Washington State Auditor indicted amid allegations of falsifying tax returns, possessing stolen property

A U.S. Grand Jury in Seattle has returned a ten count indictment against TROY X. KELLEY, 50, of Tacoma for his scheme to keep stolen money and hide it from both the IRS and those due a refund related to their purchase of a home or refinance of a home mortgage, announced Acting U.S. Attorney Annette L. Hayes.  KELLEY currently serves as the elected Washington State Auditor.  The majority of the criminal conduct detailed in the indictment spans years prior to KELLEY’s election to statewide office.  However, some of the criminal conduct detailed in the indictment occurred following his election.  KELLEY is scheduled to appear in U.S. District Court in Tacoma at 2:30 today.


“Mr. 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,” said Acting U.S. Attorney Annette L. Hayes.  “I commend the FBI and the Internal Revenue Service Criminal Investigation for their diligent work to piece together the voluminous records that form the basis for the charges in this case.”


According to the indictment, between 2003 and 2008, KELLEY operated a business that was paid by real estate title companies to track documents related to real estate sales and refinancings.  KELLEY had agreements with those companies for the fees he could charge in connection with the document-tracking work.  While the title companies withheld $100-$150 on each loan to pay the fee, the bulk of the money was to be returned to the borrower with KELLEY’s company being paid $15- $20 per transaction.  However, the indictment alleges, in most cases, KELLEY kept the entire amount withheld on each loan resulting in more than $2 million in stolen money.  This conduct is the basis for count one of the indictment:  Possession and concealment of stolen property.  When the amount withheld by title companies became the subject of civil litigation, the indictment alleges KELLEY obstructed the litigation, repeatedly lying in a declaration and in depositions while under oath.  For this conduct KELLEY is charged with four counts of false declarations and one count of attempted obstruction of a civil lawsuit.  Further, the indictment alleges KELLEY failed to pay federal taxes and obstructed the IRS in its efforts to collect taxes from him.  He is charged with corrupt interference with Internal Revenue laws and two counts of filing false income tax returns.  Finally, KELLEY is charged with making false statements to Internal Revenue Service agents who questioned him about his scheme in April 2013.


“Today’s action demonstrates our collective efforts to enforce the law,” stated Special Agent in Charge Teri Alexander of IRS Criminal Investigation.  “IRS CI is committed to unraveling the complex financial transactions individuals might use to attempt to conceal their taxable income.  To build faith in our tax system, honest taxpayers must be confident that everyone is paying their fair share.”

“The public deserves integrity and honesty from elected officials,” said Special Agent in Charge Frank Montoya, Jr., of the FBI’s Seattle Division.  “For that reason, identifying and investigating public corruption is a top priority for the FBI.”

The charges contained in the indictment are only allegations.  A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.


Possession and concealment of stolen property is punishable by up to ten years in prison.  Attempted obstruction of civil litigation is punishable by up to twenty years in prison.  False declarations and false statements are punishable by up to five years in prison.  The remaining charges are punishable by up to three years in prison.


The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI) and the FBI.


The case is being prosecuted by Assistant United States Attorneys Arlen Storm, Kathryn Frierson and Andrew Friedman.

Hoquiam credit union receives coveted Northwest award

Left to Right: Photo (L-R) Denise Gabel, COO, Northwest Credit Union Association Richard Hein, CEO, OSU Federal Credit Union (2013 winner)   Ynette Gibbs, CEO, Newrizons Federal Credit Union Troy Stang, CEO, Northwest Credit Union Association
Left to Right:
Photo (L-R)
Denise Gabel, COO, Northwest Credit Union Association
Richard Hein, CEO, OSU Federal Credit Union (2013 winner)
Ynette Gibbs, CEO, Newrizons Federal Credit Union
Troy Stang, CEO, Northwest Credit Union Association

Newrizons Federal Credit Union located in Hoquiam for nearly 50 years was recently awarded the highly competitive 2014 Credit Union Innovation and Impact award by the Northwest Credit Union Association. “This is like getting an Oscar. It’s a very big deal,” said Ynette Gibbs, CEO. “Of all the great work that credit unions do in Washington and Oregon, Newrizons was chosen for what we naturally do in Grays Harbor County.” What they do is amazing according to those who know Newrizons. Last year their IRS-certified Volunteer Income Tax Assistance program returned over $600,000 in tax refunds to 375 Grays Harbor low-and-moderate income families for free.

