The prosecution says the case against Troy Kelley is clear-cut. The defense says it’s built on questionable evidence and untrustworthy witnesses.
Now it’s up to a jury. After hearing evidence and arguments over parts of six weeks, five women and seven men are set to consider whether to issue a verdict that could send Washington’s state auditor to prison for years.
The most serious of 15 felony counts carries a maximum prison sentence of 20 years.
“This is a plain case of fraud and a cover-up,” assistant U.S. attorney Katheryn Frierson said in her closing argument Wednesday.
“Troy Kelley stole $3 million and evaded tax on $3 million, and then he laundered the money, and then he lied under oath,” Frierson said.
In his own closing argument, defense attorney Angelo Calfo sought to raise doubts.
He said repeatedly that investigators ignored problems with the case because they were looking for guilt, not the truth — “from the top down, not the bottom up.”
Calfo noted that authorities learned of the case because of an attack on Kelley during the Democrat’s 2012 political campaign for auditor, not a complaint by a victim.
“When you’re investigating the case from the top down,” Calfo said, “(with) a high-profile target, one that we picked off from the newspaper, this kind of thing can happen.”
The case concerns Kelley’s handling of money his real-estate services business received from 2006 to 2008. His business tracked documents related to property ownership after the closings of home sales and refinancings.
Escrow companies took fees of $100 or more from homeowners and passed them to Kelley, their contractor.
Prosecutors allege Kelley won the companies’ business by promising them to take a cut of $15 or $20, pay any third-party charges and refund the rest of the fee to homeowners — but that he rarely issued refunds.
Calfo said Kelley was never dealing with other people’s money. An escrow company acknowledged in writing, he said, that Kelley earned the money by providing services in exchange for the fees.
He said that false premise makes the case a “rotten onion,” to be exposed when its layers are peeled back.
“Let’s take this rotten onion and throw it out,” Calfo said. “Let’s let Troy go back to his wife and his kids.”
Prosecutors allege Kelley shuffled millions of dollars in stolen money through a series of newly created accounts, made false statements in court proceedings after an escrow company sued him and finally lied to investigators.
Instead of paying taxes on the money right away, they said, he waited until lawsuits were resolved and then gradually withdrew money in annual installments of $245,000 while taking deductions as if he were still operating a business.
The defense argued authorities should be pursuing their tax accusations against Kelley in a civil case in which he could explain his tax theories or his deductions.
Federal prosecutors with authority over crimes such as terrorism are “driving to the zoo to find out whether a $100 deduction should have been put on a corporate tax return,” Calfo said. “How did we get here?”
Frierson said the defense has raised complicated arguments about real-estate services law, escrow agreements and when companies should report revenue.
“Whatever these things do, what they do not do is give Mr. Kelley permission to cheat, lie and steal,” Frierson said.
She also rejected a defense argument that Kelley gave refunds as a kind of customer service, noting that even when refunding money Kelley kept the base fee of $15 or $20 to which prosecutors say he was entitled.
“This is not some generous gesture on the part of Mr. Kelley,” she said. “This is Mr. Kelley simply quieting the squeaky wheel so he can continue with this scheme.”
Calfo sought to undermine the prosecution’s witnesses.
He pointed to evidence he said contradicts parts of their testimony and suggested some might face prosecution under the standards being used to charge Kelley with false declarations.
Calfo also said key prosecution witness Jason JeRue isn’t reliable and that a key piece of evidence related to JeRue is bogus.
JeRue was Kelley’s right-hand man at his company, the Post Closing Department. He pointed to a spreadsheet and testified that Kelley asked him to alter the document to make it look as if no refunds were due.
JeRue testified under a grant of immunity from prosecution, and Calfo said authorities pressured him to say what they wanted as part of that deal.
“When you’re looking for a conviction rather than proof, one thing you might do is threaten your witness with an arson,” Calfo said.
A fire in an Everett building that Kelley said destroyed some of his records was ruled accidental, but JeRue testified he was at first worried prosecutors suspected him of setting the fire.
As for the spreadsheet, it came to the prosecution via Old Republic Title, the escrow company that sued Kelley. Calfo said electronic information about the document shows it was changed in some way after being sent to Scott Smith, Old Republic’s lawyer.
“False spreadsheet,” a slide in Calfo’s closing presentation said.
Calfo also noted that Old Republic gave homeowners only a fraction of the more than $1 million it won when Kelley paid to settle the company’s lawsuit against him. He said Smith didn’t tell the truth to authorities about how the money was spent.
Frierson urged the jury to ignore “distractions” raised by the defense.
Old Republic had incurred nearly $1 million in legal fees, Frierson said, yet still paid some money to homeowners.
After four hours of closing arguments, U.S. District Judge Ronald Leighton handed the case over to the jury late Wednesday afternoon. Jurors were to return Thursday morning to deliberate.