I spent an hour reading through the documents, and it looks like James Watkins is definitely on-target. I can't say for sure how the underlying lawsuits against Troy Kelley should have been decided, but these things seem pretty ominous. Certainly Watkins has done an excellent job of research, which is a skill highly relevant to being a good state auditor.
It is interesting that no one found out this information back in 2010, when Kelley was running a very close re-election campaign (52-48) that was the most expensive state House campaign that year. That might have changed the result.
Please keep in mind that most better informed Democrats supported Craig Pridemore, who missed the # 2 spot for the general election by less than 2% of the vote. Mark Miloscia was another qualified Democrat, also of great integrity, and got 10% of the primary vote. Troy Kelley made it to the general by spending more than $300,000 (mostly his own money) in this normally low profile race, and also having a nice sounding last name and being first on the ballot.
I seriously think the news media will conduct their own investigation of this matter, and spend the time necessary to figure out what this all means. Certainly, this is a legitimate political attack by Watkins in the court of public opinion. But I have a strong hunch that the media will come out with a strong condemnation of Kelley on the merits of his legal troubles.
I also get the hunch that the state bar association might end up investigating Kelley. The Old Republic lawsuit alleges that Kelley ripped off Old Republic and its clients (mostly homeowners who were selling their homes, or refinancing their mortgages) something like $3.8 million by overcharging on paperwork processing fees (for recording documents saying that prior mortgages were satisfied). This would certainly be professional misconduct by a lawyer (such as Kelley), regardless of whether Kelley was doing this in a law practice or in some other business. Perhaps Kelley could get disbarred or suspended for a long time, but hard to tell.
Here's what the Kelly campaign sent out today. Ladies and gentlemen, Troy Kelly looks very UNqualified to serve as auditor. From what I'm seeing, Watkins is clearly the best and only choice for voters who care about integrity and an auditor who will be their watchdog in Olympia:
"September 6, 2012 - Today, the Watkins for Auditor Campaign released the following statement and launched www.FactCheckTroyKelley.com. In summary, following months of investigation prompted by tips to the Watkins campaign, the campaign has posted original documents, case summaries, and case time-lines detailing an otherwise unbelievable series of lawsuits documenting charges of misappropriation of funds, hiding funds offshore in Belize, theft, tax evasion, and more made against Mr. Kelley by his former employer, his former clients, and his former insurance company.
As James says, "I believe voters deserve to know the truth, and hope they find access to the original source materials useful in deciding for themselves the issues of State Representative Kelley's integrity and fitness to serve."
Friends - this is an unpleasant post to write.
As soon as State Representative Troy Kelley entered the race, my campaign started getting bizarre tips and allegations about Troy - things like misappropriation of funds, suspicious office fires, theft, and offshore bank accounts in Belize. The tips increased after he spent a record amount of 'his' own money to fool voters into thinking he was endorsed by Brian Sonntag for state auditor.
So, in a manner similar to traditional whistle-blower allegations, my team of volunteer researchers checked it out. Unfortunately, we uncovered a trove of lawsuits and court documents that detail an otherwise unbelievable story - a story that voters deserve to know.
But I'm not asking voters to take my word for it. Detailed case summaries, time-lines, and searchable PDF's of the original documents are posted at www.FactCheckTroyKelley.com. Certified copies of case files can be obtained from the original courts of jurisdiction. Voters can read the summaries and documents and decide for themselves.
Brief summaries are below:
Kelley v. First American Title, Los Angeles District Court, 2002
The case files start in California with First American Title Company, where future State Representative Kelley's termination led to exposure of an apparent burglary and theft by Kelley captured on surveillance video (with photos introduced as evidence), censure by the Court for a pattern of abuse in the discovery process, and documented knowledge of Kelley's understanding of the illegality of the exact reconveyance fee misappropriation scheme he would apparently use when he moved to Washington State.
He withdrew his own case a day before he was due in court to provide records that would confirm or exonerate him for the burglary and theft.
