Troy Kelley knew nearly two years ago that a federal grand jury was investigating him, a legal adversary of the embattled state auditor says.
Attorney Scott Smith said he notified Kelley in an April 30, 2013, letter that Smith had received a grand jury subpoena five days earlier requesting documents from a lawsuit Kelley had settled with Smith’s client, Old Republic Title.
Documents indicate investigators have been on the trail since before Kelley took office as auditor in January 2013. Smith said they contacted him in late 2012, and a subpoena served on the state Auditor’s Office this month contains a case number with a 2012 date.
It’s not clear whether the Democrat knew about the investigation before taking office. Whether he did or whether he discovered it a few months later, Kelley did not disclose it publicly.
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This month, the inquiry became public when Treasury Department agents searched Kelley’s house in Tacoma. Kelley said in a statement he had “not been informed of any reasons for a search.” A second statement followed this week saying he had “fully cooperated with their investigation and remain puzzled by their interest,” and an Auditor’s Office spokesman said he didn’t know when Kelley had first learned of the investigation.
Kelley did not respond Thursday to requests for comment.
State ethics law does not require state officials to disclose that they are under criminal investigation. A former U.S. attorney said an investigation of a sitting state auditor is highly relevant to the public, yet Kelley has the same rights as any private citizen who is innocent until proved guilty.
Ultimately, it was up to him to decide what to disclose, said Mike McKay, now a lawyer in Seattle whose firm regularly defends clients involved in grand jury investigations.
“He doesn’t have an obligation to publicize this,” said McKay, who was U.S. Attorney for the Western District of Washington from 1989 to 1993.
McKay said 2012 campaign-season news reports about Kelley’s past business dealings likely drew prosecutors’ interest. The reports had called attention to the 2009 lawsuit Old Republic filed against Kelley, raising questions about whether Kelley misappropriated money and whether he paid taxes on $3.8 million that he said was earned legitimately.
Kelley paid Old Republic to settle the lawsuit in 2011, and the two parties agreed not to reveal details of the settlement. During the 2012 campaign, Old Republic offered to disclose the amount of the settlement but Kelley refused.
A few months later, when Smith received the request for records, he said he mailed Kelley a letter at his home address that informed Kelley he planned to turn over confidential documents to federal authorities.
Smith didn’t hear back, so his assistant called Kelley’s assistant at 12:08 p.m. on May 6 to confirm he had received the letter, he said. Kelley’s assistant soon called back to say he had received the letter, Smith said.
“We made sure he got it,” Smith said.
Smith had declined to comment about any contact with federal investigators, but disclosed details to The News Tribune, The Olympian and Northwest News Network after confirming with authorities that he was under no obligation to stay silent, he said.
McKay said grand jury investigations can take a long time. The barrage of federal requests to state agencies about Kelley during the past few months and the search of his home could indicate something new has developed, he said – or it could mean the investigation is nearing a conclusion.