The federal trial of State Auditor Troy Kelley opened Tuesday with a failed attempt by the defense to win a mistrial.

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TACOMA — Did State Auditor Troy Kelley steal money through his real-estate reconveyance company? If so, whom did he steal it from?

Those are not simple questions, but a jury of seven men and five women will hear more than 100 witnesses and view thousands of documents over the next four-plus weeks as they attempt to figure it out.

Just how difficult that task will be was underscored Tuesday during opening statements in U.S. District Judge Ronald Leighton’s courtroom.

Just 45 minutes into opening statements, Kelley’s attorneys — at the conclusion of the government’s statement — moved for a mistrial, accusing the government of shifting its theory of the fraud in midstream.

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Patricia Eakes, one of Kelley’s attorneys, told the jury the whole case was politically motivated and that federal agents were pressured to find something to charge him with.

The government has alleged in prior filings that the victims were mortgage borrowers, but in opening statements Assistant U.S. Attorney Andrew Friedman referred to escrow companies as being the victims of Kelley’s alleged scheme, which involved keeping real-estate transaction reconveyance fees that should have been refunded.

The government has said it doesn’t have to prove who owned the money — only that it wasn’t Kelley’s to keep.

U.S. District Judge Ronald Leighton denied the motion for mistrial.

Theft charges

Federal prosecutors have accused Kelly of theft for allegedly keeping millions in fees paid by clients of the real-estate services firm Post Closing Department, a business he owned before he was elected auditor.

The company operated from 2002 through 2008, when the real-estate market was superheated, and Kelley’s company collected more than $3 million from customers through contracts with several escrow and title companies.

The government alleges much of that money should have been refunded.

“He lied to get this money, he lied to hide it and ultimately” he lied to the Internal Revenue Service when agents questioned him about it, Friedman told the jury. “He engaged in a 10-year scheme to steal from others and keep it for himself.”

Friedman said the government will show Kelley ordered his longtime friend and business associate, Jason Jerue, to alter documents so that balance sheets “zeroed out” to hide his thefts.

Eakes, in an opening statement that lasted twice as long as Friedman’s, said evidence will show that “this is not a case about fraud at all, but about fees people pay every day when they sell a house.

“Money wasn’t stolen from anyone,” she said.

The $3 million Kelley accumulated was not hidden from anyone, she said, and was kept by him to ensure that his customers got what they paid for and to protect him and his company from potential legal liabilities.

Immunity for witness

Eakes cautioned the jury about Jerue, saying he had been offered immunity to testify and had given conflicting sworn statements in lawsuits that were filed after the real-estate market collapsed in 2008.

Kelley and his legal team say the $3 million represented simply fees for “services rendered.”

At best, Eakes said, there might have been a contract dispute, but even that’s doubtful, she said, because the contracts the case relies on are vague.

The 16-count indictment alleges Kelley laundered money — in the form of a $245,000 salary — that he paid himself from funds allegedly stolen from clients of Post Closing Department, a now-defunct company that tracked documents involved in home loans.

Federal prosecutors allege that Kelley and Post Closing Department engaged in a drawn-out scheme to placate the concerns of his business partners while keeping fees that should have been refunded to customers.

Friedman said that a review of more than 20,000 transactions by Post Closing Department showed refunds were paid to just 82 customers, often only after they asked for them.

Kelley, a Democrat elected in 2012, has insisted he has done nothing wrong.

Kelley’s defense maintains that the practices Kelley has been accused of were common in the industry, and were common among other reconveyance firms and even some of the title companies the government has said were victims of Kelley’s fraud.

One key issue will be a lawsuit that was filed against Kelley by Old Republic Title seeking the fee refunds. Kelley settled that case for $1.1 million, which the government has implied was proof he knew what he was doing was wrong.

Eakes, however, said the settlement was a business decision.

More importantly, she said, Old Republic had said it would refund that money to a client, but ended up giving back only $171,000, and pocketed more than $400,000 for itself — the same sort of action Kelley has been condemned for by prosecutors.