Politics & Government

Charges against state Auditor Troy Kelley are unusual, but not a first

If state Auditor Troy Kelley lied to defend himself from a lawsuit, he’s hardly unique.

People lie under oath all the time in civil courts, former U.S. Attorney Mike McKay said. That’s illegal, but prosecutors don’t have time and money to go after all of them.

But a high-ranking official receives more attention, McKay said. Think President Bill Clinton, who was impeached — but not removed from office or prosecuted criminally — for statements under oath. The idea, McKay said, is both to hold an official to a higher standard and to make a high-profile example.

“People are going to remember that,” McKay said, “and so the next time their deposition is being taken, they’re just a little less likely to make a false statement.”

After Kelley pleaded not guilty to 10 felony counts Thursday in federal court, his attorney suggested the Tacoma Democrat is being unfairly singled out. Mark Bartlett told reporters that prosecutors’ pursuit of Kelley is “unprecedented.”

Unprecedented, he said, because the case centers on Kelley’s actions years in the past, because it plows ground already explored by a lawsuit, and because Kelley is now in trouble for what he said during that lawsuit.

The charges against Kelley that grab headlines involve evading taxes and keeping more than $1.4 million in stolen money. But the charge that carries the heaviest sentence, up to 20 years in prison, is that he tried to obstruct a lawsuit against him by giving false information in a written response to questions about his bank accounts.

Title company Old Republic, a former client, sued Kelley in 2009 trying to recoup money it said Kelley should have refunded to its customers. He’s also now accused of making false statements in a deposition under questioning from Old Republic’s lawyer.

At a news conference Thursday, Kelley insisted he did not break the law.

“I have never, ever seen a criminal case brought related to civil deposition or civil filing,” Bartlett told reporters, citing his experience over more than three decades as an assistant U.S. attorney in Western Washington.

False statements in a civil case are typically handled within that case by excluding the false evidence, not by prosecution, said Scott Schumacher, a University of Washington law professor.

“It’s unusual,” Schumacher said. “It’s not unprecedented.”

Two former Texaco executives were prosecuted in the 1990s and acquitted of withholding evidence in a racial discrimination lawsuit against the company that was settled.

“Unlike criminal sanctions,” a federal judge in New York wrote in allowing the prosecution to go forward, “civil sanctions are inadequate to effect either general or specific deterrence, or to protect the integrity of the court and the due administration of justice, especially under egregious circumstances such as are alleged in the indictment.”

Other indictments have accused people of lying in depositions during Internal Revenue Service audits, as in a 2007 case against current and former Ernst and Young executives.

Seattle tax attorney John Colvin said he always cautions his clients that the government could throw the book at them if they aren’t truthful in a deposition.

“Just because it’s civil doesn’t mean you’re going to be able to dance away home free. Any time you lie, there’s risk,” Colvin said.

If such prosecutions are relatively rare, Colvin said another aspect of Kelley’s case is common: someone facing charges over dirty laundry first aired in a civil lawsuit.

Colvin’s firm has defended clients in such cases, he said.

Bartlett told reporters that while someone can be liable in both civil and criminal courts for the same acts, federal prosecutors usually focus on wrongs that haven’t been corrected.

“They normally do not double down on that, especially seven years after the last act,” Bartlett said.

Old Republic’s lawsuit against Kelley, he noted, has already been settled. A court dismissed it in 2011 after Kelley paid more than $1 million to Old Republic.

Now prosecutors contend Kelley failed to refund fees to Old Republic, title company Fidelity and their customers from 2006 to 2008, while also avoiding about $1 million in income taxes in those years.

They also allege Kelley tried to reduce his 2011 and 2012 taxes by fraudulently claiming personal and campaign-related spending as business deductions.

Kelley insists he did not break the law. He said last week that he plans to take a temporary leave of absence from the Auditor’s Office beginning May 1 but is determined to fight the charges and keep his position.

Gov. Jay Inslee has called for Kelley to resign.