Labor head: Officials told of insurance fund embezzlement

Heads of the Department of Labor, Department of Finance and the Office of Auditor of Accounts defended themselves in letters sent June 4 to legislative leaders and the General Assembly following calls by an open government group questioning why theft from the state’s unemployment fund was never reported despite state law requiring those departments to do so.

Secretary of Labor Karryl Hubbard and Secretary of Finance Rick Geisenberger signed a joint letter to legislative leaders following extensive publicity of a Division of Unemployment Insurance employee embezzling $180,000 from the Unemployment Insurance Fund.

They acknowledge that an employee “exploited gaps in the [unemployment insurance] processes and manipulated a temporary worker to steal from the trust fund.”

“Once the theft was discovered, DOL leadership immediately notified the Department of Human Resources and the Department of Safety and Homeland Security. Within days, the employee suspected of the theft was placed on administrative leave and regrettably died later that same day,” the letter states.

The letter continues to say DOL reported the theft to the state auditor, the Department of Finance, the Delaware State Police, the Department of Justice, the federal DOL Office of Inspector General and to unnamed members of the General Assembly who serve on the Unemployment Insurance Advisory Council.

Both Hubbard and Geisenberger blame the media for conflating incidents and contributing to confusion. The two also say the problem happened because of an antiquated information system, the loss of long-term staff through retirement and attrition, the inability to recruit and retain sufficient accounting resources, and the lack of up-to-date written policies and procedures – the same issues highlighted by an independent auditor in a 2023 report. 

The independent auditor along with State Auditor Lydia York both wrote reports noting poor accounting made it difficult to audit the unemployment fund, resulting in an unprecedented opinion that the fund was not auditable for fiscal year 2023.  

In York’s letter to the General Assembly, she said news reports “unfortunately caused some misunderstandings amongst the Delaware public.”

York said her office continues to investigate what happened at the unemployment insurance division and will present a formal report once complete.

Hubbard and Geisenberger also pledged a full accounting of what happened, and said both departments are collaborating to provide a report to legislative leaders in July.

The Delaware Coalition for Open Government first alerted all members of the General Assembly May 30 about an embezzlement problem at the Department of Labor’s Division of Unemployment Insurance, and requested an investigation into the Office of the Auditor of Accounts and the Department of Finance’s Division of Accounting for failing to disclose the embezzlement problem. The group cited state law that they said was violated, and pointed to several reports filed by the auditor’s office and finance officials that never mentioned embezzlement of funds but alluded to some sort of problem with the unemployment fund.

State Republicans followed by saying a separate inquiry is needed to determine what happened, but so far no oversight hearings or any other proceedings have been scheduled.

On June 24, the Civic League for New Castle County requested the Delaware Public Integrity Commission investigate violations of the Delaware Code, code of conduct and oath of office by state officials for failure to disclose and possibly conceal the 2023 embezzlement of state and federal funds from the Department of Labor’s Division of Unemployment Insurance Trust Fund.