- Associated Press - Thursday, March 31, 2016

TACOMA, Wash. (AP) - A former employee of Washington State Auditor Troy Kelley testified Wednesday that a distressed Kelley called him one day, telling him to write refund checks to homeowners.

“He said, write refunds,” Jason JeRue said at Kelley’s criminal trial. “Find some refunds that are owed, and write all your checks out.”

The charges stem from before he became auditor. Prosecutors have accused Kelley, who ran a real-estate services firm before taking office, of pocketing $3 million he was supposed to refund to homeowners.

Lawyers for Kelley, the first Washington official indicted in 35 years, say he was entitled to keep the money.

Whether Kelley was entitled to keep the money is a key point as prosecutors try to prove the charges against him, which include possession of stolen property, money laundering, filing false tax returns and lying in a deposition. The government alleges that out of tens of thousands of transactions Kelley’s company handled from 2005 to 2008, it issued fewer than 100 refunds - even though he didn’t need the extra money for any legitimate purpose.

Prosecutors say Kelly typically only refunded money when borrowers were savvy enough to demand it, while he also ordered employees to issue random batches of refund checks to head off uncomfortable questions from another title company he worked for.

A visibly nervous JeRue testified Wednesday that he was asked by Kelley to issue the refunds on two occasions, The News Tribune reported (https://goo.gl/97bI6Y ).

Escrow companies charged fees of $100 to $150 when homes were sold or refinanced and paid Kelley to track deeds showing ownership of the properties.

JeRue, whose role in Kelley’s business was operations manager, backed up prosecutors’ arguments that Kelley’s company was supposed to get a flat fee of $15 or $20 per mortgage.

Prosecutors say Kelley promised companies he would take that fee and refund the rest to homeowners if it wasn’t needed to pay third-party fees.

Several tasks were included in that fee, and there were no extra charges, JeRue testified.

JeRue also said he wasn’t expected to log tasks done on each file, such as contacting banks or writing letters. He never saw those kinds of tasks recorded, he said as he reviewed a spreadsheet projected for the jury to see.

Kelley said under oath in a previous civil case over the same fees that other spreadsheets detailed the tasks and fees associated with them.

JeRue has been granted immunity from prosecution in exchange for his testimony in the case, a point the defense is expected to highlight in an attempt to undermine his credibility.

JeRue’s former part-time work for the Auditor’s Office from his home in California has sparked a separate investigation at the state level.

Kelley was elected state auditor in 2012, tasked with rooting out fraud and waste in government operations. Allegations of impropriety surfaced during that campaign, leading federal investigators to examine how he ran his old company.

Kelley took a seven-month leave of absence following his indictment last year. He returned to work in December, despite calls from Gov. Jay Inslee and other officials to resign.

Kelley’s lawyer has said Kelley won’t run for re-election and is done with politics.

Testimony in the trial is expected to last another week. The most serious charge, money laundering, carries up to 20 years in prison.

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Information from: The News Tribune, https://www.thenewstribune.com


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