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Kelley indicted on federal charges; asked to resign

by caprecord

Washington State Auditor Troy Kelley, the official responsible for ensuring the state’s financial integrity, was indicted Thursday on federal tax evasion charges. A federal grand jury says the Tacoma Democrat stole millions, filed false tax returns and lied under oath.

A 41-page indictment alleges Kelley kept more than $1 million collected while operating a mortgage reconveyance company between 2003 and 2008.

He’s been charged with 10 counts, including possession of stolen property, corrupt interference with Internal Revenue laws, tax evasion and four counts of obstruction.

Acting U.S. Attorney Annette L. Hayes said in a statement: “Mr. Kelley spun a web of lies in an effort to avoid paying his taxes and keep more than a million dollars that he knew did not belong to him, but instead should have been returned to thousands of homeowners across this state.”

The indictment comes exactly one month after federal agents searched Kelley’s home on March 16, and, later, subpoenaed his office for records. He has been under investigation since 2013.

Kelley says he has no plans to resign, but will take a leave of absence beginning May 1. “I believe the indictment has no merit and want to note that none of the allegations touch on my work as an elected official in any way,” he said in a statement.

The first-term auditor appeared Thursday before a federal court in Tacoma. He pleaded not guilty and was released without bail. If convicted of a felony, state law would force him to step down.

At a press conference following the court appearance, Kelley read a version of the written statement he released earlier in the day, did not take questions and left through a back door while his lawyers spoke to reporters.

Meanwhile, lawmakers on both sides of the aisle are calling for Kelley’s resignation.

Gov. Jay Inslee asked him to step down right away. “This indictment today makes it clear to me that Troy Kelley cannot continue as state auditor,” he said in a statement. “He should resign immediately. An appointee can restore confidence in the office and assure the public that the Office of the State Auditor will operate at the high standards required of the post.”

Sen. Mark Miloscia, the Federal Way Republican who against Kelley, said the indictment compromises public trust in the office. “He’s a leader, representing all the voters and elected officials, making sure everybody is ethical, and not lying, cheating and stealing,” Miloscia said. “But having an auditor that has been indicted on lying, cheating and stealing, I know, gives nobody confidence in that office at all.”

If Kelley resigns, an interim state auditor would be appointed until the following election.

If he doesn’t resign, lawmakers have discussed options for impeachment. Under state law, the House has to vote to impeach an elected official, then the Senate can hold a trial and decide whether to remove him.

Auburn Republican Rep. Drew Stokesbary is leading the push to remove Kelley from office. “He needs to resign and it doesn’t look like he’s going to,” he said. “He did the same thing he always does at the press conference: deny everything, claim ignorance, evade, run and hide and hope people forget about it.”

Voters will get to elect a new auditor this year if Kelley steps down before May 10. If he stays in office past May 11, a vote wouldn’t happen until 2016. Stokesbary says the public shouldn’t have to wait that long.

Democrat leaders, too, want Kelley to step down.

Rep. Pat Sullivan, Covington Democrat and House Majority Leader, says it will help restore confidence. “We want to ensure the state auditor’s office has the standing and credibility that the public expects,” he said. “Him stepping down would allow for a process, either through appointment or through special election, in order for that to be filled and the credibility to continue in a way that it should.”

But former Democratic State Auditor Brian Sonntag says that trust might be tough to get back. “More than anything else, it’s a feeling of sadness,” he said. “I feel bad for state government, for the employees of that office and the citizens of Washington who really have a real trust in that office and whoever holds it. Public trust can be fragile and when broken, can be tough to repair.”

Kelley’s trial is set to begin June 8.