Washington auditor says he's cooperating with investigation

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Posted: Mar 23, 2015 10:13 PM
Washington auditor says he's cooperating with investigation

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 subpoenaed by the Justice Department.

But the elected Democrat remained out of the public eye, issuing 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 fraud and misuse of public funds.

The FBI requested and received details of Kelley's expenses from the years he served in the state House of Representatives.

There were also separate requests from the Internal Revenue Service for license information and tax returns from Blackstone International Inc., an investment holding company that listed Kelley's home address as its location. The requests from late February and earlier this month were released by the state Department of Revenue on Monday.

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

The state Public Disclosure Commission also confirmed Monday that the FBI sought all of Kelley's personal financial disclosure forms and the case file related to a campaign finance complaint against him. Those documents were turned over in January, commission spokeswoman Lori Anderson said.

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, which handled filings from real estate transactions. That company has since closed.

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

The subpoena request 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 discussions relating to lawsuits involving three companies.

U.S. Treasury agents 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.

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 Kelley owned. 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, 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.