State auditor implicates ex-PUD employee

By Paul Gottlieb
Peninsula Daily News

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PORT ANGELES — A fraud investigation has determined that former Clallam County Public Utility District line foreman Timm Kelly was paid $24,726 in PUD residency stipends for living in Forks when he was not residing there, according to a state Auditor’s Office report issued this week.

Kelly is the husband of PUD candidate Cindy Kelly, who is running against PUD board President Ted Simpson, the owner of Angeles Electric in Port Angeles, in Tuesday’s general election.

Timm Kelly, also the president and business manager of the International Brotherhood of Electrical Workers Local 997, was fired in April for allegedly violating the district’s residency policy.

The 2-page state report was released Tuesday.

Neither Timm nor Cindy Kelly returned calls requesting comment Tuesday and late Wednesday afternoon.

The report’s findings were forwarded to the county Prosecuting Attorney’s Office “for any action it deems necessary,” according to the report.

That action — or a decision not to pursue charges — may not be happening in the immediate future.

Prosecuting Attorney Deb Kelly, who is not related to Timm Kelly, received the report Wednesday afternoon and asked the Auditor’s Office for the underlying evidence gathered by the agency that led to the document’s conclusion.

“There’s not enough there for me to do anything,” she said, calling the report a “summary document.”

The Auditor’s Office told Deb Kelly it would let her know when she will receive the additional information, but the agency did not say Wednesday when that might be.

If an investigation is warranted — it could lead to criminal charges — it would be conducted depending on her staff’s workload, Deb Kelly said.

The report said the district should seek recovery of the $24,726 in stipends that Timm Kelly was paid over more than five years, from 2007 through the first quarter of 2012, and an additional $1,588 for the Auditor’s Office investigation.

The district remains in arbitration with the union over whether its collective bargaining agreement with the PUD “can be interpreted as allowing [Kelly] to live away from the required residency area,” the report said.

PUD General Manager Doug Nass said the district would decide on a course of action after the county Prosecuting Attorney’s Office makes a decision.

“He had a place where he was living full time in Forks, that’s what our understanding was,” Nass said Tuesday.

The report said Kelly was receiving a stipend of about $550 a month for living in the PUD’s Forks service area from Jan. 1, 2007, through April 6, 2012.

Kelly said he was not living in Forks 50 percent of the time from Jan. 1, 2007, to June 30, 2010; not living there 80 percent of the time from July 1, 2010, to Nov. 30, 2011; and not living there 100 percent of the time from Dec. 1, 2011, to April 6, 2012, the report said.

“[Kelly] was aware that the stipend was contingent on his living in the Forks service area, yet he did not inform the district of his temporary living arrangements or that he was staying in his home outside of the service area at least 50 percent of the time,” the report said.

He received a total stipend of $40,808 during that time, $24,726 of which he was not eligible for, the report said.

“I’ve never seen anything like this before reported to our office, something like a residency-requirement violation resulting in a possible misappropriation of funds,” said state Auditor’s Office spokeswoman Mindy Chambers, who has been at the agency for 15 years.

When the district found out Kelly was not living in the Forks area 100 percent of the time, it was “quite a surprise,” Nass said.

“We started hearing complaints” from PUD employees, Nass said, after which the PUD investigated Kelly.

Kelly provided the information on the percentage of time he was not living in Forks to the PUD investigator but refused to be interviewed by the Auditor’s Office, the report said.

District spokesman Mike Howe said the PUD paid the investigator $11,537.

The state Auditor’s Office could not verify the accuracy of Kelly’s information, the report said.

The Auditor’s Office also said the PUD “allowed” the loss of public money.

“Internal controls at the district were not adequate to safeguard public resources,” it said.

“We found the district did not verify the residency of the line foreman receiving an area-pay stipend, which allowed the loss of public funds to occur.”

The district pays $48,000 a year in residency stipends to seven employees, according to the report.

Nass said that when employees have worked in the Forks service area, they have signed a job description that outlines the district’s residency requirements.

“Now, we go out with an annual report for all employees requesting a number of items, one of which is their residency,” Nass said.

“If they come in showing a place other than where they are supposed to be, we would be checking into that further.”

Timm Kelly filed a complaint in October with the state Public Employment Relations commissioner over his termination.

Nass read a one-page statement regarding the complaint at an Oct. 15 commissioners’ meeting.

He quoted extensively from an administrative law judge who upheld the state’s denial of Timm Kelly’s unemployment compensation and defended Kelly’s firing.

Cindy Kelly also ran against Simpson six years ago and lost by 229 votes out of 19,453 cast.

The revelation of the complaint at the Oct. 15 meeting “was timely because we’re in a campaign season,” she said at the time.

Nass said Tuesday that the district revealed the complaint in open session on advice from the PUD’s lawyer and because Timm Kelly had filed the complaint a week earlier.

“It wasn’t anything we had control over,” Nass said.

“I am totally neutral on anything to do with the election,” Nass continued.

“I don’t have any leanings any way, and I want to keep it that way.”

Despite his termination, Kelly remains union president and is involved in contract negotiations with the PUD, Nass added.

“We see Timm periodically,” Nass said.

Senior Staff Writer Paul Gottlieb can be reached at 360-452-2345, ext. 5060, or at

Last modified: October 31. 2012 6:02PM
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