The evidence presented over the last 4 1/2 weeks against State Auditor Troy Kelley justifies the case going to a jury, a federal judge says.
The prosecution rested its case in Kelley’s criminal trial Wednesday morning. As soon as the jury filed out of the Tacoma courtroom, Kelley’s defense asked U.S. District Court Judge Ronald Leighton to dismiss the bulk of the case.
Defense attorney Angelo Calfo said the trial has contradicted allegations from a September indictment of Kelley. For example, he said evidence shows Kelley disclosed his bank accounts to the IRS, the courts and political-campaign regulators. Prosecutors argue Kelley shuffled money through the same accounts to hide it.
A rational jury couldn’t find guilt based on what has been presented, Calfo said.
Leighton disagreed. “In the main I am satisfied there’s an abundance of evidence of possession and concealment of stolen property, and I am satisfied there is an abundance of evidence on the money laundering counts,” the judge said.
Prosecutors say before Kelley was state auditor he stole and hid more than $1.4 million in fees paid by homeowners that he should have refunded after taking a cut. As a contractor for escrow companies, he tracked documents showing property ownership after the sale or refinancing of a home.
He promised the companies his cut would be $15 or $20 out of a fee that usually topped $100, prosecutors say. He avoided taxes on the stolen money and made false statements in a lawsuit and to the Internal Revenue Service, the prosecution says.
He is charged with 16 felonies.
Kelley’s defense says prosecutors have been inconsistent about whose money was stolen: the homeowners,’ or the escrow companies.’
Neither can be shown to have owned the money, the defense says. The homeowners signed over the fees at closings, and Calfo told the judge that escrow companies only had possession, not ownership, of the money.
Prosecutors say it doesn’t matter whose money it is, only that it wasn’t Kelley’s to keep.
They say Kelley committed theft by deception under state law and that the theft itself need not violate federal law to create a foundation for a federal charge of possessing and concealing stolen property.
Calfo disputed that state law can be used in that way, citing a 1957 Supreme Court decision concerning car theft.
“I feel like we’re headed toward serious error, legal error,” Calfo told the judge.
The arguments could lay grounds for appeal if a jury convicts Kelley.
The first day of testimony by defense witnesses was highlighted by National Guard Lt. Col. Matt Cooper vouching for Kelley’s ethics in his work as an officer and lawyer in the Guard.
“As to his truthfulness and honesty, I would rate him extremely high , the highest that I’ve worked with,” Cooper said of Kelley, his fellow lieutenant colonel and judge advocate.
Earlier, real-estate lawyer Mark Schedler bolstered the defense case that refunds were not required of the fees related to reconveyance – the process Kelley tracked for escrow companies – if refunds weren’t promised in writing at closing.
Schedler said escrow companies sometimes refunded fees voluntarily when homeowners asked for them, to keep the homeowners from complaining to their real-estate brokers.
Companies want to stay on good terms with brokers who send clients their way. It’s a cliche in the industry, Schedler said: “You’re only as good as the last closing you did.”
Closing arguments in the trial could come next week.