State Auditor Troy Kelley entered a not guilty plea to 10 counts connected to tax evasion and obstruction in U.S. District Court in Tacoma on Thursday.
U.S. District Court Judge J. Richard Creatura set the trial date at June 8, and released Kelley on his own recognizance. Creatura allowed Kelley to travel to South Korea for scheduled Washington National Guard duty and throughout Washington for his children’s sports events.
Amid calls for his resignation from Democrats, Republicans and Gov. Jay Inslee, Kelley maintained his innocence and announced he would be taking a leave of absence from his position starting May 1.
“I take this action to allow my office to the important work without distractions and to allow me to participate fully in my defense,” he read from a statement in front of reporters at a press conference. “I fully expect to resume my duties when these old legal matters are finally put to rest.”
Kelley read from the prepared statement before leaving through a back door, on advice from his lawyers.
“I’m very confident — very confident — that I will be able to prove my innocence. I look forward to doing that in an open court of law,” he read.
He maintained that he will clear his name and his activities at the company are in line with current real estate practices.
“It’s not our intent to settle the case, unless there’s a dismissal of the indictment,” one of his attorneys Rob McCallum told reporters.
Kelley has been under public scrutiny since March, when federal investigators raided his Tacoma home, and requested information from the State Auditor’s Office.
It emerged that the federal investigators were looking into financial activities related to The Post Closing Department, Kelley’s former real estate transaction business in California. They also had requested information related to Jason JeRue, who worked with Kelley at the California company, and then took a part time remote job at the Auditor’s office in 2013.
The charges filed this week are related to alleged activities Kelley conducted at Post Closing Department. According to the indictment filed by the U.S. Attorney’s Office on Thursday, Kelley withheld more than $2 million that he was supposed to return to clients and that he moved the money between accounts and between states. The indictment also alleges that when the companies filed a lawsuit to get the money back, Kelley lied under oath. The indictment also alleges that Kelley filed false income tax returns, and then lied to Internal Revenue Service agents who questioned him about it in April 2013.
U.S. Justice Department spokeswoman Emily Langlie declined to comment on whether charges were forthcoming against JeRue.
Each count is punishable between 3 and 10 years in prison, according to the U.S. Attorneys Office.
Kelley, a Democrat, was a state legislator elected to the State Auditor’s Office after Auditor Brian Sonntag decided not to run.
The State Auditor’s Office is consulting with the State Attorney General’s Office to find out whether Kelley will be paid during his leave of absence, according to spokesman Thomas Shapley.
McCallum and Kelley’s other attorney, Mark Bartlett, told reporters that it was unusual for a criminal case to be filed in connection to a settled civil case.
“I have never ever seen a criminal case brought related to civil deposition or civil filings,” Bartlett said.
Bartlett said that Kelley believed that the case was behind him before he ran for the state auditor’s office.
“That tells you more about what was in Troy Kelley’s mind than anything else. He clearly didn’t think he’d done anything wrong,” Barlett said.
“If he had thought he did anything wrong,the last thing he would have done is run for office.”