Newrizons started GHC IDA raising $75,000 in community funds and receiving a $75,000 federal grant.This program rewards savers with $1 of federal and $1 of community for every $1 they save for first time home ownership, college or trade school. “People work for this, stick to a savings plan for at least 6 months and take financial education.” Another reason why Newrizons received the innovation and impact award is their homegrown credit and financial counseling program. Newrizons’ 3 full-time, certified financial counselors help Grays Harbor County residents rebuild poor credit and pay collections or garnishments.

Ynette credits the Newrizons’ team who work confidentially one-on-one to jointly build realistic and manageable plans paying old and current bills in a way that really works. People increase their credit score an average of 62 points in just 6 months. Sometimes this includes negotiating settlements or debt consolidation loans but the real secret is the ongoing support for new choices achieving what at first feels impossible.

Newrizons, located at 120 Firman Street in Hoquiam, is a US Treasury-certified, community-development financial institution dedicated to the credit union philosophy of “People Helping People”.

New phone scam asks patriotic mark to help stranded soldiers

Phone scams again targeting Grays Harbor residents, the Aberdeen Police Department tells us they’ve received reports on scams ranging from a man claiming to be from the IRS, or some other federal agency, to threatening arrest, or even offering lottery winnings. A new scam involves a soldier, claiming to be stranded somewhere and hoping that a patriotic mark will send them cash.

The formula is the same and should be getting easier to spot. The caller will threaten legal action, or that you will be arrested if you don’t pay up. They may claim to be in law enforcement, but police will tell you they will not call your home to resolve a debt or warrant.

Seattle Archdiocese data breach hits home, and highlights need to address identity theft

Identity theft is a growing problem nationwide, and Washington is no exception. In early March 2014 the Seattle Archdiocese learned that volunteers and employees at parishes and schools across Washington state became victims of a tax-identity fraud scheme.

Through a data breach, fraudsters obtained victims’ personal information, including their names and Social Security numbers and filed false income tax returns.

The Attorney General’s Office (AGO) has received reports from parishioners and employees throughout Western Washington who have been victimized. Some of these individuals, including volunteers and employees of St. Mary School in Aberdeen, discovered they were victims after filing their taxes and being informed by the Internal Revenue Service (IRS) that their tax return was rejected because a return had already been filed under their name and Social Security number.

The Archdiocese has not discovered the source of the breach and is working with federal investigators on an investigation. The Archdiocese also hired a national forensic firm to investigate this matter.

If you are a victim of tax-identity fraud, the AGO urges you to take the following steps.

Determine if you’re the victim of tax-identity fraud, then follow these corrective steps

To check if your identity has been stolen, contact the IRS by calling the Individual Tax Line at 1-800-829-1040, or go in-person to the IRS office at 915 Second Ave. Seattle, Wash.

Correcting tax-identity fraud is a multi-step process, involving the IRS, the Federal Trade Commission (FTC), police and credit bureaus.

