Escrow official testified Troy Kelley agreed to a flat fee of $15 — and no more — for every transaction his company performed and believed he was refunding leftover funds to homebuyers.
An escrow official who hired state auditor Troy Kelley to track real-estate paperwork insisted Wednesday that he agreed to do the job for $15 per transaction and promised to refund any leftover money to homebuyers.
Julie Yates told a jury in U.S. District Court in Tacoma that she hired Kelley in 2003 to track real-estate transactions called reconveyances, pay county and trustee fees and ensure titles were clear for new homebuyers. For that work, she said, he was initially given $100, of which $15 was his to keep. Any money left over after paying fees, she told Assistant U.S. Attorney Andrew Friedman, was to be returned to the homebuyer at closing.
Yates’ testimony goes to the heart of the government’s case against Kelley, who prosecutors say kept more than $3 million in fees that should have been refunded. Kelley disputes that, and his attorneys insist the government has turned a contract dispute into a criminal case.
However, Kelley — who faces a 16-count indictment and up to 20 years in prison — has insisted that any money left over was his to keep.
Yates said she hired Kelley and his business, Post Closing Department, in 2003 when she was at Fidelity’s Lynnwood branch. She said she never had problems with him and believed he had done his job as outlined in their contract until federal agents investigating Kelley came calling in 2013.
And that contract, she said, was unambiguous and to her knowledge never changed: Kelley would be paid $15 per transaction, and nothing more, even though the amount he was given to cover costs increased to $140 over the years.
“Fifteen dollars was always his fee,” she told the court.
She said she never noticed that refunds were not being paid.
However, under cross-examination by defense attorney Patricia Eakes, Yates acknowledged she did not have a signed copy of the Kelley contract and that Fidelity emails from three critical years — 2003 through 2006 — were not available. While she said she did not believe the terms of the contract were ever altered, or that Kelley ever told her he was taking additional money, she could not be sure.
Nor, she acknowledged, was she aware that the company that did reconveyances before Post Closing also kept the fees. She testified earlier that her understanding was that that company, called Reconveyance Services Inc., had given refunds.
Fidelity auditors had reviewed three years of Post Closing Department’s spreadsheets in 2006 and had found nothing wrong, she conceded to Eakes.
“You never heard anything to suggest there was a problem, is that fair?” Eakes asked.
“That’s fair,” Yates replied.
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However, Yates insisted that the contract was clear, and that Fidelity expected those fees to be refunded.
“I disagree,” she said when Eakes suggested otherwise. “It’s my memory. It’s in the contract … It’s the way we did business.”
Yates continues her testimony on Thursday.
Kelley is the first state official to be indicted in the past 35 years.
He is on leave from the Auditor’s Office and has said he will not run for re-election.
Earlier Wednesday, prosecutors solicited testimony from homebuyers who said that they were given reconveyance refunds by Post Closing Department when they complained. Kelley attorneys have said that he gave money back in those instances not because it was owed, but out of a courtesy and wanting to keep clients happy.
Eakes, during opening statements on Tuesday, likened the practice to Nordstrom’s policy of taking returns for any item, even if it’s been worn or used.
Information in this article, originally published March 16, 2016, was corrected March 17, 2016. A previous version of this story that ran in some editions gave an incorrect name for Julie Yates.