Washington state auditor indicted on 10 federal counts

Troy Kelley takes questions at a news conference in Olympia, Wash., during his successful 2012 campaign for state auditor. In an indictment unsealed Thursday, a federal grand jury charged Kelley with filing false tax returns, obstruction of justice and possession of stolen property. (Rachel La Corte / AP)

By MICHAEL MUSKAL contact the reporter

State Auditor Troy Kelley has been indicted on charges including filing false tax returns

A federal grand jury has indicted Washington state Auditor Troy X. Kelley on 10 counts, including charges that he filed false tax returns, obstructed a civil lawsuit and possessed stolen property, officials announced Thursday.

Kelley is scheduled to appear in U.S. District Court in Tacoma on Thursday afternoon.

The charges concern a mortgage title services company that Kelley, 50, of Tacoma, ran between 2003 and 2008, according to acting U.S. Atty. Annette Hayes.

Kelley “spun a web of lies in an effort to avoid paying his taxes and keep more than a million dollars that he knew did not belong to him, but instead should have been returned to thousands of homeowners across this state,” Hayes said in a statement.

If convicted, he faces up to 20 years in prison on the obstruction charge and 10 years in prison on the stolen property charge, officials said.

"I am obviously disappointed that the U.S. attorney's office has taken this action," Kelley said in a statement. "I believe the indictment has no merit and want to note that none of the allegations touch on my work as an elected official in any way."

Kelley said he will take a leave of absence beginning May 1.

Gov. Jay Inslee went further and called on Kelley to resign.

“This indictment today makes it clear to me that Troy Kelley cannot continue as state auditor. He should resign immediately. An appointee can restore confidence in the office and assure the public that the office of the state auditor will operate at the high standards required of the post,” the governor stated.

Kelley, a Democrat,
was elected in 2012. Federal agents searched his home last month.