Jury reaches no decision on key charges against Washington state auditor

SEATTLE — In the Washington State Auditor Troy Kelley's federal fraud trial, a jury reached no decision on key charges against him.

He was found not guilty one count, which was making a false statement. They remain deadlocked on all other counts.

KEY DEVELOPMENTS

• Jury reaches verdict on 1 count
• Kelley faces 15 counts in all
• Jury begins deliberation Thursday
• Gov. Jay Inslee calls on Kelley to resign
• Kelly maintains his innocence
• Indictment alleges misdeeds in connection with mortgage title services companies

Earlier Tuesday, the judge decided to deny the motion for a mistrial.

The jury said Tuesday a radio news story may have affected one of its members. After telling U.S. District Judge Ronald Leighton that it had been able to agree on just one of the 15 counts, the jury sent out another note -- this time saying a juror had "heard something on the radio that may have affected things."

After more than five weeks, the federal fraud case against Washington State Auditor Troy Kelley recently went to the jury. He faces charges that include possession of stolen property, money laundering and tax evasion.

The five-week fraud trial of Washington State Auditor Troy Kelley drew to a close Wednesday, with prosecutors calling it a "plain case of fraud and a cover-up" and the defense team describing it as a "disaster."

"Someone who has done nothing wrong does not need an elaborate cover-up," Assistant U.S. Attorney Katheryn Kim Frierson told jurors during her closing argument. "He did the things only those who know they are guilty do."

Kelley, the first Washington state official indicted in 35 years, stands accused of illegally pocketing $3 million in fees prosecutors say he should have refunded to homeowners when he ran a real-estate services business called Post Closing Department during the height of the housing boom before he was elected state auditor.

His trial featured testimony from former employees, including Jason Jerue, who told jurors that Kelley ordered him to falsify documents to hide that the company wasn't paying the refunds.

Frierson told jurors that Kelley's actions also included moving money among various accounts to hide the proceeds, asking Jerue to destroy company records, trying to pay off a homeowner who filed a lawsuit over the retained fees, and lying in civil litigation as well as on his taxes.

One of Kelley's attorneys, Angelo Calfo, sought to dismantle the government's case point-by-point in his closing argument, saying that because of Kelley's high political profile, investigators set out from the beginning to win a conviction — not to find the truth — and as a result ignored evidence of his client's innocence.

The case is "based on a fundamental premise, a fundamental misconception, and that is that Troy Kelley was dealing with other people's money," Calfo said. "He wasn't."

Kelley, a lawyer himself who has taught tax law courses, faces 15 counts in all, including money laundering and tax evasion.

The charges date to 2005, seven years before Kelley was elected state auditor, a position that entails rooting out waste and fraud in public agencies. His company tracked escrow paperwork for title companies.

The prosecutors and defense lawyers wrapped their closing arguments Wednesday afternoon.

Two of the 14 jurors were then dismissed as alternates, and the remaining 12 began their deliberations Thursday.

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Cox Media Group