Western and Eastern US Attorneys issued the following announcement on July 29
The 9th Circuit Court of Appeals today rejected the appeal of former Washington State Auditor TROY X. KELLEY, clearing the way for him to start serving the one-year-and-one-day sentence imposed by U.S. District Judge Ronald B. Leighton on June 28, 2018. The court declined to hear oral argument and upheld the conviction with an order today.
“Through two trials and multiple appeals, the attorneys in this office have sought nothing but justice for those Kelley defrauded and the members of our community who expect law breakers to be held accountable regardless of their station or standing in society,” said U.S. Attorney Brian T. Moran. “The time has come for Troy Kelley to accept his punishment and report to custody and conclude this lengthy legal odyssey.”
According to the evidence at trial, between 2003 and 2008, KELLEY operated a business that monitored real estate filings on county websites. KELLEY agreed with escrow companies that his business would charge a flat fee of $15 or $20 for each real estate transaction it monitored for the escrow companies’ customers. In addition to the flat fee, the escrow companies also gave Kelley $100-$150 of customer money for each transaction, which KELLEY agreed to use to pay expenses if necessary. KELLEY agreed to refund the money to the homeowners if there were no expenses. However, beginning in 2005, in virtually every case he handled, KELLEY kept the entire amount withheld on each transaction, thereby stealing nearly $3 million.
In 2008, class action lawsuits were filed against escrow companies, claiming that homeowners had been charged excessive fees in real estate transactions. After the lawsuits were filed, KELLEY falsified a letter to the plaintiff in one lawsuit to make it appear that KELLEY had refunded the plaintiff’s money, when in fact he had not. Concerned that the lawsuits would lead to his downfall, KELLEY transferred millions of dollars of stolen money through a series of bank accounts, ultimately placing the funds in an investment account for a company controlled by a Central American trust controlled by KELLEY. One of the escrow companies sued KELLEY to retrieve the stolen money. KELLEY testified falsely under oath in the lawsuit that he had only kept money he had earned for services provided. One of KELLEY’s convictions for making false declarations in a court proceeding is based on that testimony.
Beginning in 2011, KELLEY spent the stolen money on personal expenses and his campaign for State Auditor. To hide the fact that this was money he had stolen years earlier, KELLEY claimed on his tax returns that he was continuing to perform real estate services and to earn income through his business, when in fact he had not operated the business for years. In the same tax returns, KELLEY claimed tens of thousands of dollars of business deductions for personal items like spa treatments, a family trip, and household purchases such as sheets and toys. KELLEY’s tax fraud convictions are based on this conduct.
In December 2017, a unanimous jury convicted KELLEY of possession of stolen property, two counts of making false declarations under oath, and six counts of tax fraud. Following the trial, an unrelated U.S. Supreme Court ruling resulted in the dismissal of one of the tax fraud counts.
A first trial in March 2016 ended with the jury being able to reach a verdict on only one count, acquitting KELLEY on lying to the Internal Revenue Service agent who questioned him about his scheme in 2013.
The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI) and the FBI.
The case was prosecuted by Assistant United States Attorneys Arlen Storm, Andrew Friedman, Seth Wilkinson and Katheryn Frierson. Assistant United States attorney Michael Morgan handled the appeal.
Original source can be found here.
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