If you know your identity has been stolen

  • Contact the IRS Identity Protection Specialized Unit at 1-800-908-4490.
  • Complete and file the IRS Form 14039 “Identity Theft Affidavit” (You must file a copy of your driver’s license, passport, or other government-issued identification with this).
  • Submit an “Identity Theft Report” to the FTC by following the directions on the FTC’s website, here. You will be assigned a complaint number.
  • Print and fill out a copy of the FTC’s “Identity Theft Victim’s Complaint and Affidavit.” This form can then be filed with local police and creditors.
  • File a report with your local police department.
  • Include a copy of the FTC Identity Theft Victim’s Complaint and Affidavit.
  • The police department will assign you a case or reference number.
  • Call the FTC at 1-877-438-4338 to report the assigned police case number (You will need the complaint number you obtained when you initially filed the FTC Identity Theft Report to complete this step).
  • Consider placing a credit freeze on your credit report.  Learn more about a credit freeze, here.
  • Periodically request a free copy of your credit report and review it thoroughly. You can request a copy online at AnnualCreditReport.com, or by calling 1-877-322-8228 (you will be asked for your Social Security Number).
  • If someone has used your Social Security number for employment purposes, report this to the Social Security Administration. You can contact the Social Security Administration at: 1-800-772-1213.

 If your identity has not been stolen, but you believe it is vulnerable

  • Call the IRS Identity Protection Specialized Unit at 1-800-908-4490 and ask them to place a fraud alert in your file.
  • Consider placing a fraud alert on your credit report.  You can place a fraud alert by contacting one of the three major credit-reporting agencies:
    • Equifax: 1-800-525-6285, website link, here.
    • Experian: 1-888-397-3742, website link, here.
    • Trans Union: 1-800-680-7289, website link, here.

You will be asked to provide your Social Security Number. The agency you contact will share your request with the other two. 

Protect yourself from identity theft

  • Don’t carry your Social Security card or any documents that include your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN).
  • Don’t give a business your SSN or ITIN just because they ask. Give it only when required.
  • Protect your financial information.
  • Check your credit report every 12 months.
  • Secure personal information in your home.
  • Protect your personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for Internet accounts.
  • Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

For more information about identity theft and credit freezes, visit the Attorney General’s website, here.

Visit the Seattle Archdiocese website for updates on the data breach, here.

Aberdeen Police warn of scam targeting Grays Harbor residents

The Aberdeen Police Department has received two fraud complaints that are also occurring throughout the county, state and country.
The first complaint involved a fraudulent letter from the IRS requesting confidential information including copies of the victims tax return and  social security number.
It appears that this incident is part of the Seattle Archdioceses fraud where past employees and volunteers of organizations within the Seattle Archdiocese are apparent victims of a tax refund scheme.
The second report involved the GH PUD fraud where a person calls and states they are from the PUD.  The suspect tells the victim that their current bill is overdue and they must make a payment now or risk having the service disconnected immediately.
The suspect told the victim that they could not pay with cash or a credit card as that would take 24 hours to process.  The victim was told to purchase Greendot Moneypaks.  The victim was told to provide the numbers on the card by the suspect.
The Aberdeen Police Department advises to never provide anyone with unsolicited requests for confidential information.  If a person is ever in doubt they may call their local police department or check for current fraud and identity schemes at the Federal Trade Commission website which is, http://www.consumer.ftc.gov/scam-alerts

Grays Harbor residents among 90,000 victims of identity theft at Archdiocese of Seattle

Some employees and volunteers at St. Mary School in Aberdeen are affected by a data breach at the Catholic Archdiocese of Seattle. Sources tell us some are finding that their taxes were already filed. Some returns have been rejected, and the IRS is working with the church to identify victims at 170 parishes in western Washington. The data was collected for background checks on more than 90,000 people in Western Washington.

There are eight parishes throughout Grays Harbor County. A source at St. Mary’s tells us they working to contact anyone locally that might be affected, but if you think you might be call the Archdiocese of Seattle Identity Theft Help Line at 1-866-329-5954.

Visit http://www.seattlearchdiocese.org for details, or email taxinformation@seattlearch.org for more information.

