In 1980, Worcester architect Frank Masiello testified before the
Special Commission Concerning State and County Buildings that his company paid Kelly's accounting firm a $500 monthly retainer after Kelly threatened to have his firm's contracts with the state cancelled. The payments allegedly began in January 1971 when Kelly became chairman of the Ways and Means Committee and ended in September 1976. He also stated that his company paid for Kelly's travel, entertainment, and YMCA memberships. Kelly's firm received a total of $9,500, but never performed any work for Masiello and Associates. James L. Bauchat of Masiello and Associates' parent company Kassuba Development Corp., testified that Kelly demanded $10,000 in exchange for state design contracts. Kelly appeared before the Commission on June 27, 1980,
pleaded the Fifth Amendment and refused to answer any questions. On September 23, 1980, Kelly was indicted on charges of extorting $34,500 from Masiello and Associates. The indictment was based on the
Hobbs Act, which makes it illegal for a public official to solicit money from people trying to influence his official conduct. On September 30 he pleaded not guilty and was released by
United States magistrate judge Peter W. Princi on $10,000 bond. His trial began on March 18, 1981, and ended on April 29. After eleven hours of deliberation, the jury remained deadlocked 11 to 1 for conviction. Judge
Joseph L. Tauro declared a mistrial. Before the retrial, the prosecution attempted to have Tauro removed from the case, citing his pro-defense rulings during the trial and having received assistance from Kelly when Kelly was chair of a committee investigating the Volpe administration and Tauro was Volpe's chief legal counsel. The United States Court of Appeals ruled that there was no legal basis to bar Tauro from presiding over the retrial. Also prior to the retrial, two of the prosecution's witnesses had committed
perjury. Kelly's retrial began on November 15, 1982, and ended on December 22. The next day, the jury found Kelly guilty of extortion. On January 20, 1983, Judge
Rya W. Zobel sentenced him to two years in prison. He was allowed to remain out of prison until the outcome of his appeal, which was rejected on December 1, 1983. Kelly then sought to have his sentence delayed until April 1984 so he could complete his studies for a master's degree in business administration at
Florida International University. The request was denied and Kelly began his sentence in March 1984. He was incarcerated in
Federal Prison Camp, Eglin. ==Personal life==