State auditor says he did not steal millions or hide funds from IRS

TACOMA - State auditor Troy Kelley pleaded not guilty to a 10 count indictment. The feds say the long running scheme to steal money from homeowners started in 2003 and lasted even after he became the state auditor.

Kelley had to face a federal judge accused of stealing about $2 million from thousands of homeowners and evading taxes on those stolen funds.

The US Attorney’s Office says Kelley stole funds between 2003 and 2008 when he owned the Post Closing Department. The former business is a mortgage reconveyance company.

A Reconveyance fee is when borrowers pay to transfer a title of a home. The feds say Kelley did not refund unused portions of reconveyence fees to borrowers. Instead he fraudulently retained, stole and converted them to his own use. On Thursday state lawmakers and Governor Inslee called for Kelley to resign.

“These indictments Mr. Kelley makes it clear he will not be able to serve effectively as the state auditor he does need to resign,” Inslee said.

Q13 FOX News spoke with Rep. Drew Stokesbary, who said the Legislature has the power to impeach Kelley.

After his initial appearance in federal court, Kelley responded to the allegations in a press conference.
He says he is taking a temporary leave of absence starting May 1 because of the distraction but has no plans to resign. He says the indictment has no merit.

“In the end they’ve been able to obtain that indictment but they are a long way from proving any wrongdoing,” Kelley said.

He says he is confident that he will prove his innocence in an open court.

“I filed tax returns with the IRS disclosing funds that appear to be a part of the central government case.
I’ve been paying taxes on those long before the government’s interest in his case,” Kelley said.

Kelley’s trial date is set for June 8.