Lawyers for Kelley, the first Washington official indicted in 35 years, say he was entitled to keep the money. The four-week trial began Monday. The most serious charge, money laundering, carries up to 20 years in prison.
Julie Yates, who ran Fidelity National Title’s branch in Lynnwood, took the witness stand in U.S. District Court. She said she hired his company, Post Closing Department, in 2003 to track certain real estate transactions, called reconveyances. Kelley said he would charge $15 per transaction for his services, but he would collect $100 from borrowers in case additional fees were needed, she said, and that he promised to refund unused money back to customers — and in fact he did so, at least initially.
Assistant U.S. Attorney Andrew Friedman asked her whether the refund promise was important to her in deciding to hire Kelley’s company.
“Absolutely,” she said. “It’s how I always did it.”
But by 2005, the government alleges, Kelley had stopped refunding unused fees to customers of Fidelity and other title companies he worked with. Yates said she didn’t learn that Kelley was keeping the money before she left Fidelity for a job with Chicago Title in 2006.
Prosecutors have produced a 2003 contract between Yates and Kelley that specifies Kelley’s fee was to be $15 per transaction tracked. Yates’ signature is on the document, but Kelley’s isn’t. On the stand, she insisted repeatedly that Kelley did sign an identical version of the agreement — she kept a copy by her desk, she said — even if the one with his signature hasn’t surfaced in the investigation.
“$15 was his fee — was always his fee,” even as the total amount Kelley collected from borrowers rose to $140 over the years, Yates said.
“And what was supposed to happen to the rest of the fee?” Friedman asked.
“Refund to the borrower,” she answered.
Kelley has suggested that he emailed with Yates or others at Fidelity about additional fees. Yates repeatedly insisted she doesn’t remember ever receiving any such emails — and she believed she would if she did.
But on cross examination, one of Kelley’s lawyers, Patty Eakes, pressed the point that investigators never obtained Yates’ emails from 2003 to 2005. While Fidelity emails dating from 2006 on were recovered, the company’s earlier emails were on a different system and were never pulled up, one of Fidelity’s information technology workers, Todd Surles, testified earlier Wednesday.
“The jury has to rely on your memory,” Eakes noted in her questioning of Yates. “You would agree that your memory may not be perfect?”
“That’s correct,” Yates conceded.
Eakes also suggested that even if the contract Kelley didn’t sign specified that he could charge $15 per transaction, it didn’t necessarily bar him from charging other fees. Yates resisted that notion, saying the contract was clear that Kelley’s fee was limited to $15, but conceded that it didn’t specify outright he couldn’t charge other fees.
The question of whether Kelley was entitled to keep the money is a key point as prosecutors try to prove the charges against him, which include possession of stolen property, money laundering, filing false tax returns and lying in a deposition. The government alleges that out of tens of thousands of transactions Kelley’s company handled from 2005 to 2008, it issued fewer than 100 refunds — even though he didn’t need the extra money for any legitimate purpose.
Typically, Kelly only refunded money when borrowers were savvy enough to demand it, while he once also ordered employees to issue random batches of refund checks to head off uncomfortable questions from another title company he worked for, prosecutors say.
Earlier in the day, two customers who had escrow-related services handled by Kelley’s company told jurors they received checks from him only after complaining about the fees he had collected.
Accountant Nancy Moore, of Burien, and developer Krista Thoreson, of Snohomish, testified at Kelley’s trial in federal court in Tacoma on Wednesday. They said they were surprised to see fees from Kelley’s company on their settlement statements when they sold property because they had already paid their lenders for the escrow-related services.
“Because I’m an accountant I look at everything,” Moore testified. “I thought I was charged twice for reconveyance fees.”
Kelley’s lawyers say the customers were not entitled to the money, but Kelley sometimes returned money to keep customers happy
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