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Originally published Thursday, September 27, 2012 at 8:48 PM

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Watkins, Kelley trade personal attacks in animated endorsement interview

Republican James Watkins and Democrat Troy Kelley took turns portraying each other as unethical and unfit to be the state's top watchdog — occasionally relying on props like the United States tax code — during the hourlong Seattle Times editorial-board endorsement interview Thursday.

Seattle Times staff reporter

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If there were any doubts the state auditor's race is this election's ugliest matchup, they were dissolved Thursday after a tense and animated Seattle Times editorial-board endorsement interview.

Republican James Watkins and Democrat Troy Kelley took turns portraying each other as unethical and unfit to serve — occasionally relying on props like a copy of the United States tax code — during the hourlong session, which barely delved into substantive issues related to the state watchdog agency's work.

When they weren't bickering, the hopefuls spelled out somewhat different visions for the office. Watkins, a Redmond business-development consultant with performance-review experience, said he would prioritize working closely with the governor and putting more money into assisting audits in smaller counties.

Kelley, owner of an escrow-services company and three-term state representative from University Place, said he would focus on auditing data security issues, interstate compacts and the implementation of President Obama's signature health-care law.

Both candidates repeatedly praised current Auditor Brian Sonntag, who is retiring after two decades on the job. He has not endorsed a successor.

They were far less kind about each other.

The fireworks began about 15 minutes in, when Watkins was asked about a website he recently put up to attack Kelley.

The website, factchecktroykelley.com, contains hundreds of pages of court documents primarily from two lawsuits.

One was a 2010 case in which Kelley paid an undisclosed settlement with a business customer, Old Republic National Title, which accused him of "fraudulently transferring funds, intentional spoliation of evidence, shady business schemes, tax evasion, and hiding from creditors" $3.8 million in newly formed accounts.

The other was an earlier case in which Kelley said he received an undisclosed settlement against his employer, First American Financial, after claiming he was fired for refusing to help cover up illegal activity. The company denied that, saying his exit was tied to a reorganization.

The site also accuses Kelley of lying about having been a president at First American.

"I do not believe that we can have an auditor that's going to be effective in Washington state with that kind of background," Watkins said, after summarizing the website's contents. "An auditor has to have integrity."

Kelley was then asked if he wanted to dispute any of Watkins's findings.

"Pretty much all of it, " he said, apologizing in advance, because, "this is going to take a little time."

And he was right: Kelley spent the next 10 minutes addressing the attacks, which he called "complete garbage."

Kelley called the suits "nuisance lawsuits," filed routinely as part of the escrow world. He pointed out they were quickly settled, noting that anybody can make an accusation about anything at any time.

He said he has been very specific about his assets on public-disclosure documents.

He pulled out a copy of the tax code to defend his fund transfers, and he produced old business cards to show he was a president of a subsidiary at First American.

And, he said, he has never been charged with a crime or had any other legal trouble.

"There are no ongoing suits, no pending suits, no investigations, no criminal charges, no civil charges," he said. "I have never had a speeding ticket."

Kelley then produced Internet records showing that creating attack websites is a common Watkins tactic.

That prompted Watkins to shoot back: "Apparently, the whole interwebs thing (the Internet) is new to Mr. Kelley. This is what modern campaigns do."

Then Kelley went on the offensive, accusing Watkins of lying about how many performance audits Watkins has done.

While Watkins claims to have done 150 audits in his consulting business, Kelley said nobody in the country has done that many performance audits.

The argument hinged on the specific terminology of the type of audit.

Watkins explained that when he mentions his audit experience, he is talking about "performance engagement" audits, in which a consultant evaluates the workings of a specific part of a business. Those audits, his specialty, occur in the private sector but not in government, Watkins said

"Troy just doesn't understand the private sector," he said.

Kelley was quick on the response: "If I don't understand it, Google doesn't understand it, either. There's no such thing as a performance engagement (audit)."

Editorial-board members eventually steered the conversation back to the issues, with a question about priorities.

But the closing-statement section became another back and forth of attacks.

"It's unfortunate that the campaign has gotten here," Watkins said as the interview ended.

"But here we are."

Brian M. Rosenthal: 206-464-3195 or brosenthal@seattletimes.com. On Twitter @brianmrosenthal.

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