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James Watkins unloads accusations on Troy Kelley

Post by Jordan Schrader / The News Tribune on Sep. 6, 2012 at 10:29 am |
September 10, 2012 10:24 am

The state auditor’s race is getting personal.

Republican James Watkins today unloaded a laundry list of allegations against Democrat Troy Kelley, based on lawsuits over the past decade involving Kelley and business associates.

We’ll be checking the claims and reporting what we find. You can see for yourself what Watkins has posted on a website he unveiled today, including hundreds of court documents.

Kelley worked as an executive for First American Title Insurance Co. before starting his own company to track documents such as title to property. He is also a National Guard lieutenant colonel.

Many of the documents came from a lawsuit Kelley filed against First American, according to the case files. Kelley said the company fired him in 2000 after he refused to go along with illegal activity at the company. But the company accused him of later breaking into its offices and stealing a painting. Grainy, indistinct surveillance photos of someone are presented as evidence in the case.

Watkins also says the documents show Kelley’s involvement in “misappropriation of $3.8 million from mortgage borrowers,” “money laundering,” and “tax evasion.”

There are no allegations that Kelley faced any criminal charges based on the allegations.

Watkins said the First American case ended when Kelley dropped his lawsuit against the company, while another case ended with a settlement whose details are not disclosed. Watkins says some documents were publicly available online or in an Los Angeles courthouse, while he asked a court to unseal others.

UPDATE: Kelley put out a statement saying the website is full of “false allegations.” He said when he voluntarily had his own lawsuit dismissed — presumably a reference to the case involving the supposed artwork heist — it was because he received a financial settlement, not because the other side had evidence of his wrongdoing.

My opponent put up an attack website today that is riddled with errors, falsehoods and selective quotes based on false allegations made in nuisance lawsuits filed by parties on the other side of business disputes.

The over-the-top allegations put forward by my opponent are just that — baseless claims. They are not true, and the cases cited on the attack web site were dismissed. As just one example, my opponent has falsely implied that I dismissed a case because the other side had evidence of wrongdoing in my part. That is not true — in fact, just the opposite. The case was dismissed because I received a financial settlement. That company later became a client of mine and we are on good terms.

The truth here is that this is nothing more than an attempt to distract voters from Mr. Watkin’s extreme, Tea Party political views that are out step with Washington voters, like cutting federal funding from our public schools, as he has previously stated. Again, the claims are meritless and I am disappointed that Mr. Watkins has resorted to dirty politics and character attacks rather than focusing on issues that matter.

UPDATE: Here’s my story for tomorrow’s paper:

Past accusations of theft, burglary, fraud and tax evasion against Tacoma state Rep. Troy Kelley became public Thursday when his opponent in the campaign for state auditor posted hundreds of pages of court documents online.

The allegations come from legal disputes between Kelley and business associates, including a client claiming to be owed money and an employer who said Kelley came back to the office to steal a painting after being dismissed.

Kelley worked as a lawyer and executive in California for the employer, First American Title Insurance Co., before going into business on his own.

Today, he is a National Guard lieutenant colonel and a three-term state lawmaker, a job he’s giving up in hopes voters will make him state government’s watchdog.

The Democrat held a news conference Thursday in Olympia hours after his Republican opponent, Redmond business consultant James Watkins, made the documents public online.

“The allegations are absurd,” Kelley told reporters, saying he’s licensed to practice law in several states. “If half of them were true, I wouldn’t be a member of the bar or anything else.”

There’s no evidence showing Kelley ever faced criminal charges or other punishment.

Both of the major civil cases involving him are closed. One was a lawsuit he filed against First American over his 2000 dismissal; he says he received an undisclosed sum to settle the dispute. The other, a lawsuit against him, ended in 2011 when he paid an undisclosed settlement of his own to his company’s former client, Old Republic Title.

“Businesses get sued all the time,” Kelley said.

When Kelley dropped his lawsuit against his former employer, the company had been trying to force him to provide records showing where he was the night of the alleged artwork heist.

“After his departure from First American,” the company wrote in a legal brief posted by Watkins, “(Kelley) sneaked back into the Company’s Glendale offices late in the evening and stole some artwork. He was caught on a security surveillance videotape.

“At his deposition, Plaintiff denied being in Defendants’ offices on August 4, 2000 (he says he was in Seattle having dinner with his wife), or taking the painting at issue.”

The court documents in the case couldn’t be independently obtained Thursday from Los Angeles County court.

Surveillance photos submitted into evidence are indistinct; Kelley says the person in the picture isn’t him.

The only reason the alleged theft emerged in court: Kelley complained in his lawsuit that his boss had circulated untrue rumors that he stole from the company.

He also claimed in the lawsuit that the company fired him because he refused demands to help cover up illegal activity. The company denied it, saying he was laid off as part of a corporate reorganization.

In the other case, his company’s client, Old Republic Title, sued Kelley, saying he misappropriated $3.8 million and tried to hide it by cleaning out his computer, shutting down his company and shuffling the money through four bank accounts and three companies.

“Kelley also appears to claim (his attorney) advised him to not pay taxes on the money,” court documents state. The News Tribune retrieved the documents from federal courts’ online files.

Old Republic expressed worry that Kelly would put the money into another account, in Belize, a country that has been described as a haven from U.S. taxes and financial laws.

Kelley says the Belize account was set up by an attorney without his knowledge and closed when he discovered it. He says the other accounts in multiple states and banks reflect standard business practices.

Old Republic was after money it said should have been refunded to its customers. Kelley’s company was paid to track and process documents related to the customers’ title to property, and was supposed to refund money that was unused after going through those transactions and charging its own fees. Old Republic said there should have been more money left over.

Kelley told reporters every fee he collected was for work he did. The claims were calculated to embarrass him and extort a bigger settlement, he said.

U.S. District Judge James Robart wrote that Old Republic “accuses Mr. Kelley of all forms of wrongdoing including misappropriation of customer funds, lying, fraudulently transferring funds, intentional spoliation of evidence, shady business schemes, tax evasion, and hiding from creditors. … Mr. Kelley requests that documents relating to these allegations be sealed as they may subject Mr. Kelley to annoyance, embarrassment and harm to his legislative career.”

The judge refused to seal the documents, saying potential embarrassment or harm to Kelley’s political career weren’t good enough reasons to deny the public access.

As predicted, the allegations emerged – but not until Kelley was running for auditor and had defeated two other Democrats to emerge along with Watkins from the August primary.

Watkins posted them on <a href=”http://factchecktroykelley.com/” target=”_blank”>factchecktroykelley.com</a>. It’s an echo of a website, <a href=”http://factcheckjayinslee.com/” target=”_blank”>factcheckjayinslee.com</a>, created in Watkins’ previous campaign challenging former U.S. Rep. Jay Inslee.

Kelley said Watkins was practicing “dirty politics” by airing “baseless claims” aimed at distracting from Watkins’s conservative political views.

But Watkins said the documents – which he obtained with the help of a researcher in California and by asking for improperly sealed court documents to be opened – are relevant to the auditor’s race because they show Kelley has been dishonest.

“There doesn’t seem to be anything he won’t lie about,” Watkins said.

“If you look at any of the standards for what an auditor is, what an auditor does, integrity is No. 1,” he said.

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