By Gene Johnson
The Associated Press
TACOMA — Opening statements began Tuesday afternoon in the trial of indicted Washington state Auditor Troy Kelley.
Kelley, the first Washington state official to be indicted in 35 years, faces a range of charges stemming from conduct that began before he was elected in 2012, when he ran a real-estate services firm.
$1 million in fees
Prosecutors say he kept more than $1 million in fees he should have refunded to homeowners, evaded taxes and lied under oath in a deposition in an effort to hide his actions.
Assistant U.S. Attorney Andrew Friedman started out by telling the 14 jurors about a road trip Kelley took in 2011 with his family to visit Yellowstone and Glacier National Parks, as well as Mount Rushmore.
The prosecutor said Kelley claimed hotel rooms and other expenses for that trip as business expenses on his taxes — and, he said, that was just the latest phase of a decade-long scheme Kelley perpetrated.
Kelley’s attorneys say he was entitled to keep the money.
U.S. District Judge Ronald Leighton and lawyers for Kelley and the government began vetting potential jurors Monday, beginning with questions about how much news coverage they’ve seen about the case.
Elected auditor in 2012
Kelley, a 51-year-old Democrat and former state representative, was elected in 2012 to be Washington’s auditor, the state official tasked with rooting out fraud and waste in government operations.
Allegations of impropriety against him surfaced during that campaign, prompting federal investigators to take a look at how he ran his old company, Post Closing Department.
He took a seven-month leave of absence following his indictment but returned to work in December, over the objections of state officials who have called for his resignation.
Kelley accumulated some $3.7 million by 2008, at least $1.4 million of which was fraudulently retained, the government alleges, and he shifted the money among various accounts including a sham trust in Belize in an effort to shield it from litigation.
He eventually started paying himself $245,000 a year from the proceeds, prosecutors say, and falsely declared tens of thousands of dollars in family expenses as business expenses to minimize tax liability.
Kelley’s attorney, Angelo Calfo, argues that no one promised that the homeowners would receive refunds and insists that the government can’t prove the money was stolen.
‘No victim’
“This is a fraud case that does not have a victim,” Calfo wrote in a trial brief.
Federal prosecutors insist they don’t have to prove whom the money was stolen from — only that it wasn’t Kelley’s to keep.
The trial is scheduled to last four weeks. The most serious charge, money laundering, carries up to 20 years in prison.
