Washington State Auditor Troy Kelley’s federal trial saw the unveiling of a “Nordstrom return-policy” defense. He’s charged with stealing millions, but Kelley’s lawyers said the money really was his to keep, he was just trying to keep customers of his real-estate-service company satisfied.

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TACOMA — A key element of Washington State Auditor Troy Kelley’s defense against federal charges that he stole millions of dollars when he ran a real-estate-services company a decade ago is that no one promised borrowers they’d get their fees back.

But when borrowers complained, he paid up. Why would he do that if the money was his to keep?

The opening days of Kelley’s criminal trial in U.S. District Court in Tacoma this past week clarified how his attorneys are tackling that question. They describe it as a “Nordstrom return-policy” defense: Like the Seattle-based department-store chain, he was trying to keep customers satisfied, even if he wasn’t obligated to issue a refund.

“We don’t have to take the item back,” one of his lawyers, Patty Eakes, said during her opening statement. “But we’re going to do it in order to make them happy.”

Whether jurors buy that explanation could help determine whether they clear Kelley of the charges, which include possession of stolen property, money laundering, lying in a deposition and filing false tax returns. Prosecutors say he illegally collected more than $3  million in fees and moved the proceeds among various accounts to hide the money.

The most serious charge, money laundering, carries a penalty of up to 20 years in prison.

The charges date to 2005, seven years before Kelley was elected state auditor, a position that entails rooting out waste and fraud in public agencies. At the time, he ran a company called Post Closing Department (PCD), which tracked escrow paperwork for title companies.

Prosecutors say that to obtain business from the title companies — and get access to vast sums of money from homeowners — he promised that Post Closing Department would collect $100 to $150 for each transaction it tracked; keep $15 or $20 for itself; use some of the money to pay county recording and other fees if necessary; and refund the customer any remaining money.

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In the majority of the transactions the company tracked, the additional fees weren’t needed, Assistant U.S. Attorney Andrew Friedman told jurors.

Some government witnesses took aim at Kelley’s assertion that the money belonged to him. Julie Yates, who ran Fidelity National Title’s branch in Lynnwood, testified that she hired his company in 2003. His fee was “always $15,” she said — as was laid out in a contract prepared by Kelley and signed by Yates.

“At the completion of the post closing documentation if extra funds are left over, PCD shall forward the funds to the Customer,” the document states.

The defense insists the contract, if it is a contract, is vague and wouldn’t have prohibited Kelley from charging additional fees. No copy signed by Kelley has surfaced, but Yates testified that he did sign an identical version.

By 2005 Kelley was pocketing the excess fees, prosecutors say. They allege that for the most part, he only issued refunds in small, random batches to mollify concerned title company employees — or when borrowers were savvy enough to demand them.

Developer Krista Thoreson, of Snohomish, fell into the latter category. When she and her husband sold seven residential units in 2007, she noticed duplicate fees on her closing documents. The couple had already paid their lender for “reconveyance” services, but Post Closing Department was charging $135-$145 for each unit, for a total of $955.

After months of emailing and calling her banker and escrow officer, she received a check from Kelley for $850: the $955 total, minus Kelley’s fee of $15 for each of the seven transactions.

During cross-examination, defense attorney Angelo Calfo again evoked the “Nordstrom” defense, noting that Thoreson was a “good customer” and that she and her husband had agreed to pay the fee when he signed the closing documents.

She said she believed it was an incorrect fee and that she was entitled to get it back, but said she never felt cheated.

Defense lawyers have suggested it was common for title companies that handled such tracking work in-house to keep the fees. Prosecutors say that was their prerogative: The difference in Kelley’s case was that he promised the companies he’d return the money, then didn’t.

The defense has asserted that Kelley kept the money as an insurance policy in case anything turned out to be wrong with the deeds of trust years later, a notion the government has dismissed. Kelley eventually started paying himself $245,000 a year from the proceeds.

After the government’s opening statement, Calfo asked U.S. District Judge Ronald Leighton to declare a mistrial. Calfo said the defense was being “whipsawed” by the government’s shifting theory about who were the purported victims, the borrowers or the title companies. Prosecutors say they don’t have to prove whose money it was, only that Kelley wrongly obtained it.

Leighton denied the mistrial, telling Calfo, “You persist in framing the question the way you want the question to sound.” The allegations — as laid out by the government — constitute a crime, he said.