Inslee wants answers from auditor Kelley

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Washington State Auditor Troy Kelley

Embattled State Auditor Troy Kelley replied Wednesday to Gov. Jay Inslee's request for information on the federal investigation into Kelley and part-time auditor's office employee Jason Jerue.

That answer didn't really say much that is not already publicly known.

Federal agents are investigating Kelley and part-time Auditor's Office employee Jerue for unknown reasons. The feds have been scouring the pair's Auditor’s Office records and Kelley's records from when he was a state representative. They also executed a search warrant on Kelley’s Tacoma home. The feds won't comment on the investigation. And Kelley won't either.

On Tuesday, March 31 Inslee sent a letter to Kelley to request that the auditor provide information to him in writing by Monday about the governor's concerns. Inslee said the state constitution gives him the authority to require state officers to respond in writing to the governor's concerns about performing the duties of their office.

"I want it in writing, and I want to share it with the public," Inslee told reporters Wednesday, April 1.

Late Wednesday afternoon, the Auditor's Office released Kelley's written reply. Kelley said that he had removed himself from any auditor's functions that could conflict with the federal investigation; that no conflicts of interest are present in the 360-person agency; and the investigation is not interfering with agency's work. Also, Jerue is on a leave of absence, Kelley wrote.

"While the intense media coverage may have been a distraction, there is no change or impact on our audit and field operations. ... We have anecdotal evidence of public disappointment that I am not able to speak to the media and the public about federal investigators' search of my home and subpoena for certain documents from our office," Kelley wrote Wednesday. Inslee has consistently called for Kelley, a fellow Democrat, to become more open about this matter.

Kelley's reply also included a link to what the Auditor's Office provided the feds in their investigation on Jerue. The material is mostly payroll information.

Kelley was not available for an interview on Wednesday. He has refused to talk to the press since the federal investigation became public knowledge in mid-March. Since then, he has issued two brief written statements saying he does not know what the investigation is about.

Inslee's letter requested that the Kelley provide information about employment dates, duties, and all of the Auditor's Office documents produced for Jerue.

Jerue is the mystery man in this affair. He was previously vice president of Post Closing Department, a title documents firm owned by Kelley. The company is now closed. Hired by the Auditor's Office in 2013, Jerue is a part-time technical writer telecommuting from an undisclosed city in California since March 2013. His writing involves behind-the-scenes administrative work. Jerue’s wage is $22.68 an hour. He earned $15,286 in 2013 and $22,884 in 2014.

In a 2010 lawsuit, a former client of Kelley's, Old Republic Title, a title-insurance firm, alleged breach of contract and the misappropriation of $1.2 million against Kelley and Post Closing Department. Kelley denied the allegations. The case ended in 2011 with a closed settlement. While there is much speculation that the federal investigation could be linked to this matter, that has never been confirmed by the feds, who have a policy of not discussing ongoing investigations.

Inslee's letter also requested that Kelley provide him with details about whether the federal investigation is disrupting work at the Auditor's Office, including current and pending state audits and investigations. And Inslee wanted Kelley to discuss whether conflicts of interest exist in the Auditor's Office pertaining to this matter.

On Wednesday, Inslee said he has talked once on the phone with Kelley about the investigation since March 23, and said the auditor told him he did not know what it is about. Inslee's Capitol office and Kelley's office are in neighboring buildings in Olympia.

Inslee and members of the Senate Accountability and Reform Committee voiced concerns about not interfering with the federal investigation. On Wednesday, the committee had a briefing by the Auditor’s Office on ethics matters within the agency. The committee was also briefed on its subpoena power in demanding records and testimony from others.

Committee chairman Sen. Mark Miloscia, R-Federal Way, invited Kelley to talk with the committee Wednesday along with the other auditor's officials. Kelley did not show up.

Miloscia was unhappy that Kelley did not accept the invitation, saying the auditor should be open and transparent about himself and his office. "I think all elected officers should be available and visible to the public and media. ... I think public confidence in his office is going down," Miloscia said.

On a political note, Miloscia ran for state auditor in 2012, coming in fourth in a top-two primary. Kelley, a Democrat, represented southern Pierce County’s 28th District as a state representative for three terms, was elected state auditor that year by a 53 percent-to-47-percent margin. Miloscia said many people have asked him recently whether he plans to run for state auditor again. He said it is premature to make that decision now.

Meanwhile, Miloscia doubted that his committee would try to investigate Kelley by taking the subpoena route, citing information gained in Wednesday's briefing.

The committee's attorney, Sam Thompson, said that for a legislative committee to issue a subpoena, it must meet two requirements. The first is that the information sought by a subpoena be within the scope of that committee's responsibilities. Second, the subpoenaed information must be relevant to future legislation. Miloscia said that second requirement would likely defeat a subpoena attempt.

The last time that a Washington legislative committee tried to issue a subpoena was in 1988, when the then Senate Law & Justice Committee sought information about a superior court judge accused of child abuse. The Washington Supreme Court quashed that subpoena and created the two requirements for legislative committees to meet on subpoenas.

The last successful legislative subpoena action took place in 1980 and 1981 when the then Senate Energy & Utilities Committee obtained information from the Washington Public Power Supply System -- now Energy Northwest-- on its troubled attempts to build five nuclear reactors at Hanford and Satsop. Only one reactor at Hanford was finished, and WPPSS defaulted on $2.25 billion in bonds.


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About the Authors & Contributors

John Stang

John Stang

John Stang is a freelance writer who often covers state government and the environment. He can be reached on email at and on Twitter at @johnstang_8