Old Republic Title v. Kelley, US District Court, 2009
After his termination from First American Title, State Representative Kelley moved to Washington State and founded United National LLC to participate in the mortgage reconveyance business. While in office - and running for reelection in 2010 - Kelley was sued by his client, Old Republic Title. As Judge James Robart, summarized (while denying Kelley's plea to hide the official case records from the public), the case involved charges of:
"... misappropriation of customer funds, lying, fraudulently transferring funds, intentional spoliation of evidence, shady business schemes, tax evasion, and hiding from creditors."
In summary, State Representative Kelley apparently seized $3.8 million of client funds using a scheme he previously testified was illegal when perpetrated by his former employer in California; attempted to hide the money in a series of shell companies and complicated bank transfers; then tried to hide the money in the notorious tax haven of Belize by way of newly formed entities in Las Vegas and Belize City; refused to provide documentary evidence by making false claims under oath about fire damage; and while claiming the money was legitimately earned over several years, admitted under oath he failed to pay any taxes on it.
State Representative Kelley settled the case days before it was scheduled to proceed with a cash payment to Old Republic title. Kelley then tried to seal the records to hide them from voters, but the Court concluded that Kelley's interest in avoiding "annoyance, embarrassment, and harm to his political career" did not overcome the public's interest in disclosure.
Axis Reinsurance v. Kelley, US District Court, 2010.
The next case file is a response by Axis Reinsurance, State Representative Kelley's business liability insurance provider, to protect itself from Kelley's attempt to force the company to pay for Kelley's legal defense in the previous misappropriation of funds case. Axis argued that it wasn't obligated to pay for Kelley's defense against his own illegal acts, citing the policy exclusion for "gain, profit, or advantage to which any Insured is not legally entitled."
This is not the race I had hoped for, but regardless of the type of race State Representative Kelley has forced on Washington's voters, I've pursued a positive campaign focused on the office, my background, and my experience. I've maintained a relentless schedule across the state, talking with every group that has invited me - Republican, Democrat, and independent alike. I've focused on good government. That approach earned me primary wins in every county in Washington State (the best result of any statewide Republican candidate); endorsements from Republicans AND Democrats; and primary endorsements from every major newspaper which held endorsement boards.
And now this. Personally, I don't understand why a person with State Representative Kelley's documented record would put himself, his family, and his political supporters in this position. Legitimate business people do not get sued by their clients for misappropriating client funds. They do not shift funds between shell companies domiciled at their residences, do not suddenly close profitable businesses and convert dedicated client accounts to personal use, and do not get sanctioned and fined by the Court. Legitimate businesses pay taxes on legitimate earnings. Finally, aside from native Belizeans, I'm not aware of any legitimate reason for Americans to bank in the notorious offshore tax haven of Belize.
In court documents, State Representative Kelley has already outlined his likely defense. He has argued that since the cases did not come to trial, there is no 'real' evidence, implying that we as voters can make no conclusions.
Of course, that's a ridiculous and legalistic argument only a politician could make. In every case listed above, we have sworn testimony in depositions, often from State Representative Kelley himself detailing his own behavior. We have documentary evidence including business agreements, emails, bank statements, and wire transfer documents. We even have photographs taken from surveillance video of State Representative Kelley's apparent burglary and theft and his willingness to abandon his wrongful termination lawsuit the day before his forced testimony on the theft.
Above all, we have common sense; the objective analyst can make their own conclusions from the evidence at hand.
State Representative Kelley's likely avenue of defense is particularly ironic given his years of legal tactics designed to prevent the cases from coming to trial - the same tactics that earned him a sanction and a cash penalty by the Los Angeles County Court for abuse of the discovery process. State Representative Kelley settled each case days before the evidence could be argued in open court. Most recently, in 2011, he actually mounted a vigorous effort to seal the case records to hide his own sworn testimony and documentary evidence from the press and voters.
Based on his documented history, his own sworn testimony, and the abundant evidence of his own actions, I believe State Representative Kelley is fundamentally unfit to serve in ANY position of public trust, much less as Washington's State Auditor.
I believe voters deserve to know the truth, and hope they find access to the original source materials useful in deciding for themselves the issues of State Representative Kelley's integrity and fitness to serve."
You bet voters deserve to know the truth. Not even a democrat who cares about good government could vote for Kelly now. Watkins has shown nothing but aptitude from the job and a willingness to serve the people upfront and with skill and care.