Politics & Government

Gov. Inslee done questioning Auditor Troy Kelley about investigation, for now

For the moment, Gov. Jay Inslee is done questioning State Auditor Troy Kelley about a federal probe that caused treasury agents to search Kelley’s home and the Justice Department to subpoena records from Kelley’s office.

Last week, Inslee asked Kelley to respond to several questions about the investigation, including whether it was affecting the work of the Auditor’s Office. Kelley, a Tacoma Democrat, responded that it wasn’t.

Inslee spokeswoman Jaime Smith said Monday that the governor has reviewed Kelley’s responses, and for now “does not have additional questions.”

“He appreciated the quick response and shared them with legislative leaders,” Smith wrote in an email. “This is an ongoing process and so the governor will continue to monitor the investigation and other legislative inquiries.”

Smith said Inslee has not communicated with Kelley since the auditor responded in writing to the governor Wednesday. The governor is not planning any additional reply to Kelley at this point, Smith said.

Kelley responded to all the questions Inslee posed last week, though some of his replies were brief. The auditor answered 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 simple, “No.”

Kelley also said that he was aware of no conflicts of interest that would affect his or any any other employee’s work at the Auditor’s Office.

Kelley has ignored requests for interviews, but issued a written statement last month saying all his actions have been lawful and he is unsure why he is being investigated.

On March 16, agents with the U.S. Treasury Department served a search warrant at Kelley’s home in Tacoma, and spent five hours searching the property.

Also last month, the Justice Department subpoenaed records related to Auditor’s Office employee Jason JeRue, a part-time technical writer who formerly worked at Kelley’s business that tracked mortgage title documents.

That business venture led to an acrimonious federal lawsuit. However, Kelley was not charged with any crime.

The lawsuit ended in 2011 when Kelley 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.

To date, FBI agents have requested Kelley’s expense records from his time in the Legislature, as well as his personal financial disclosures and copies of a 2012 investigation by the state Public Disclosure Commission.

A letter marked “criminal investigation” from the Internal Revenue Service also sought Kelley’s business tax returns and business registration information from the state Department of Revenue.