TACOMA — A key witness in the government’s fraud case against indicted Washington State Auditor Troy Kelley told jurors Thursday that he doctored documents to get a client of Kelley’s former real estate services firm “to leave us alone, basically.”
Jason JeRue worked for Kelley’s company, Post Closing Department, during the height of the last decade’s real estate boom, years before Kelley was elected state auditor in 2012. Prosecutors have accused Kelley of pocketing about $3 million in fees that he told title companies he would refund to homeowners. Kelley’s attorneys say he was entitled to keep the money.
Testifying under a grant of immunity from federal prosecution, JeRue described how a “pretty intense” employee of one title company, Old Republic Title, repeatedly asked about how Kelley was handling the fees.
“She kind of was haranguing us — meaning me — with a battery of questions and inquiries,” JeRue said. “He wanted to get her to stop asking, to leave us alone, basically.”
So at Kelley’s behest, JeRue “zeroed out” the spreadsheets, he said: He took a column showing money due to the borrower, and he entered the same amount in a column for other expenses, suggesting that no money was due back to the borrowers.
Kelley’s lawyers tried to keep the documents from being admitted as evidence, saying there’s no record that Post Closing ever actually sent them to Old Republic, but U.S. District Judge Ronald Leighton allowed them in after JeRue confirmed he had created them. Under cross-examination from one of Kelley’s attorneys, Patty Eakes, JeRue acknowledged when he was first interviewed by investigators in March 2014, he made no claim that Kelley had asked him to falsify documents. He only reported that a year later, after prosecutors had granted him immunity.
Kelley, who faces up to 20 years if convicted, was indicted about a year ago and took a seven-month leave from office before returning to work in December. He has fought calls for his resignation as he defends himself against charges of possession of stolen property, money laundering, lying in a deposition and filing false tax returns.
The charges date to 2005, seven years before Kelley was elected state auditor, a position that entails rooting out waste and fraud in public agencies. His company tracked escrow paperwork for title companies.
Prosecutors say to obtain business from the title companies — and get access to vast sums of money from homeowners — he promised that Post Closing Department would collect $100 to $150 for each transaction it tracked; keep $15 or $20 for itself; use some of the money to pay county recording and other fees if necessary; and refund the customer any remaining money.
The additional fees were rarely needed, but Kelley refunded the balance only when title companies began asking uncomfortable questions or when homeowners were savvy enough to demand it, prosecutors say.
JeRue began testifying Wednesday afternoon. He told jurors that on two occasions in 2007, a concerned Kelley called him, asked him how many company checks he had handy, and asked him to randomly use those checks to send refunds to customers. When homeowners began filing class-action lawsuits against the title companies because they hadn’t received refunds, Kelley shut down his business, telling JeRue to “get rid of” boxes of files. “He just said, ‘Dump ’em.’ So I dumped ’em,” Jerue said.
“Did he tell you to delete your electronic documents?” Assistant U.S. Attorney Andrew Friedman asked.
“Not in those words,” JeRue said. Asked if he recalled the exact words, JeRue added, “Get rid of it.”
JeRue said when he and his wife were planning to have a baby, he told Kelley, who assured JeRue that he’d have employment for the foreseeable future — and that if anything happened, Kelley would cover a year’s worth of severance pay. But after Post Closing shut down, that severance wasn’t immediately forthcoming.
After some badgering from JeRue, Kelley eventually wrote two checks — in 2011 and 2012 — for just under $10,000 each, and then, in an unusual arrangement, he hired JeRue to work part time for the Auditor’s Office from home in California. JeRue said he received a rocky reception from the performance auditor he was first assigned to, but Kelley then transferred him to work for Matt Miller. Miller was deputy director for external affairs at the Auditor’s Office — and had been Kelley’s campaign manager.
JeRue’s employment at the Auditor’s Office is the subject of a separate investigation by Washington Attorney General Bob Ferguson.
Much of the defense team’s cross-examination of JeRue was aimed at undermining his credibility, noting when he testified to a grand jury investigating Kelley, JeRue didn’t mention that Post Closing was getting pressure from title companies.
Eakes also brought up an affair JeRue had with his wife’s obstetrician, who was subsequently disciplined for writing JeRue prescriptions for painkillers. He wasn’t completely honest with the FBI when it first asked him about the affair, she suggested.
JeRue, clearly pained, disagreed. He said he told the truth, that his wife had forgiven him and it had nothing to do with Kelley’s case.
“That’s very private. It involves my family and my son,” he said. “I would appreciate it if you would respect that.”