You can download forms and view a schedule of several IRS Regional meetings on their Action Alert page at http://www.seattlearchdiocese.org/Archdiocese/Action.aspx

Archdiocese of Seattle letter to victims of I.D. theft

Grays Harbor Volunteer Search and Rescue now a 501c3 non-profit

GHVSARAlmost two years after their formation, the Grays Harbor Volunteer Search and Rescue is now officially a non-profit 501c3 recognized by the IRS. Current president, Sara Owen tells us “We were so excited to get that determination letter from the IRS. It means we’ll be able to fundraise, and ask companies for donations for gear and equipment and so many things that we really need.” The all-volunteer group consists of about 75 first responders, police, and community members throughout the county.
A 9-member crew from the group rescued a woman with a leg injury that had hiked 9 miles into the Olympic National Park over the Memorial day weekend. She had to be transported about seven miles on a one-wheeled stretcher.Owen recounted “I can’t even describe the level of difficulty that it took for those people to bring her out in a stokes basket. These people are incredibly dedicated individuals who train really hard and really take it seriously. I couldn’t be more proud to be associated with this group.”
The GHVSAR team will elect new leadership at their regular meeting tonight. Owen said they are always looking for new volunteers from first responders to loud-mouthed radio personalities, for details visit www.ghvsar.org

U.S. Attorney warns: Watch for ID theft during tax season

U.S. Attorney Jenny A. Durkan joined federal law enforcement partners warning about a growing problem of identity theft related to tax refund fraud.  Scammers across the country are using other people’s personal information to try to claim income tax refunds.  People may not know they are a victim until they try to file their tax return and it is rejected because someone using their Social Security Number has already filed and claimed a refund.
“Protecting your personal information has never been more critical,” said U.S. Attorney Jenny A. Durkan.  “Always mail your tax documents from a secure mailbox, or file electronically on a secure network.  Using a trusted tax professional and filing early can also protect you from being a victim.”
In 2013, nearly 700 Washington residents reported being a victim of tax related identity theft, and there are likely many more people who simply did not report being victimized.  Nationwide tax ID theft fraud is estimated to cost the U.S. Treasury more than $5 billion annually. 
“Stealing identities and trying to file false tax returns not only threatens the integrity of our tax system, it victimizes innocent people.  It can cost victims time and stress when they have done nothing wrong,” said Kenneth J. Hines, Special Agent in Charge of IRS Criminal Investigation in the Pacific Northwest. “The men and women of IRS, along with our law enforcement partners and the United States Attorney’s Office, will continue to pursue fraudsters who try and help themselves to our nation’s tax dollars and who cause so much heartache for the victims of this crime.”
This week as part of Tax Identity Theft Awareness Week, the Federal Trade Commission and the Internal Revenue Service are teaming up to educate the public about ID theft tax refund fraud.  The FTC is providing a webinar tomorrow to educate tax preparers about the problem and how to assist their clients if they discover they have been the victim of tax refund ID theft.  For those who have had their identities stolen and used for fraud, the IRS will issue a special PIN to use for filing taxes.  More information on the PIN program is available at http://www.irs.gov/uac/Newsroom/IRS-Combats-Identity-Theft-and-Refund-Fraud-on-Many-Fronts-2014
IRS-CI Special Agent in Charge Ken Hines is available to talk further with reporters about the problem of tax ID theft refund fraud.   To arrange an interview please contact Leia Bellis at (206) 464-4920 or Leia.Bellis@ci.irs.gov.
Both the Federal Trade Commission and the Washington Coalition of Crime Victim Advocates (WCCVA) have resources for victims of identity theft.  Find them at www.ftc.gov and www.wccva.org

IRS Seeks to Return More Than $2.9 Million in Undeliverable Refunds

If a refund check is returned to the IRS as undeliverable, taxpayers can generally update their addresses with the “Where’s My Refund?” tool on IRS.gov. The tool enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2008 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.
Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.
Avoiding Future Problems
The IRS encourages taxpayers to choose direct deposit when they file their return because it puts an end to lost, stolen or undeliverable checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct deposit is available for filers of both paper and electronic returns.
The IRS also encourages taxpayers to file their tax returns electronically because e-file eliminates the risk of lost paper returns. E-file also reduces errors and speeds up refunds.


