State Auditor Troy Kelley’s office turned over records Thursday after a U.S. Justice Department subpoena — a day after Kelley’s home was searched by federal investigators.
OLYMPIA — State Auditor Troy Kelley’s office turned over records Thursday in response to a U.S. Justice Department subpoena — a day after Kelley’s home was searched by federal investigators.
The records were hand-delivered around midday to a Justice Department office in Tacoma, said Thomas Shapley, spokesman for the auditor’s office. The subpoena had been served on the auditor’s office March 6, he said.
The nature and scope of the records were not disclosed. Officials with the auditor’s office and state Attorney General Bob Ferguson’s office said they would review public-records requests by The Seattle Times and other media outlets for the subpoena and related documents.
With some Republicans already calling for him to step down, Kelley, a Democrat elected auditor in 2012, remained out of state on a family vacation and did not respond to interview requests.
Shapley said Kelley was in California, where his wife, a professor of French studies at the University of Puget Sound, was participating in a conference. He was expected to return to work next Monday.
Agents with the U.S. Treasury Department pulled up in SUVs and spent about five hours searching Kelley’s Tacoma home Monday, according to Tacoma police and Kelley’s neighbors.
The reasons for the search and subpoena remained unknown Thursday.
Emily Langlie, a spokeswoman for the U.S. Attorney’s Office in Seattle, declined to comment on the matter.
In 2010, Kelley had been accused in a civil lawsuit of shady business dealings and tax evasion related to a real-estate escrow-services company he owned.
James Watkins, the Republican who was defeated by Kelley in 2012 despite aggressively publicizing the lawsuit allegations, said he didn’t know anything about the new developments beyond what he’d read in the news. “I can’t say it comes as a huge surprise,” he said in an email.
Watkins had created a website where he posted numerous documents from lawsuits about Kelley’s business dealings during the hard-fought 2012 campaign.
State Republican Party Chair Susan Hutchison called Thursday for Kelley to step down pending resolution of the apparent federal probe.
“As State Auditor, Kelley is responsible for finding and preventing waste, fraud, and abuse in state government. The position requires the highest standards of honesty and integrity,” Hutchison said in a statement.
In a statement emailed to reporters Wednesday, Kelley said he’d been out of town since Friday night and had not been told the reasons for the search of his house.
News of federal investigators searching a statewide elected official’s home sent shock waves through the state Capitol, where scandals involving federal law enforcement have been rare. Perhaps the state’s most notorious, “Gamscam,” struck in 1980, when House Speaker John Bagnariol and Senate Majority Leader Gordon Walgren, both Democrats, were indicted on charges of conspiring to allow gambling in the state in return for a share of the profits. Both men served time in prison.
The 2010 federal civil lawsuit — eventually settled out of court with a confidentiality agreement — accused Kelley of “fraudulently transferring funds, intentional spoliation of evidence, shady business schemes, tax evasion, and hiding from creditors” nearly $3.8 million by shuffling money through multiple bank accounts.
The lawsuit was brought by Old Republic National Title, a business customer of Kelley’s firm, United National, which tracked loan and real-estate documents for large title and escrow companies.
Old Republic accused Kelley’s firm of improperly keeping about $1.2 million in fees that should have been returned to clients under terms of his contract.
After those accusations and others were lobbed at Kelley during the 2012 campaign, he defended his business practices as standard and called the lawsuit a simple business dispute.
In 2012, an attorney for Old Republic offered to waive confidentiality and disclose the amount of the settlement if Kelley agreed.
But Kelley never agreed to have the amount revealed publicly, said Scott Smith, the Seattle attorney who represented Old Republic.
Smith said Thursday he could not comment on whether he’d been contacted by federal authorities with regard to Kelley.
Court records from the lawsuit said Kelley had opened bank accounts in Nevada and elsewhere and moved money from one bank to the next. The money ended up in accounts that would have allowed him to wire the money to a trust set up in Belize, an offshore haven for shielding assets.
Kelley acknowledged in a deposition the move allowed him to defer paying taxes on the income. He said only a small amount of money ended up in Belize. During the 2012 campaign, he said he’d been the subject of no IRS actions and was current on all taxes.
Before being elected state auditor, Kelley served as a state representative and chairman of the Joint Legislative Audit and Review Committee. He beat out Democratic primary rivals and then Watkins to win the 2012 election, in part by spending $500,000 of his own money on the race.
An attorney, Kelley had also previously worked as a federal prosecutor focused on white-collar crime and has served as a JAG lieutenant colonel for the Washington National Guard, according to his campaign biography.
He succeeded Brian Sonntag, who held the office for two decades, before retiring in 2012. Sonntag said he’d heard about the raid on Kelley’s home on Tuesday through neighbors — a day before it became public in media reports.
Sonntag said Thursday it’s “way too premature” to talk about Kelley resigning. “I think everyone needs to hear what Troy has to say,” he said. “The public-trust issue is of utmost importance — that is the heart of any public office but maybe even more so for the office of the auditor.”
“I would hope that he would be in discussions with his staff and the governor’s office and then also be available to the media to respond to these concerns.”
In Kelley’s neighborhood Thursday, neighbors described him as friendly to reporters who’d converged on the area.
Jim Mrowca, a Boeing worker who lives next to Kelley’s home, said he voted for Kelley in 2012. “He’s innocent until proven guilty, that’s my opinion,” Mrowca said.