State Auditor Troy Kelley returned to his office Monday – and stayed there, declining to emerge to answer questions about a federal investigation that is mining Kelley’s business dealings and public life.
The Tacoma Democrat’s silence left a spokesman to hand out a statement, field questions and assure reporters that Kelley was indeed in the office.
State government has now turned over at least four sets of documents related to Kelley or his office to the FBI, the Internal Revenue Service and a federal grand jury.
“I have fully cooperated with their investigation and remain puzzled by their interest,” Kelley wrote in the statement. “I do not know any specifics about their inquiry, despite repeated requests for information, and cannot comment further.”
“I can assure you that all of my actions over the years have been lawful and appropriate,” he wrote.
Kelley has known of federal officials’ interest at least since his office received a grand-jury subpoena dated March 5. But he left for a California vacation March 13, where he remained even after learning that U.S. Treasury agents searched his house March 16.
He returned to his Capitol-campus office Monday morning but planned to send a top lieutenant to a speaking engagement in his stead, and spokesman Thomas Shapley said Kelley has no plans to talk to reporters.
“It’ll be a while. Because there is apparently an investigation underway, it’s my understanding that if anyone were to speak about it without permission they run the risk of obstruction of justice charges,” Shapley said.
The U.S. Attorney’s office in Seattle has said it can’t confirm or deny any investigation involving Kelley.
In letters under the heading of “criminal investigation,” the IRS asked the state Department of Revenue for tax returns and business-license documents related to one of Kelley’s companies, Blackstone International. The letters came from an IRS “tax fraud investigative assistant” in Tacoma.
The Revenue Department said the IRS later widened the search to include any business affiliated with Kelley’s home address. The state agency turned over the tax returns March 12, a little more than a week after providing the other documents.
A bank account in Blackstone’s name at one point held $3.8 million that was at the center of a federal lawsuit against Kelley by a former client, Old Republic Title.
Kelley ran a business that processed and tracked mortgage title documents. Old Republic accused Kelley of keeping $1.2 million in fees that should have been refunded to Old Republic and its customers. It also alleged that Kelley’s business had misappropriated more than $2 million from two other escrow companies.
Kelley said in a deposition he had earned the fees. Old Republic raised the issue of whether Kelley paid taxes on the money, which Kelley said he would pay when an attorney advised him to do so. He said in the deposition that his attorney was Alan Eber, a California lawyer who specialized in helping clients protect their assets from creditors.
Kelley and Old Republic settled the lawsuit in 2011 after Kelley paid an undisclosed amount. In 2012, Old Republic offered to make public the amount of the settlement, but Kelley declined.
Documents in the Old Republic lawsuit mention another apparent target of the federal investigation: Jason Jerue, a part-time employee of Auditor’s Office. A former Kelley employee declared in court records that Jerue, who was vice president of Kelley’s firm, destroyed documents associated with the business after legal troubles surfaced.
Last week, the auditor’s office turned over information to the grand jury about Jerue, who has worked from his home in California since the state agency hired him as a technical writer in 2013, Shapley said.
On Monday, officials at the state Public Disclosure Commission said they turned over records to the FBI of Kelley’s financial reports last October. Then in January, the PDC handed over documents from a campaign-season investigation of Kelley related to how he reported his business dealings. Public radio’s Austin Jenkins first reported the federal requests to the PDC.
The House of Representatives, where Kelley was a three-term lawmaker, revealed last week that it had turned over Kelley’s expense records to the FBI in February.