Washington auditor says he's cooperating with investigation

Staff Writer
Columbus CEO

OLYMPIA, Wash. (AP) — Washington state Auditor Troy Kelley returned to work Monday following a week during which his home was raided by federal agents and his office turned over records that were subpoenaed by the Justice Department.

But the elected Democrat continued to stay out of the public eye and issued a written statement to reporters waiting in his lobby saying that all of his actions over the years have been "lawful and appropriate."

In the statement, Kelley said he was aware that the U.S. attorney has questions about financial activities at a business he owned before he was elected. Kelley said he has fully cooperated but remains "puzzled by their interest."

"I do not know any specifics about their inquiry, despite repeated requests for information, and cannot comment further," he wrote. "I can assure you that all of my actions over the years have been lawful and appropriate."

Kelley canceled a planned speech at a conference in Olympia on Monday afternoon and doesn't have plans for any public appearances in the coming days, according to his spokesman, Thomas Shapley. He said the auditor is limited in what he can say due to the investigation.

"It's my understanding if anyone were to speak about it without permission they run the risk of obstruction of justice charges," Shapley said.

Information continues to come out about the wide net the federal government has cast around Kelley, who as state auditor is tasked with rooting out both fraud and misuse of public funds.

The investigation includes an FBI request for Kelley's expenses from the years he served in the state House of Representatives. House administrators released that material over the weekend.

There were also separate federal requests — by a tax fraud investigative assistant with the Internal Revenue Service — seeking license information and tax returns for another one of Kelley's previous companies, Blackstone International Inc., an investment holding company that lists Kelley's home address as its location. The requests, released by the state agency Monday, were sent in late February and earlier this month.

Department of Revenue spokeswoman Kim Schmanke said the department has sent the IRS all documents but the tax returns could not be publicly released due to state confidentiality laws. Also sent to the IRS, and released Monday, was license information for four previous businesses that listed Kelley's home address as a mailing address.

Late Friday, Kelley's office released a Department of Justice subpoena that sought documents related to a part-time employee at the auditor's office who was a longtime business associate of Kelley.

The federal grand jury subpoena, dated March 5, sought material related to 46-year-old Jason J. Jerue, who used to work for the auditor at another one of Kelley's companies — Post Closing Department — that handled mortgage filings from escrow and other real-estate transactions. That company has since closed. Those documents were turned over to the Justice Department on Thursday.

Auditor spokesman Shapley said Jerue is a technical writer who lives in California and works remotely for the auditor's office. However, Kelley has an active Washington state driver's license with a Kirkland address, according to the state Department of Licensing.

The subpoena request — which Shapley said was received by the agency March 6 — included information about Jerue's employment at the auditor's office and email discussions between Jerue and others relating to his prior employment at Post Closing Department, as well as those relating to lawsuits involving three companies.

The subpoena also sought emails on the "commission of any criminal offense."

Agents with the U.S. Department of Treasury spent about five hours searching Kelley's Tacoma home last week while he was on vacation in California. The U.S. attorney's office in Seattle has declined to confirm or deny an investigation. No documents had been publicly filed in federal court by Monday related to an investigation involving Kelley or his address.

A phone number listed for Jerue at the auditor's office went directly to voicemail.

During a contentious auditor's race campaign in 2012, details emerged about lawsuits involving Kelley, including a federal case brought by Old Republic Title, a former customer of an escrow-services company owned by Kelley. The title company claimed Kelley fraudulently transferred funds, evading taxes and hiding millions from creditors. The case was ultimately settled.

Later that year, the state Public Disclosure Commission fined Kelley $200 for not being fully forthcoming about his financial dealings. The PDC's investigation, conducted in response to a Republican complaint, found Kelley had not disclosed his ownership of a company called United National in 2008, the year that company was dissolved.

Shapley noted Monday that there's not much in the subpoena to indicate what the investigation is actually about.

"It's probably been a matter of frustration for him, because they're not forthcoming," Shapley said of federal officials. "They're not telling him what, if anything, they're looking for."