State Auditor Troy Kelley’s indictment paints a picture of someone who could be a bit of a criminal mastermind. Kelley has pleaded innocent and expressed confidence that he will be vindicated. His attorneys dismiss the allegations as unworthy to be heard in a criminal court.
After reading the 40–page document, which gives the federal grand jury and prosecutors' views, here are six aspects of the allegations – and they are only allegations – that might surprise you.
- He did it twice. A lot of the case involves reconveyance-processing fees that his former company, Post Closing Department, was supposed to refund to thousands of borrowers involved in real-estate transactions. After allegedly defrauding real-estate escrow firm Fidelity, the Columbia bank account used for Post Closing's Fidelity business grew from $745,121 on Jan. 1, 2006 to $2,361,181 by June 2008. He deposited $443,006 into his personal account at Bank of America. The indictment says he defrauded another escrow firm, Old Republic, and its customers in the same way. In both cases, according to the prosecutors, thousands of borrowers should have received refunds on their fees for which Post Closing had to do no work.
- He covered his tracks. The indictment says he defrauded Old Republic in the same way: “Contrary to his representations and promises, TROY X. KELLEY directed Post Closing Department employees to issue refund checks in only two limited situations.” Those two situations were, if an escrow company or borrower complained that they hadn’t received a refund. Second, he would have his employees issue small batches of refund checks. The indictment says he did this to cover his tracks in case he was questioned by Old Republic. By June 2008, the balance in the Old Republic business bank account grew to $888,949. Kelley, the indictment charges, transferred $95,000 into his personal bank account.
- He didn’t report a serious chunk of change to the IRS. United National, a company that Kelley controlled and which operated under the name Post Closing Department, failed to report income earned between 2006 and 2008 by an aggregate amount of more than $3 million. By not reporting this, Kelley reduced the individual income taxes he was required to pay for those tax years by $1 million.
- He was meticulous in creating a possible cover when challenged. On May 14, 2008, two class action lawsuits were filed against Fidelity and Old Republic alleging the reconveyance-processing fees from borrowers weren’t refunded. Kelley learned of these lawsuits on May 15, 2008. So on May 16 he went on a mission to make it look like his company had refunded the check — he drove to a Bank of America ATM, withdrew $300 cash from his personal bank account, then drove to Washington Mutual, got a $250 cashiers check and wrote a letter to the plaintiff claiming that Post Closing had refunded the check. He alleged it had been sent on Jan. 7, 2008. He put a slightly incorrect address on the letter’s heading to create an explanation that it hadn’t been delivered to the plaintiff. He also made sure to pay himself back through the Fidelity business bank account — designating the payment as “reimbursement.”
- He went to a lot of trouble to move funds. He apparently used a variety of banks and accounts to move $3.7 million — the indictment says it was an effort to conceal the money. He moved the money held in Post Closing Department’s Columbia bank accounts through wire transfers in various newly opened bank accounts. The money went to bank accounts at Wells Fargo, U.S. Bank and Nevada State Bank. He then formed a company called Berkeley United and formed Wellington Trust at the same time. Wellington Trust owned 99 percent of Berkeley United and his company Blackstone International owned the remaining 1 percent. He opened an account at Vanguard in the name of Berkeley United and transferred $3,634,673 from Nevada State Bank to an account at Vanguard in Pennsylvania. On June 25, 2008 a fire was reported at Stewart Tile offices in Everett, Wash. Kelley said all of Post Closing Department’s records had been destroyed in that fire and in a crash of his computer. He shut down Post Closing on Aug. 11, 2008. Each year, he continued to withdraw $245,000 from the account and deposit it into an account of his Blackstone International. By Feb. 27, 2015 there was only $1,355,843 left in the Vanguard account.
- Kelley withdrew funds from a Vanguard account less than a month ago. On March 26, he wrote a check to the United States Treasury for $447,421. Then, he wrote a check for $908,397 to a trust account in Seattle in which the funds were to be held for his benefit.
