A Port Ludlow couple are facing five counts of forgery after they were allegedly found to have multiple counterfeit $100 bills in their possession earlier this month in Chimacum.

Jason Paul Allan, 44, and Kathryn Carlson Manahan,  42, were arrested Aug. 14 outside the Cenex store on Rhody Drive after Allan paid for fencing with two phony $100 bills and an employee called 911, according to a deputy’s case report from the Jefferson County Sheriff’s Office.

A deputy found Allan walking his dog in the Cenex parking lot while he was waiting for help with material he needed for a gate.

When the officer explained the two $100 bills he had passed along were fake, Allan allegedly denied knowing they were counterfeit and said he “got the money from a friend who owed him for an impound.”

After Allan was frisked for weapons — the deputy noted in his report he had made previous threats to law enforcement officers, including brandishing a sword, and was known for erratic behavior — the deputy learned Allan was allegedly driving with a suspended license.

Allan said he had no choice but to drive because he was due in court in Port Townsend. He also said he had recently purchased the truck but didn’t know who was currently registered as being the vehicle’s owner.

Manahan was a passenger in Allan’s truck, and the deputy determined she was actually wanted on a felony warrant for identity theft in Snohomish County.

In his report, the deputy said Allan appeared to be “purposefully vague” when asked about the counterfeit money.

“He did admit that he has previous arrests for possession of counterfeit money,” the case report continued.

An examination of the two bogus bills showed the currency had faint marks visible that showed the actual denomination of the notes, which were smaller-denomination bills that looked like they had been chemically washed to remove the visible ink and then printed over with the image of a $100 bill.

Allan consented to a search of the truck, and the deputy found a large tablet in the center console that had a pouch that contained “envelopes filled with U.S. currency that was in various stages of being washed and counterfeited,” the report said. 

“Allan immediately denied any knowledge of the pouch and claimed a friend must have left it in there,” the report said.

Other deputies responded to the scene, and discovered Manahan had five additional counterfeit $100 bills in her possession.

Allan then told a deputy he had met a friend at a casino in Snohomish County two days earlier who had paid him $800 in eight $100 bills, and he had used two of them inside Cenex.

He also said he spent some of the money at the casino and put the rest in the bank.

The deputy said Allan changed his story, however, after he was told Manahan had been found with five counterfeit bills, and several of them had the same serial numbers as the fakes he spent inside Cenex.

Allan allegedly continued to change his story until he eventually admitted he knew the bills were counterfeit before using them to buy fencing material.

He also denied having any involvement in creating the counterfeit bills, though authorities noted Allan had an extensive history of fraud in Snohomish County that involved counterfeit currency.

Deputies also allegedly found suspected methamphetamine and heroin in Manahan’s possession, including a large quantity of drug paraphernalia and a passport for an Edmonds woman that had been stolen from her mail around the beginning of the year.

Jail records show Allan had also been arrested in June for second-degree burglary in Jefferson County.

Allan and Manahan made their initial court appearance Friday in Jefferson County Superior Court.

Their arraignment on the forgery charges has been set for Friday, Sept. 3.

Allan is also facing a count of making false or misleading statements to a public servant.

A conviction on forgery can result in a maximum prison sentence of five years.