Case 3:15-cr-05198-RBL Document 46 Filed 09/09/15 Page 1 of 9 1 The Honorable Ronald B. Leighton 2 3 4 5 6 7 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON AT TACOMA 8 9 10 UNITED STATES OF AMERICA, 11 12 13 14 15 No. CR15-5198RBL Plaintiff, v. TROY X. KELLEY, GOVERNMENT’S MOTION FOR INQUIRY CONCERNING POTENTIAL CONFLICT OF INTEREST Defendant. Noted: September 18, 2015 16 17 I. INTRODUCTION 18 The United States respectfully requests that the Court conduct an inquiry into 19 whether conflicts of interest may impact Defendant Troy Kelley’s current choice of 20 counsel. On September 1, 2015, Angelo Calfo entered an appearance on behalf of Mr. 21 Kelley in this matter. Prior to appearing as Mr. Kelley’s counsel, Mr. Calfo represented 22 a witness in this case, Sandy Evans. Ms. Evans may be called to testify at trial, at which 23 point Mr. Calfo may have to cross-examine her in spite of him having been her lawyer in 24 the same case. Mr. Calfo has informed the government that he will no longer represent 25 Ms. Evans, and that both Mr. Kelley and Ms. Evans have executed detailed waivers of 26 conflict-free counsel. The government has requested an opportunity to review the 27 waivers but Mr. Calfo declined to provide unredacted versions, citing confidentiality. 28 An inquiry by the Court, therefore, is necessary as the Court is in the best and only Government’s Motion for Inquiry Concerning Potential Conflicts of Interest U.S. v. Troy Kelley, CR15-5198RBL/ - 1 UNITED STATES ATTORNEY 700 STEWART STREET, SUITE 5220 SEATTLE, WASHINGTON 98101 (206) 553-7970 Case 3:15-cr-05198-RBL Document 46 Filed 09/09/15 Page 2 of 9 1 position to ascertain the extent of any conflict and the nature and adequacy of the 2 waivers. Without such an inquiry, the record may be deemed insufficient to show that 3 the Defendant’s right to effective assistance of counsel as well as the Court’s independent 4 interest in upholding the integrity of these proceedings were preserved. 5 II. FACTS 6 Troy Kelley is charged with a series of crimes stemming from his operation of a 7 reconveyance tracking business, United National, LLC, d/b/a Post Closing Department. 8 The government has alleged that Troy Kelley unlawfully stole millions in reconveyance 9 fees entrusted to his company, laundered the illegal proceeds, committed perjury in civil 10 law suits regarding his business, and filed false tax returns. 11 A. Sandy Evans and Jason Jerue. 12 Sandy Evans is the mother of another witness in this case, Jason Jerue. In order 13 to understand the possible conflicts presented by Mr. Calfo’s successive representation 14 of Ms. Evans and Mr. Kelley, Jason Jerue’s role in the case must first be explained. 15 A central issue in this case is whether Mr. Kelley was authorized to take the 16 majority of the reconveyance fees entrusted to his company by the escrow companies. 17 Jason Jerue worked for the Post Closing Department between 2005 and 2008, as 18 Operations Manager. He even held for a period of time the title of Vice President. 19 Mr. Jerue’s tasks included tracking reconveyances, communicating with Post Closing 20 Department’s major customers, Fidelity National Title Company and Old Republic Title, 21 and maintaining and updating the spreadsheets that recorded what reconveyances had 22 been tracked and the amounts in fees that were retained, paid or refunded by Post Closing 23 Department. Mr. Jerue, therefore, is an eye witness to how Mr. Kelley handled the 24 reconveyance fees and what Post Closing Department represented to the escrow 25 companies about those fees. Accordingly, Mr. Jerue will likely be called to testify at 26 trial. 27 In 2008, various civil lawsuits were filed by a putative class of property sellers 28 against escrow companies, including Fidelity and Old Republic. The suits alleged, Government’s Motion for Inquiry Concerning Potential Conflicts of Interest U.S. v. Troy Kelley, CR15-5198RBL/ - 2 UNITED STATES ATTORNEY 700 STEWART STREET, SUITE 5220 SEATTLE, WASHINGTON 98101 (206) 553-7970 Case 3:15-cr-05198-RBL Document 46 Filed 09/09/15 Page 3 of 9 1 among other things, that escrow companies charged unnecessary reconveyance fees. 2 The civil lawsuits soon implicated Troy Kelley’s Post Closing Department. In 2009, Old 3 Republic brought suit directly against Mr. Kelley alleging that Post Closing Department, 4 contrary to Mr. Kelley’s promises and representations, failed to refund escrow customers 5 excess reconveyance fees that the escrow company had entrusted to Post Closing 6 Department. According to Old Republic’s counsel, however, despite due diligence Old 7 Republic was unable to find and serve Jason Jerue with a subpoena to compel deposition 8 testimony in their case. By 2011, the civil lawsuits against Fidelity and Old Republic 9 had been dismissed, and the suit brought by Old Republic against Mr. Kelley was settled. 