Judge Dismisses One Count Against Kelley, Allows Rest Of Case To Go To Jury
After nearly six weeks, the jury in the trial of Washington State Auditor Troy Kelley will hear closing arguments Wednesday and then retire to decide the case.
On Tuesday, U.S. District Judge Ronald Leighton dismissed one of the false declaration charges against Kelley on the grounds that prosecutors had failed to introduce sufficient evidence to lead a reasonable jury to convict on that particular charge.
However, the judge denied a defense motion for a judgment of acquittal on all of the charges and declared the case will go to the jury.
“I don’t know what they will do,” Leighton told the lawyers outside the presence of the jury. “But there is ample evidence … that a reasonable jury could convict on any and all remaining counts.”
As the judge spoke, Kelley’s wife Diane sat in the gallery and shook her head.
Kelley is charged with possession of stolen funds, money laundering, filing false tax returns and making false declarations. The charges stem from his days in the real estate services industry prior to being elected state auditor in 2012.
Specifically, Kelley is accused of pocketing millions of dollars in homeowner fees that prosecutors say should have been refunded, then conspiring to conceal the money and avoid paying taxes on it. The defense maintains Kelley was entitled to keep the money and applied a legal accounting method to recognize the fees as income and pay taxes on the money over time.
Final defense witness
As Kelley’s trial wound down Tuesday, the defense tried to cast doubt on the testimony of the prosecution’s star witness, Jason Jerue.
At issue was a spreadsheet from June 2006 that Jerue, Kelley’s former operations manager, testified he had “zeroed out” at Kelley’s direction to make it look like un-refunded homeowner fees had been spent to pay third-parties, not retained by Kelley.
The defense called as its last witness Richard Conte, a retired FBI agent turned private investigator who reviewed the spreadsheet in question to try to determine when it was created and who created it.
Conte testified that the spreadsheet lacked that sort of metadata.
“What’s missing is any information about who authored it or who last modified it?” defense attorney Patty Eakes asked.
“That’s correct,” Conte replied.
The defense then showed the jury a different, larger spreadsheet that appeared to contain identical information to the first, including the zeroed-out entries. But the spreadsheet metadata showed it had been modified in 2010 by Scott Smith, an attorney for Old Republic Title.
In 2010, Smith was representing Old Republic in a lawsuit against Kelley over un-refunded homeowner fees. Kelley later settled that lawsuit for more than $1 million and no admission of wrongdoing.
The defense also noted that there was no email chain to prove that either spreadsheet had been transmitted to Old Republic Title by Kelley or his company, the Post Closing Department.
Finally, the jury was shown yet another spreadsheet that Jerue sent to Old Republic Title in 2007, but in this version the homeowner files that had been zeroed out in the other spreadsheets were not zeroed out.
“Each [row] …. that showed a third party fee on [the other spreadsheets] showed a balance on [this spreadsheet],” Conte testified.
On cross-examination, Assistant U.S. Attorney Andrew Friedman noted that businesses and law firms routinely remove metadata from documents. He also pointed out that even minor changes to a spreadsheet could result in it appearing that someone had modified the document. And he got Conte to agree that the zeroed-out data in the first two spreadsheets appeared to be identical.
“You didn’t identify a difference in the information?” Friedman asked.
“No,” Conte responded.
“Not a single one?” Friedman continued.
“No,” Conte said.
Friedman also displayed for the jury an email from Jerue’s public defender Russell Leonard discussing Jerue’s recollection of a zeroed-out spreadsheet even before the spreadsheets had been produced as evidence in the trial.
“He recalls seeing a spreadsheet with a long list of check numbers reflecting refunds given and therefore the balances being ‘zeroed out,” the email read.
After the defense rested its case, the jury was dismissed for the day so that the prosecution and defense could argue the nuances of the jury instructions. The burden of proof for count 1, possession of stolen funds, has been a key point of contention throughout the case. The prosecution has maintained that it’s enough to show that Kelley was not entitled to keep the $1.4 million at issue in the trial.
“Any felonious taking will qualify,” Friedman argued earlier in the case.
However, the defense has sought to show that homeowners gave up their right to the money when they signed their closing statements and that the funds were never owned by Kelley’s escrow company clients.
“We believe the instructions should make it clear that if the property is transferred to Mr. Kelley with the consent of the owner then it cannot be stolen,” Calfo argued to Judge Leighton.
After praising the lawyers for their professionalism in the grueling trial, Leighton retired to put the finishing touches on the jury instructions.
He’s allotted each side two hours to make their final case to the jury in closing arguments.