Former Washington State Auditor Troy Kelley is seeking to have his conviction for possession of stolen money overturned or, alternatively, granted a new trial.
In court filings this week, Kelley’s attorney Angelo Calfo reiterated the chief arguments he made during Kelley’s previous two federal trials: that the $1.5 million Kelley was convicted of illegally pocketing was “willingly” paid by escrow customers and he had no obligation to refund the fees.
Prior to becoming auditor in 2013, Kelley ran a small real estate services firm called the Post Closing Department that tracked property closings to ensure that banks cleared their lien after a loan was paid off. This is known as a reconveyance.
Kelley’s clients were title and escrow firms. They would collect a reconveyance fee of between $100 and $150 at closings and then forward that fee to Kelley’s company.
According to federal prosecutors, Kelley was entitled to retain a $15 to $20 tracking fee, but was obligated to refund the remaining funds if they weren’t needed to complete the reconveyance. In most cases, the banks completed the reconveyance without the Post Closing Department having to intervene.
But prosecutors said Kelley often retained the entire fee unless customers complained, in which case he would issue a refund.
Kelley’s defense argued that home sellers agreed to pay the fees and relinquished any ownership to the money at closing, and therefore no theft or possession of stolen money occurred.
“Crucially for this case, property transferred with the consent of the owner cannot be considered stolen,” the defense wrote in its motion for acquittal. “The reconveyance fee … was never listed as an estimate, deposit, or holdback; instead, it was presented to the borrowers as a pure fee.”
In their filings, the defense said even if Kelley was contractually obligated to refund the money, not issuing refunds didn’t rise to a criminal act.
“If the government wants to contend Mr. Kelley breached a contractual promise to pay refunds, the proper remedy would be a civil judgment—not prison,” the motion for acquittal said.
Kelley’s first trial in 2016 ended with the jury finding him not guilty of making a false statement to the IRS and deadlocking on the remaining counts. But last December, Kelley was convicted on nine counts and acquitted on five following a second trial.
In their motion for acquittal, Kelley’s attorneys argued the evidence in the case is insufficient to sustain his conviction.
“As the mixed verdict and prior mistrial attest, this was an incredibly close case, in which any number of small things could have made all the difference between Mr. Kelley going to prison or returning to his family,” his lawyers wrote in a separate 30-page motion for a new trial. “Unfortunately, several factors pushed the jury toward a guilty verdict that was not supported by the evidence.”
Among the reasons Kelley’s lawyers argue he deserves a new trial:
- The defense didn’t have time to investigate and rebut new evidence the government presented three weeks before the second trial.
- Prosecutors misrepresented key facts to the jury and falsely represented to the jury that a key piece of evidence was authentic.
- Prosecutors violated Kelley’s double jeopardy protection by bringing up evidence related to the charge he was acquitted on after his first trial.
- The jury in the second trial indicated that it was deadlocked and only returned with a guilty verdict after the judge sent them back to continue deliberating a third time.
“Given the closeness of the case, any one of these individually could have tipped the balance,” the lawyers wrote. “Taken together, it is apparent that the jury’s verdict was tainted.”
Kelley’s lawyers are also seeking to overturn his convictions on other counts including making a false declaration in a civil deposition.
In the coming weeks, federal prosecutors will file responses to the defense motions in which they will make the argument for why Kelley’s convictions should stand and there should be no retrial.
After the second trial, Assistant U.S. Attorney Andrew Friedman said Kelley “was keeping money that wasn’t his to keep” and that the verdict sent a message that “you can’t take advantage of innocent victims.”
Kelley left office in January 2017 after not seeking re-election. He is scheduled to be sentenced in federal district court in Tacoma on May 18.