Politics & Government

Auditor Troy Kelley answers governor’s questions about federal probe – but not senators’

Embattled state Auditor Troy Kelley avoided appearing before a Senate committee Wednesday, but he didn’t brush off questions from Gov. Jay Inslee.

On Tuesday night, Inslee invoked his constitutional authority to demand that Kelley answer several questions about an ongoing federal investigation, which led treasury agents to search Kelley’s home and the Justice Department to subpoena records from Kelley’s office last month.

Kelley responded in writing Wednesday, telling Inslee that the federal investigation isn’t affecting the work of the Auditor’s Office, which is tasked with identifying financial fraud and waste in government.

“While the intense media coverage may have been a distraction, there is no change or impact on our audit and field operations,” Kelley wrote.

Kelley, a Democrat from Tacoma, has ignored several requests for interviews, but he issued two written statements last month saying he doesn’t know why he’s being investigated.

Inslee told reporters about his letter to Kelley on Wednesday morning, shortly after Kelley declined a Republican state senator’s invitation to appear before the Senate’s Accountability and Reform Committee.

Inslee asked Kelley to share what steps Kelley has taken to “ensure... that the federal investigation is not disrupting the work of the office,” and whether Kelley or members of his staff have conflicts of interest that may interfere with their official duties.

“I think we need to do what we can to make sure the law is followed, and to make sure the public has confidence in the Auditor’s Office,” Inslee told reporters Wednesday.

Inslee’s letter also asked Kelley to provide details about Jason JeRue, a past business associate of Kelley’s who now works for the Auditor’s Office as a part-time technical writer. Last month, the U.S. Department of Justice subpoenaed records concerning JeRue’s employment at the Auditor’s Office, along with any emails to or from JeRue concerning his past employment at Kelley’s Post Closing Department, which became embroiled in a federal lawsuit with a former client.

In his reply, Kelley said JeRue was still an employee of the auditor’s office, “although he is currently on a requested leave of absence.” That status was a change from late last month, when a spokesman for the Auditor’s Office said that JeRue had not gone on leave.

Kelley answered all questions posed by the governor, though in some cases his answers were brief. The auditor responded to one query – “Is the federal investigation impacting any of the open or pending audits or investigations being conducted by the Auditor’s Office?” – with a single word: “No.”

A spokeswoman for the governor’s office said Wednesday afternoon that the governor had not yet had a chance to review Kelley’s reply.

Kelley did not appear at a Senate committee work session Wednesday about his agency’s ethics standards and its efforts to reduce fraud. Committee chairman Mark Miloscia, R-Federal Way, had invited Kelley to use that opportunity to speak publicly about the federal probe.

Instead, two of Kelley’s senior staff members showed up to answer senators’ questions.

Miloscia, who in 2012 ran against Kelley for the auditor post and lost in the primary, said he was disappointed that Kelley didn’t testify. Miloscia said he has “been especially concerned by (Kelley’s) decision to go in hiding from the media, from the public, and now from the Legislature.”

“I’m not sure where he is, or when he will ever hold himself publicly accountable to the Legislature and to the voters,” Miloscia said. “This is frankly unprecedented.”

The committee also received a briefing Wednesday on lawmakers’ subpoena powers. According to staff, any subpoena must be within the scope of legislative authority and also must focus on issues germane to future legislation.

Democrats on the committee cautioned that the Legislature should avoid interfering with the federal investigation surrounding Kelley, which they said would provide answers in time.

“I believe we risk politicizing an issue of utmost importance to the citizens of the state of Washington,” said Sen. Pramila Jayapal, D-Seattle. “In the end, I trust that the federal government will investigate thoroughly and with full due process, and that the investigation will allow justice to be served.”

Kelley, 50, previously ran a business that processed and tracked mortgage title documents. The venture led to an acrimonious federal lawsuit. However, Kelley was not charged with any crime.

The lawsuit ended in 2011 when he paid an undisclosed settlement to his company’s former client, Old Republic Title.

Old Republic had contended Kelley kept $1.2 million in fees that should have been refunded to Old Republic’s customers. Kelley later told reporters he collected fees properly for work he did.

In defending himself against the lawsuit, Kelley answered questions under oath about why he had moved $3.8 million among multiple bank accounts, and whether he paid taxes on that money.

Kelley said he would pay taxes when told to do so by an attorney advising him.

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