10 Subsequently, the United States learned that Troy Kelley provided substantial 11 financial support to Mr. Jerue during a portion of the time period in which the civil 12 lawsuits were pending, and then in the years after the suits were dismissed or settled. 13 In 2008, after Mr. Kelley closed Post Closing Department, he continued to employ and 14 pay Mr. Jerue through another business, Attorney Trust Services. In about September 15 of 2009, after Old Republic filed its direct suit against Troy Kelley, Attorney Trust 16 Services laid-off Jason Jerue. Mr. Jerue, thereafter, began to receive Washington 17 State unemployment benefits. In September 2011, after the Old Republic settlement, 18 Mr. Kelley wrote a check to Jason Jerue in the amount of $9,980. Then in about July 19 2012, Mr. Kelley, rather than pay Mr. Jerue directly, wrote a check for $9,985 to Sandy 20 Evans, Mr. Jerue’s mother. Finally, in about March 2013, Mr. Jerue began to be paid by 21 the Washington State Auditor’s Office. 22 Throughout the government’s investigation, Mr. Jerue has characterized the 23 payments in 2011 and 2012 as a type of severance due him as a result of his prior 24 employment with Mr. Kelley. According to Mr. Jerue, the second payment was funneled 25 through his mother in an effort to hide the money from Mr. Jerue’s wife. 26 B. Sandy Evans’ Representation by Angelo Calfo. 27 The government sought information from Sandy Evans regarding the July 2012 28 payment, her connection to Troy Kelley, and her relationship to and her knowledge of her Government’s Motion for Inquiry Concerning Potential Conflicts of Interest U.S. v. Troy Kelley, CR15-5198RBL/ - 3 UNITED STATES ATTORNEY 700 STEWART STREET, SUITE 5220 SEATTLE, WASHINGTON 98101 (206) 553-7970 Case 3:15-cr-05198-RBL Document 46 Filed 09/09/15 Page 4 of 9 1 son’s financial affairs. In or about August 2014, the United States Attorney’s Office 2 was contacted by Mr. Calfo and was informed that he represented Ms. Evans. Thereafter, 3 Mr. Calfo and his office worked over the next two months with the United States 4 Attorney’s Office, negotiating the location, timing, and terms of any law enforcement 5 interview and gathering and providing the government with documents from Ms. Evans 6 relevant to the investigation. In October 2014, Ms. Evans met with law enforcement in 7 the presence of another attorney from Mr. Calfo’s office to conduct a recorded interview. 8 During the interview, Ms. Evans answered questions about why she received payment 9 from Troy Kelley and the reasons for the payment. Ms. Evans stated that according to 10 Mr. Jerue, the payment was connected with his prior employment and that the money 11 was paid through her so that Mr. Jerue’s wife would not know about it. 12 III. ARGUMENT 13 A. Legal Framework. 14 A defendant’s right to counsel of choice is not absolute. The “essential aim of 15 the [Sixth] Amendment is to guarantee an effective advocate for each criminal defendant 16 rather than to ensure that a defendant will inexorably be represented by the lawyer whom 17 he prefers.” Wheat v. United States, 486 U.S. 153, 159 (1988). Thus, the presumption in 18 favor of counsel of choice “may be overcome not only by a demonstration of an actual 19 conflict but by a showing of a serious potential for conflict.” Id. at 164. This is true 20 even when a defendant and other impacted parties express a desire to waive potential 21 conflicts. That is because courts have “an independent interest in ensuring that criminal 22 trials are conducted within the ethical standards of the profession and that legal 23 proceedings appear fair to all who observe them.” Id. at 160. In other words, the 24 existence of a waiver is relevant to the analysis but does not per se end the need for 25 inquiry. When waivers are presented, the court needs to “‘ascertain with certainty’” 26 that those who waive the right to conflict free counsel do so voluntarily, knowingly, and 27 intelligently. See United States v. Lockhart, 250 F.3d 1223, 1232-33 (9th Cir. 2001) 28 (internal citation omitted) (holding that defendant did not validly waive