Former Washington State Auditor Convicted of Nine Criminal Counts for Fraud Relating to Business He Operated Prior to Statewide Elective Office
Stole Money that should have been Returned to Homeowners; Lied to Court and Committed Tax Fraud
Former Washington State Auditor TROY X. KELLEY was convicted today in U.S. District Court in Tacoma of possession of stolen property, making false declarations in a court proceeding, and tax fraud announced U.S. Attorney Annette L. Hayes. The jury deliberated for two days following a five-week trial. The charges stem from a business KELLEY operated before being elected to statewide office. KELLEY is scheduled for sentencing on March 30, 2018.
“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,” said U.S. Annette L. Hayes. “I commend the investigators and the trial team that worked diligently to present a complex case, and the jury who carefully reviewed all the evidence before returning this verdict.”
According to testimony at trial, between 2003 and 2008, KELLEY operated a business that was paid by real estate title companies to track documents related to real estate sales and refinancing. KELLEY had agreements with those companies that he would charge a flat $15 or $20 for each of the title documents his employees tracked on county websites. While the title companies withheld $100-$150 on each loan to pay the fee and any other potential costs, unneeded money was to be returned to the borrower. But beginning in 2005, in virtually every case, KELLEY kept the entire amount withheld on each loan resulting in nearly $3 million in stolen money. When the fees became the subject of class action litigation in 2008, KELLEY moved the stolen money through various bank accounts to hide it. One of the title companies sued KELLEY for the fees and he settled the case by paying more than $1 million. KELLEY was convicted of possession of stolen property, two counts of making false declarations, and six counts of tax fraud. The jury found him not guilty on five counts of money laundering.
In closing arguments, prosecutors said TROY KELLEY “had found the perfect crime,”… because no one was watching what was happening to the money that should have been refunded to homeowners. Prosecutors said, “Kelley engaged in ten years of lies to steal millions of dollars and to hide the money he had stolen.”
This is the second trial on these charges. The first trial in March 2016 ended with the jury able to reach a verdict on only one count, acquitting KELLEY on lying to the Internal Revenue Service agent who questioned him about his scheme in 2013.
Possession and concealment of stolen property is punishable by up to ten years in prison. False declarations and false statements are punishable by up to 5 years in prison. The remaining charges are punishable by up to three years in prison.
The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI) and the FBI.
The case is being prosecuted by Assistant United States Attorneys Arlen Storm, Andrew Friedman, Seth Wilkinson and Katheryn Frierson. Appellate attorney Michael Morgan provided significant assistance.