Investigation: No Crime When Former State Auditor Hired Former Business Associate

Apr 24, 2018

The sentencing of former Washington Auditor Troy Kelley has been delayed until the end of June while his attorneys seek to have Kelley’s federal conviction for possession of stolen funds overturned--or a new trial granted.

Meanwhile, a separate state investigation into the former state auditor's hiring of a one-time business associate has ended without finding wrongdoing.

Shortly after he was elected, Kelley hired Jason Jerue , who’d worked for Kelley’s real estate services firm. At the auditor’s office, Jerue worked part-time from California. That raised eyebrows.

After Kelley was indicted by a federal grand jury in 2015, Governor Jay Inslee asked Attorney General Bob Ferguson to open a criminal probe into Kelley’s hiring of Jerue.

In a February letter to the governor released Monday, the attorney general said investigators “did not discover facts sufficient to charge a crime.”

In his letter, Ferguson also said investigators interviewed 10 witnesses, including co-workers of Kelley and Jerue at the state auditor’s office. The letter said state investigators tried to interview both Kelley and Jerue, but neither agreed to participate and the two could not be compelled.

In a statement, Kelley’s attorney, Angelo Calfo, said, “Bob Ferguson was able to see through the IRS’s smoke and mirrors case against Troy. There was no political corruption, no theft, and no criminal violation of the tax laws. Troy is a public servant and Army officer who was unfairly targeted.”

Jerue’s part-time position with the state ended in May 2015 following Kelley’s indictment

Kelley took a leave of absence for several months. Later he returned to work and served out the remainder of his first term. He left office in January 2017.

Kelley’s first federal trial ended with an acquittal on one count, but the jury deadlocked on all the rest. His retrial ended last December with the jury convicting Kelley of nine felonies, including possession of stolen funds. However, he was acquitted on five charges of money laundering. Jerue testified for the prosecution in both trials.

After the conviction, U.S. Attorney Annette Hayes said, “Troy Kelley stole money from thousands of homeowners, then tried to hide it by passing it through a variety of accounts-- ultimately he committed tax fraud to try to hide the theft and keep as much of the ill-gotten gain as he could.

Prior to becoming state auditor, Kelley ran a firm that tracked when banks cleared their interest in a property after a loan was paid off. Escrow companies contracted with Kelley’s firm to do this work and collected a fee from homeowners at closing.

Federal prosecutors said Kelley was obligated to refund the bulk of those fees, but instead pocketed much of the money.

This story has been updated