Court documents unsealed Thursday provide the first details behind federal authorities’ accusation that state Auditor Troy Kelley evaded taxes by claiming campaign-related spending as business expenses.
The tax deductions are seemingly the sole connection to his public life of a April 15 indictment of Kelley that mainly centers on his business tracking real-estate documents.
Kelley is charged with keeping stolen money that should have been refunded to customers, giving false information to courts and investigators, and evading taxes — first by hiding income and then by offsetting it with business deductions in years when prosecutors say his company was no longer doing work. Court documents say he used false, personal or campaign expenses to mask the lack of business.
The newly unsealed records shed more light on their case.
In a March 25 application for a warrant to search computers seized nine days earlier from Kelley’s home, an IRS agent describes what he found in the Tacoma house, including paper records that appeared to show expenses of Blackstone International. Blackstone is the company that Kelley says continued to earn money in recent years, which prosecutors dispute.
The expenses “appeared to match” what Kelley declared on tax forms, IRS Special Agent Aaron Hopper wrote.
“Upon review, however, some of the itemized expenses appear not to be related to the operation of a reconveyance tracking business, and, instead, appear to be personal expenses or expenses related to Kelley’s campaign,” Hopper wrote.
As an example of the expenses, the agent cites $1,394 in payments to Matt Miller for “business supplies” in 2012, when Miller was managing the Democrat’s campaign for auditor.
Miller told an FBI agent who interviewed him March 5 that he never worked for Blackstone.
Miller, now the deputy director for external affairs at the Auditor’s Office, told investigators he couldn’t remember what the checks were for but that they might have paid him back for making copies during the campaign or cleaning the office, or might have simply been intended to help Miller out after the campaign was over.
Miller added in an interview Friday that he bought office supplies like printer ink cartridges for Kelley’s home office that doubled as campaign headquarters.
“He’d reimburse me for the printer ink,” Miller said. “He wouldn’t use campaign accounts for the printer ink, because it’s the same (ink) they use for business or family.”
Kelley’s attorney said Kelley would not comment on the records.
The auditor plans to take a leave of absence starting Monday to deal with his legal troubles. He named longtime Auditor’s Office employee Jan Jutte to lead the agency in his place.