Delaware State Auditor Kathleen McGuiness indicted on felony theft, witness intimidation

State Auditor Kathy McGuiness faces felony charges of theft and witness intimidation in a grand jury indictment released Oct. 11.

“Kathleen McGuiness carried out the very behavior that she was hired to stop,” said Attorney General Kathleen Jennings during a press conference in Wilmington. “The investigation has confirmed a clear and disturbing pattern of behavior that was not only unethical, but it was against the law.”

The Division of Civil Rights and Public Trust began its investigation into McGuiness’s wrongdoing more than a year ago, Jennings said, after it was notified by a dozen whistleblowers. 

McGuiness has been indicted on charges of felony theft, felony witness intimidation, conflict of interest in violation of the State of Delaware official code of conduct, noncompliance with procurement law by structuring state payments, and official misconduct.

The investigation uncovered a sweetheart deal built so as to avoid oversight of the defendant's state contract with a campaign vendor, Jennings said.

In 2016, during McGuiness’s run for lieutenant governor, Jennings said, McGuiness paid for campaign services from My Campaign Group, and she later approached the group for a state contract. 

Knowing that state contracts under $50,000 need not be subject to public bidding, Jennings said, the auditor entered into a contract with My Campaign Group – which had never before had a state contract – for “communication services.” Over the course of the contract, My Campaign Group was paid $49,900 – just $100 below the oversight threshold.

“She informed them of a loophole that would allow them to avoid a competitive bidding process by keeping the initial contract below $50,000,” Jennings said. “The bidding process exists to protect taxpayers. It’s there to prevent this exact behavior.”

Payments were structured to remain under the threshold, she said, and a second contract was made to avoid public oversight. Delaware Division of Accounting rules require special approval for purchases or payments of $5,000 or more.  The auditor directed invoices of more than $5,000 to be paid in increments under $5,000, Jennings said.

“It’s important to keep this in mind – this was done by the state auditor, whose job is literally to protect your taxpayer dollars from this very spending,” Jennings said.

Office pays daughter $19,000

During the height of the 2020 pandemic, Jennings said, McGuiness fired one employee for lack of available work, and two others left. The same day that McGuiness fired the employee, Jennings said, she hired her teenage daughter and her daughter’s friend – both high school seniors at the time. 

“She even provided her daughter with access to a state vehicle,” Jennings said.

Early on in McGuiness’s tenure, Jennings said, she had assumed the job of hiring casual and seasonal employees. Despite McGuiness’ conflict of interest, she said, neither the daughter nor the daughter’s friend was interviewed, nor were their hires delegated to an employee without an ethical conflict. 

When the daughter left to attend the College of Charleston in South Carolina, Jennings said, the daughter remained on the auditor’s office payroll listed as a public information officer, and then as an intern. In total, Jennings said, the daughter received $19,000 in pay that was deposited into a joint bank account with McGuiness. The friend was paid $8,000.

Jennings said the daughter has not been charged.

Witness intimidation

Jennings said a dozen whistleblowers came forward with the information that led to McGuiness’s indictment. 

McGuiness’ conduct concerned several employees, who questioned her behavior and, in some cases, came forward to the Department of Justice to file whistleblower complaints. The DOJ’s investigation revealed that McGuiness retaliated against real or perceived whistleblowers and engaged in a course of conduct to surveil those she saw as disloyal to her.

Notably, Jennings said, McGuiness submitted dozens of “e-Records” requests to the Department of Technology and Information for the contents of auditor office employees’ email accounts. This enabled McGuiness to monitor several employees’ email communications in real time. McGuiness also discriminated against employees who questioned her misconduct, and enacted office policies to limit the off-hours, personal activities of employees who she believed associated with former auditor office staff, Jennings said.

The DOJ reminds the public that DCRPT’s investigation into McGuiness and the Office of the Auditor of Accounts are ongoing, and urges anyone with information they believe is relevant to the investigation to contact DCRPT at  302-577-5400 or de.gov/publictrust. Public trust complaints may also be submitted online at de.gov/dcrptcomplaint.

“We will treat the auditor like we would treat anyone else in the state,” Jennings said.

McGuiness was elected state auditor in 2018, and served as a Rehoboth Beach commissioner from 2003-13 and from 2014-18. She finished third in the Democratic primary for lieutenant governor in 2016.

In May, McGuiness announced a statewide transparency and accountability initiative called Project: Gray Fox to track how Delaware entities are spending federal funds through the American Rescue Plan Act.

McGuiness is scheduled to turn herself in Oct. 12, in New Castle County.

Reaction from throughout the state

In a statement, Delaware Democratic Party Chair Betsy Maron said McGuiness is not fit to continue her role as state auditor. 

“[Monday’s] announcement from the Attorney General’s office is incredibly troubling,” she said. “When Delaware Democrats supported Kathy McGuiness, they did so on the promise that she would serve as a watchdog to prevent waste and abuse and uphold the highest ethical standard of transparency and fiscal responsibility. Our volunteers and voters put their faith in her to do right by the people of Delaware. To see that she broke the public’s trust while executing her official duties is disheartening and downright embarrassing to our party. Based on today’s grand jury indictment, it is clear that Kathy McGuiness cannot be trusted to do her job in accordance with the law. It would be a disservice to every Delawarean for her to continue in her role.”

Common Cause Delaware Director Claire Snyder-Hall said elected officials are supposed to serve the public not themselves. 

“Elected officials are not supposed to use their power to benefit their children, line the pockets of their political supporters or treat their elected office as a personal fiefdom,” she said. “We’ve all watched a high-profile example of such behavior in recent years – but it’s still not right. If these charges are true, they are a particularly egregious violation of the public trust. Delaware’s Auditor is supposed to prevent and detect these sorts of activities, to protect our taxpayer dollars from misuse. Our state officials are supposed to act in the public’s interest, not their own. Delawareans shouldn’t have to wonder what our elected officials are up to, or whose interests are being served. We appreciate the work of the grand jury, and we will be watching this case closely.”

Common Cause Delaware is a nonprofit, nonpartisan citizens lobby, dedicated to fostering open, honest and accountable government at every level.