            According to the indictment, BRETT SMITH began working at Manke Lumber in May 2004.  In September 2004, SMITH became a "Scaler" for Manke.  A scaler weighs, measures and inspects logs delivered to the lumber mill to determine their grade and value.  Based on that information, Manke Lumber would mail checks to those people who were being compensated for the logs. Between November 2004, and July 2006, SMITH and others entered into a scheme to create false records that prompted Manke to send checks to conspirators for logs that were never delivered to the mill.  In his plea agreement SMITH admits he submitted false paperwork for more than 1500 loads of logs worth more than $2.5 million.  In all, SMITH submitted false log intake information in at least twenty different names.

             "Brett Smith, and several under him, seduced 25 others into lives now marred with criminal records with the lure of easy cash," Assistant United States Attorney Arlen Storm wrote in his sentencing memo.  Judge Leighton agreed saying SMITH "was the pied piper.  He was the guy playing the sweet tune and flashing the money…. There are 27 lives here that have been adversely affected big time. And that's not all on Mr. Smith, but he can't just walk away.  The honor system has been impacted."  Judge Leighton imposed a sentence above the guidelines range and ordered SMITH immediately into custody.

            In asking for a significant prison term, Mr. Storm told the court that SMITH continued to gamble away what was likely the Manke Lumber money even after the scheme was discovered and he was indicted.  Co-conspirators informed the government, moreover, that SMITH asked them to help him hide the proceeds of the crime, including a 2002 BMW and a 1998 BMW, that the government is seeking to forfeit.

            Five other defendants, Bryan Smith, 28, Puyallup, Jeffrey S. Ogburn, 24, Puyallup, (also a Manke employee for a short time), Berlie Fincham, 29, Tacoma, Shaun Jones, 29, Tacoma, and Shawn Pak, 27, Spanaway, recruited others to act as recipients of the fraudulently obtained checks. Bryan Smith was sentenced last month to 54 months in prison, Ogburn was sentenced last month to 37 months in prison, Fincham was sentenced to 30 months in prison, Jones was sentenced to 37 months in prison, and Pak was sentenced to six months in prison. 

            In addition, Bryan Smith's girlfriend, Elaine H. Turner, 28, of Puyallup, assisted Bryan Smith in obtaining check proceeds from check passers while Bryan Smith was incarcerated on a probation violation between May 2006 and July 2006.  When investigators questioned her regarding the offense, she denied any knowledge of it.  Turner entered a guilty plea to Misprision of a Felony on January 5, 2009.  Turner was sentenced today to five years probation.       

            More than a dozen additional defendants have been prosecuted and sentenced in connection with the scheme.  The majority were charged with tax crimes for failing to report the income they took from the scheme.

            "With April 15th right around the corner, it should be emphasized that the majority of the two dozen or so defendants in this case were convicted of Federal income tax crimes," said Kenneth J. Hines, the IRS Special Agent in Charge of the Pacific-Northwest.  "All income that is taxable must be reported on your Federal income tax returns."

            "The conviction of Smith and the group of individuals who assisted him in defrauding Manke Lumber highlights the impact that fraud and other types of white-collar crime can have on a business, its employees, and an entire community.  The U.S. Secret Service and other law enforcement agencies strive to combat these types of criminal activities," said David Iacovetti, the Special Agent in Charge of the Secret Service's Seattle Field Office.  "I would like to commend the outstanding work of the Tacoma Police Department and IRS-CID in this joint investigation."

            The case was investigated by the United States Secret Service, the Tacoma Police Department and the Internal Revenue Service Criminal Investigations (IRS-CI).

            The case is being prosecuted by Assistant United States Attorney Arlen Storm.