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Dispatches from public radio's correspondent at the Washington Legislature. Austin Jenkins is the Olympia correspondent for the Northwest News Network. You can also see Austin on television as host of TVW's (the C–SPAN of Washington State) weekly public affairs program "Inside Olympia."

A Mystery And An Inconsistency In Washington State Auditor's Past

Austin Jenkins
Northwest News Network
Washington State Auditor Troy Kelley Kelley has pleaded not guilty to federal charges and is on leave.

Washington State Auditor Troy Kelley was elected to root out waste and fraud in state and local government. Now, the first-term Democrat faces federal charges that he defrauded escrow company customers and the IRS.

A look into Kelley’s past reveals a mystery and an inconsistency.

A mystery in Klamath Falls

In Klamath Falls, Oregon near the California border there’s an attorney named Neal Buchanan.

Over the years, Buchanan has also helped clients set up limited liability corporations Sometimes, Buchanan is listed as a company’s registered agent.

In 2003, Troy Kelley registered his company, United National, LLC, in Oregon and named Buchanan as the registered agent. But Buchanan said he’d never heard of Kelley or his company.

Buchanan said he looked up United National and Troy Kelley.

“And did not come across any indication that I either have a closed file or an open file on either of those entities,” he said. “Which struck me as a tad odd.”

Odd because Buchanan said he would have a record if he had helped set up that company in Oregon. So then he thought maybe he did it as a favor.

It turns out, Buchanan has a six-degrees-of-separation type connection to Troy Kelley.

“If you can call it a connection,” he added.

Buchanan’s former legal assistant is the former mother-in-law of one of Kelley’s business associates. Buchanan checked with his former employee to see if she might have authorized the use of his name as the company’s registered agent. The answer back was “no.”

Asked his reaction to being pulled into the saga of an indicted state auditor, Buchanan said with laugh, “I would prefer not to have been.”

Buchanan’s not the only person who claims Kelley used their name without their permission. A decade ago, the website for United National listed Columbia Bank manager Calvin Pearson and California attorney Theodore Saibeni as board members. Both men said recently they were never board members.

The inconsistencies of a spreadsheet

The crux of the federal case against Kelley is that he pocketed more than $1 million that should have been refunded to escrow company consumers -- and then schemed to avoid paying taxes on the money.

In a 2010 deposition, Kelley said his company -- which did business as the Post Closing Department or PCD -- earned its fees by charging for things like writing a letter. And Kelley said those charges were noted on a spreadsheet.

Here’s Kelley under oath answering questioning from an attorney named Scott Smith:

Smith: “Was there a separate column for each of the different types of charges that PCD had, for example, a column labeled something like PCD follow up charge?” Kelley: “Yes.” Smith: “PCD write a letter charge?” Kelley: “Yes.”

But Dee Lamb, a former employee of Kelley’s remembers differently. She said she did not charge if she had to write a letter. She also said the spreadsheet did not have a place where she could insert a charge for things like writing a letter or making a phone or other kinds of ancillary activities.

'Squarely in line with industry practices'

Kelley would not comment for this story. He previously said under oath that the spreadsheets were destroyed in a fire, or lost when a computer broke and he gave it away.

Kelley did defend his business ethics to reporters on the day his indictment became public last month.

“My business practices in my work around real estate and reconveyances are squarely in line with industry practices,” he said. “Let me say that again: they’re squarely in line with industry practices.”

Questions about Kelley’s past business practices are nothing new. They were an issue in a lawsuit Kelley settled for $1 million in 2011. Questions were again raised in 2012 when Kelley was running for state auditor. But it was never enough to derail Kelley’s political ambitions or get him in trouble with the law - until now.

Since January 2004, Austin Jenkins has been the Olympia-based political reporter for the Northwest News Network. In that position, Austin covers Northwest politics and public policy, as well as the Washington State Legislature. You can also see Austin on television as host of TVW's (the C–SPAN of Washington State) Emmy-nominated public affairs program "Inside Olympia."