his right to Government’s Motion for Inquiry Concerning Potential Conflicts of Interest U.S. v. Troy Kelley, CR15-5198RBL/ - 4 UNITED STATES ATTORNEY 700 STEWART STREET, SUITE 5220 SEATTLE, WASHINGTON 98101 (206) 553-7970 Case 3:15-cr-05198-RBL Document 46 Filed 09/09/15 Page 5 of 9 1 conflict-free counsel where the record did not establish that defendant was adequately 2 informed of the significance of the conflict); See also, United States v. Lewis, 391 F.3d 3 989, 996 (9th Cir. 2004) (holding that defendant’s waiver of his right to conflict-free 4 counsel was invalid where there was no evidence that defendant understood the specific 5 ramifications of his waiver). 6 Situations where courts have inquired as to potential conflicts include cases of 7 successive representation where an attorney representing a defendant has previously 8 represented a potential trial witness. See e.g., United States v. Williams, 81 F.3d 1321, 9 1324-1325 (4th Cir. 1996) (holding that disqualification of defense counsel was well 10 within district court’s discretion where defendant desired representation by same lawyer 11 who had represented significant potential witness for the government); United States v. 12 Ross, 33 F.3d 1507, 1523 (11th Cir. 1994) (upholding district court disqualification of 13 defense counsel who earlier had represented a person who had pled guilty to related 14 charges and who would now be called as the government’s witness against the 15 defendant); United States v. Agosto, 675 F.2d 965, 971-977 (8th Cir. 1982) (reviewing 16 inquiry conducted by district court as to various defense counsel who had earlier 17 represented grand jury witnesses who may appear at trial, and overturning 18 disqualification rulings as to some counsel but upholding as to others). Inquiries are 19 undertaken in such instances because of the potential conflict that arises as a result of the 20 interplay between an attorney’s ethical duties of loyalty and confidentiality that she may 21 owe to both the past and current clients. See Agosto, 675 F.2d at 971. As further 22 explained by the Agosto court, “[i]n the successive representation situation, privileged 23 information obtained from the former client might be relevant to cross-examination, thus 24 affecting advocacy in one of two ways: (a) the attorney may be tempted to use that 25 confidential information to impeach the former client; or (b) counsel may fail to conduct 26 a rigorous cross-examination for fear of misusing his confidential information.” Id. 27 // 28 Government’s Motion for Inquiry Concerning Potential Conflicts of Interest U.S. v. Troy Kelley, CR15-5198RBL/ - 5 UNITED STATES ATTORNEY 700 STEWART STREET, SUITE 5220 SEATTLE, WASHINGTON 98101 (206) 553-7970 Case 3:15-cr-05198-RBL Document 46 Filed 09/09/15 Page 6 of 9 1 B. Angelo Calfo’s Successive Representation of Sandy Evans and Troy Kelley. 2 Angelo Calfo’s successive representation of Sandy Evans and Troy Kelley may 3 lead to attorney conflicts at trial under two circumstances: first, if Mr. Calfo cross4 examined Ms. Evans; and second, if Mr. Calfo cross-examined Jason Jerue. 5 The government may call Sandy Evans at trial. The evidence shows that Jason 6 Jerue and Troy Kelley utilized Ms. Evans to conceal a payment in 2012 that was, in truth, 7 destined for Mr. Jerue. As described above, Jason Jerue will likely be an important 8 witness given his direct involvement in and knowledge of Post Closing Department’s 9 reconveyance tracking business. Therefore, evidence relating to Mr. Jerue’s credibility 10 and the history of his dealings with Mr. Kelley -- including Ms. Evans’ testimony about 11 the concealed 2012 payment -- is highly relevant information for the jury. Once Ms. 12 Evans is called as a witness, however, Mr. Calfo may face the exact conflict described 13 by the court in Agosto: whether to use information obtained in confidence against Ms. 14 Evans in cross-examination on behalf of Troy Kelley, or refrain from a rigorous defense. 15 Even if only Jason Jerue is called as a witness at trial, a similar conflict may arise. 16 The subject of Mr. Calfo’s representation of Sandy Evans dealt in part with her financial 17 dealings with her son and what she understood about his relationship with Troy Kelley. 