If State Auditor Troy Kelley decides not to take the stand in his trial, some of the most anticipated testimony could come from his former employee, Jason JeRue.
JeRue’s voice hasn’t been publicly heard since he was tied to the criminal investigation of Kelley nearly a year ago. Now court filings from prosecution and defense indicate he’s expected to testify under a grant of immunity from prosecution.
The trial starts Monday morning in federal district court in Tacoma.
Kelley’s attorneys plan to argue that prosecutors ignored evidence of innocence in pursuit of an elected official. They are “reasoning backwards, from guilt to evidence, instead of forwards,” the defense says in a court filing that also suggests some witnesses now dispute what investigators have described them saying.
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. But if federal prosecutors call him to the stand, they will want him to talk about a different former job: running the daily operations of Kelley’s private business.
Kelley’s company, Post Closing Department, tracked documents involved in home loans. Title companies handed over to Post Closing thousands of $100 to $150 payments from borrowers. Prosecutors say Kelley promised the title companies he would refund unused portions of the fees to borrowers after taking a $15 to $20 cut, but rarely gave refunds and pocketed the money.
That alleged theft, which Kelley denies, is at the heart of the case against him. He’s charged with felonies including money laundering and tax fraud as part of what prosecutors say was a scheme to hide the theft from homeowners who went to court to try to get their money back.
Kelley said under oath, while defending himself in 2010 from a subsequent lawsuit by a title company, that his company charged numerous fees in addition to the basic $15 to $20, depending on how much extra work a case required. Kelley said the extra fees were detailed in spreadsheets that were lost when Post Closing’s website was shut down and the company’s computers and records were destroyed in a fire.
Prosecutors say JeRue and at least two other former Kelley employees cast doubt on that explanation.
“JeRue did not include on the tracking spreadsheet notes detailing what specific work was done on each file and which files required more work,” according to FBI Agent Michael Brown’s notes from a March 2015 interview of JeRue.
The fire consumed a title company’s building in Everett in June 2008 and was deemed to have been started by a leaking aquarium heater. Kelley said his records were stored in the basement.
“JeRue believed that Kelley took the opportunity of the fire to close down PCD, by claiming business records were destroyed,” according to Brown’s notes. “Kelley mentioned to JeRue that he was going to say his computer was in the fire. Kelley made it clear that the fire was going to be his catchall.”
A court filing by Kelley’s defense says JeRue has “serious credibility problems.”
Further, it says, “the government has no evidence that records were not in fact destroyed.
“It has found no documents that Mr. Kelley said were destroyed but were actually available to him during the civil litigation, even though it conducted an extensive search of his home for hard copy and electronic documents. It has not obtained records from Yahoo to show that Mr. Kelley could have still accessed his cloud-based email and website system.”
Prosecutors say months after Kelley said he shut down the website, Yahoo’s records show the website’s domain was still active and emails show Kelley and JeRue were still using the domain.
By then, prosecutors say, Kelley would have known he needed to preserve records because he had been sent a subpoena as part of homeowners’ lawsuits.
The trial before U.S. District Judge Ronald Leighton starts with jury selection and could run a couple of weeks or as long as six weeks.
Leighton on Tuesday denied most motions by the two sides to exclude evidence and witnesses, but he reserved judgment on whether to restrict testimony from experts.
The judge did limit the ability of Kelley’s defense to undercut an FBI accountant who worked on the case, since prosecutors have decided to have another accountant redo his work and testify in his stead. The original accountant was himself audited by the Internal Revenue Service.
Kelley, a Tacoma Democrat, was a member of the state House of Representatives before being elected auditor in 2012.