An employee of State Auditor Troy Kelley’s former real-estate services business testified Wednesday that his boss called him one day, sounding distressed, and asked how many checks he had.
“He said, write refunds,” Jason JeRue testified at Kelley’s criminal trial. “Find some refunds that are owed, and write all your checks out.”
Kelley said it didn’t matter which homeowners got the 10 to 12 checks, JeRue testified.
JeRue made his first public appearance Wednesday since his name came up more than a year ago in connection with the federal investigation of Kelley. There’s a separate state investigation into the hiring of JeRue to work part-time for the auditor’s office from his home in California.
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Wednesday was also a jury’s first look at the inner workings of Kelley’s former company, as a visibly nervous JeRue explained his job at Post Closing Department in halting and laborious detail.
In exchange for testifying, JeRue has been granted immunity from prosecution based on what he might say. Defense attorneys will highlight that deal to try to undermine his credibility.
Kelley is charged with 16 felonies, including money laundering and tax fraud, all rooted in the fees he kept.
Escrow companies Old Republic Title and Fidelity National Title charged fees of $100 to $150 when homes were sold or refinanced and paid Kelley to track deeds showing ownership of the properties.
Prosecutors say Kelley promised the companies he would take a cut of $15 or $20 and refund the rest to homeowners if it wasn’t needed to pay third-party fees. They say he didn’t make refunds except in rare cases, especially when there were complaints.
Prosecutors will try to bolster their case that Kelley owed the money back by showing he tried to make it look as if he was giving refunds through random payments, such as the 2006 checks JeRue described.
JeRue said that was one of two times Kelley told him to send all the blank checks he had that Kelley had pre-signed.
JeRue, whose title at Post Closing was operations manager, also backed up prosecutors’ contention that the company was supposed to get a flat fee of $15 or $20 per mortgage.
Several tasks were included in that fee, and there were no extra charges, JeRue testified.
He 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 civil case after Old Republic sued him over the same fees, that other spreadsheets detailed tasks and the fees associated with them.
Kelley’s defense attorneys dispute that homeowners had any right to refunds from the fees they paid.
As evidence, they have pointed to what happened to more than $1 million Kelley paid in a 2011 settlement to Old Republic that ended the company’s lawsuit.
Kelley’s defense attorney questioned Scott Smith, who was Old Republic’s attorney when it sued Kelley.
Old Republic received $1.15 million from Kelley and his insurance company, but the company paid about $170,000 to homeowners.
It kept the rest, offsetting much of the more than $1.1 million in legal fees it had incurred in the lawsuit and a related case.
Not all the customers were offered money, and many of those offered in a letter didn’t reply.
Smith said the settlement allowed Old Republic to keep the money, but instead it chose to make refunds. Everyone could have been offered refunds if the case hadn’t dragged on so long, piling up legal fees, he said.
Kelley’s attorney, Angelo Calfo, asked if the fact Old Republic didn’t hand any of the money over to a sort of government lost-and-found program suggested that “Old Republic didn’t treat it like it was the customers’ money?”
Smith said that’s what the settlement allowed.
“There was no designation that that would be customer money,” he said.