Politics & Government

Feds sought records of employee who worked with Auditor Troy Kelley in past business

Eleven days before federal agents searched state Auditor Troy Kelley’s Tacoma home on March 16, they demanded records related to a state employee and longtime business partner of Kelley’s whose name appears in an acrimonious lawsuit tied to Kelley’s past business dealings.

The federal grand jury subpoena served at the Auditor’s Office sought various records associated with Jason Jerue, 45, an office employee who previously worked as vice president of Kelley’s real estate document business, according to court records. Those same records include a declaration from another former employee of Kelley’s, who said Jerue destroyed documents associated with the business shortly after legal troubles surfaced.

The subpoena, dated March 5 and released late Friday by the Auditor’s Office, requested emails between Jerue and other office employees relating to Jerue’s past employment at Post Closing Department, Kelley’s company that became embroiled in a federal lawsuit with a former client, Old Republic Title.

The Department of Justice subpoena requested emails between Jerue and others in the Auditor’s Office discussing that lawsuit or “the commission of any criminal offense.”

Federal investigators also sought recent work completed by Jerue at the Auditor’s Office, his personnel file, and communication between Jerue and his bosses regarding the terms and conditions of his employment at the agency.

The state Auditor’s Office said it turned over the documents requested in the federal subpoena Thursday, three days after agents with the U.S. Treasury Department searched Kelley’s home.

Kelley, 50, is a Democrat and lieutenant colonel in the National Guard who was elected to the Auditor’s Office in 2012. Before that, he served three terms in the state House. The Seattle Times reported Friday that the FBI is also seeking records related to expense reimbursements Kelley received when he was a state legislator.

Kelley did not return a call from The News Tribune Friday. He remains on vacation out of state with his family, and isn’t expected back in the office until Monday, Auditor’s Office spokesman Thomas Shapley said Friday. Shapley said he believes Kelley is in California.

A spokeswoman for the U.S. Attorney’s office in Seattle said Friday she could neither confirm or deny an investigation concerning Kelley, and that no case against him had been filed.

Jerue did not return a message left on a phone linked to his name in state records. He currently works at the Auditor’s Office as a part-time technical writer, Shapley said. State salary records show that he began working for the auditor in 2013. Previously, he was vice president and operations manager at Post Closing Department, Kelley’s company, according to a 2011 court filing.

An attorney involved in the lawsuit against Kelley’s former company said Jerue could be able to provide valuable information about whether Kelley or the company was involved in unlawful business practices.

The Post Closing Department processed and tracked mortgage title documents. It did that work for Old Republic, which contended Kelley kept $1.2 million in fees that should have been refunded to Old Republic’s customers. Kelley later told reporters he collected fees properly for work he did. The lawsuit ended in 2011 when he paid an undisclosed settlement to Old Republic.

Scott Smith, a lawyer who represented Old Republic, said he wanted to speak with Jerue four years ago due to his important role in Kelley’s business, but was unable to locate Jerue to serve him with a subpoena.

“He’d be a key witness to either corroborate or contradict Kelley’s explanation for why he kept the money,” Smith said Friday.

A declaration in the Old Republic suit states that Jerue “deleted all emails, spreadsheets, and other documents” from an employee’s computer. Jerue also removed physical files, binders and boxes of records, the employee stated. Those actions came shortly after a related class action lawsuit was filed against title companies who had done business with Kelley.

In the Old Republic lawsuit, Kelley answered questions under oath about why he had moved $3.8 million among multiple bank accounts, and whether he paid taxes on that money. Kelley said he would pay taxes when told to do so by an attorney advising him. He identified the attorney as Alan Eber, the name of a California lawyer who specialized in helping clients protect their assets by creating international trusts.

Prior to starting his own company, Kelley worked as an executive for First American Title Insurance Co. He sued the company for wrongful termination and defamation after it fired him in 2000. He complained that one company official had told other managers that he was stealing and embezzling from the company.

The company accused him of later breaking into its offices and stealing a painting, an act it said was captured on surveillance footage. Kelley denied the allegation, but shortly after the footage was submitted, he dismissed his lawsuit.

Prior to the release of the subpoena Friday, Gov. Jay Inslee’s office asked Kelley to “be open with the public” about the investigation that has led federal agents to search Kelley’s home and the Department of Justice to subpoena records from Kelley’s office.

“We hope that the auditor will work with authorities and to the greatest extent possible — and as soon as possible — be open with the public,” Inslee spokesman David Postman said.

A growing list of Republicans are also calling on Kelley to provide more information or even take leave. On Thursday, the chairwoman of the Washington State Republican Party asked Kelley to step down, while the majority leader of the Republican-controlled state Senate said Kelley should consider taking a temporary leave of absence.

Sen. Mark Miloscia, a Federal Way Republican who ran as a Democrat against Kelley for auditor in 2012, weighed in Friday. Miloscia is chairman of the Senate Accountability and Reform Committee.

“The people and voters of this state deserve an explanation so we can understand the reason for these events and be able to make our own decisions about what it means or choose to investigate further,” Miloscia said in a statement. “This must happen very quickly if we’re going to keep public trust in our government.”

Staff writers Jordan Schrader and Kate Martin contributed to this report.

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