18 It is reasonable to believe that during the course of his representation of Ms. Evans, 19 Mr. Calfo learned information about Jason Jerue from Ms. Evans, with Ms. Evans 20 believing that such information would be kept in confidence in accordance with counsel’s 21 duty of loyalty. If Mr. Jerue is called as a witness in this case, which is likely, Mr. Calfo 22 faces the same conflict as above: he could either use information he learned about Mr. 23 Jerue from his mother in confidence to cross examine Mr. Jerue on behalf of Troy Kelley, 24 or again, refrain from a vigorous defense. 25 Mr. Calfo, while disputing the existence of any possible conflict, has informed 26 the government that detailed waivers have been obtained from both Ms. Evans and 27 Mr. Kelley. As noted above, however, the government has not been provided with 28 unrestricted access to the entirety of the waivers themselves and so we cannot speak to Government’s Motion for Inquiry Concerning Potential Conflicts of Interest U.S. v. Troy Kelley, CR15-5198RBL/ - 6 UNITED STATES ATTORNEY 700 STEWART STREET, SUITE 5220 SEATTLE, WASHINGTON 98101 (206) 553-7970 Case 3:15-cr-05198-RBL Document 46 Filed 09/09/15 Page 7 of 9 1 their specific contents. Mr. Calfo has also informed the government that while he had 2 extended an opportunity to both Ms. Evans and Mr. Kelley to consult with separate 3 counsel as to the wisdom of such waivers, we were not told whether either party, 4 especially Ms. Evans, had actually obtained such independent advice. Since Mr. Kelley 5 is a sophisticated party and an attorney himself, the lack of independent advice may not 6 be significant. Ms. Evans, on the other hand, is a retired individual whose last 7 employment was as a receptionist at a salon. Whether she has the wherewithal to afford 8 separate counsel for conflict purposes, or an independent ability to understand and grasp 9 the ramifications and possible consequences of her decision to waive is not clear. 10 On the basis of these facts, and in the interest of upholding the integrity of these 11 legal proceedings to all those who observe them, we believe that an inquiry by this Court 12 is necessary, especially as to the contour and validity of each of the parties’ waivers. 13 Wheat, 486 U.S. at 160. Without such an inquiry, the record may be deemed insufficient 14 to support a showing that Mr. Kelley’s rights to effective assistance of counsel was 15 preserved. 16 // 17 // 18 // 19 // 20 // 21 // 22 // 23 // 24 // 25 // 26 // 27 // 28 // Government’s Motion for Inquiry Concerning Potential Conflicts of Interest U.S. v. Troy Kelley, CR15-5198RBL/ - 7 UNITED STATES ATTORNEY 700 STEWART STREET, SUITE 5220 SEATTLE, WASHINGTON 98101 (206) 553-7970 Case 3:15-cr-05198-RBL Document 46 Filed 09/09/15 Page 8 of 9 1 2 IV. CONCLUSION For the foregoing reasons, the Court should conduct an inquiry to determine the 3 extent of the possible conflicts presented by Mr. Kelley’s current counsel of choice, and 4 whether both Mr. Kelley and Ms. Evans waived their rights to conflict free counsel 5 voluntarily, knowingly, and intelligently prior to this Court permitting the representation. 6 DATED: this 9th day of September, 2015. 7 8 9 10 11 12 Respectfully submitted, ANNETTE L. HAYES United States Attorney s/ Andrew C. Friedman ANDREW C. FRIEDMAN Assistant United States Attorney 13 14 15 16 17 18 19 20 21 22 23 s/ Katheryn K. Frierson KATHERYN K. FRIERSON Assistant United States Attorney s/ Arlen R. Storm ARLEN R. STORM Assistant United States Attorney 700 Stewart Street, Suite 5220 Seattle, Washington 98101-1271 Telephone: (206) 553-7970 Fax: (206) 553-2502 E-mail: Andrew.Friedman@usdoj.gov Katheryn.K.Frierson@usdoj.gov Arlen.Storm@usdoj.gov 24 25 26 27 28 Government’s Motion for Inquiry Concerning Potential Conflicts of Interest U.S. v. Troy Kelley, CR15-5198RBL/ - 8 UNITED STATES ATTORNEY 700 STEWART STREET, SUITE 5220 SEATTLE, WASHINGTON 98101 (206) 553-7970 Case 3:15-cr-05198-RBL Document 46 Filed 09/09/15 Page 9 of 9 1 CERTIFICATE OF SERVICE 2 3 4 5 I hereby certify that on September 9, 2015, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system which will send notification of such filing to the attorney(s) of record for the defendant(s). 6 7 8 9 10 11 12 /s/Anna Chang ANNA CHANG Paralegal United States Attorney=s Office 700 Stewart Street, Suite 5220 Seattle, Washington 98101-1271 Telephone: (206) 553-7970 Facsimile: (206) 553-2502 E-mail: Anna.Chang@usdoj.gov 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Government’s Motion for Inquiry Concerning Potential Conflicts of Interest U.S. v. Troy Kelley, CR15-5198RBL/ - 9 UNITED STATES ATTORNEY 700 STEWART STREET, SUITE 5220 SEATTLE, WASHINGTON 98101 (206) 553-7970