- Associated Press - Monday, March 14, 2016

TACOMA, Wash. (AP) - Jury selection began Monday in the case of indicted Washington state Auditor Troy Kelley, with a federal judge, prosecutors and defense attorneys whittling down the pool of candidates based on whether they’ve already made up their minds about the case or have health problems or other hardships that would prevent them from serving throughout the monthlong trial.

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. 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.

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. Among the pool of about 80 potential jurors, many had family military backgrounds and said they’d be honored to serve. Opening statements were not expected before Tuesday afternoon.

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.

“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.

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