Delaware's state auditor, who is responsible for rooting out government fraud, waste and abuse, was indicted Monday on public corruption charges.
An indictment issued by a New Castle County grand jury charges Kathleen McGuiness, 58, with felony counts of theft and witness intimidation, and misdemeanor charges of official misconduct, conflict of interest and noncompliance with state procurement laws.
Prosecutors said the charges include allegations that McGuiness hired her daughter and one of her daughter's friends, both high school seniors at the time, as temporary employees in May 2020, even though other temporary employees had to leave their positions because of the lack of available work amid the coronavirus pandemic.
Authorities said Elizabeth McGuiness, who has not been charged, continued to be paid even after enrolling at a college in South Carolina last August, and that she was still listed as an employee as recently as Aug. 28 of this year. She was initially listed as a "public information officer" and later as an "intern."
Payments to McGuiness' daughter totaling $19,000 were deposited into a bank account for which McGuiness is a listed owner. The daughter's friend was paid more than $7,700.
"As millions of Americans, including her own employees, lost their jobs, the auditor, whose job is to protect your tax dollars from abuse, used her power to hire her daughter, no questions asked," state Attorney General Kathleen Jennings, a fellow Democrat, said at a news conference outside the New Castle County courthouse Monday. "She paid her daughter thousands of tax dollars, even when the daughter wasn't showing up to work."
McGuiness also is charged with orchestrating a 2019 no-bid "communications services" contract for a company she had used as a campaign consultant when running for lieutenant governor in 2016. Investigators said McGuiness evaded public bid requirements by keeping the initial contract with My Campaign Group just under the $50,000 threshold that requires public bids. She also avoided getting approval from he Division of Accounting, a separate state agency, for the payments to My Campaign Group by splitting up invoices and keeping payments under the $5,000 reporting threshold.
Prosecutors also said two payments to My Campaign Group were made outside the initial $45,000 purchase order, bringing the total that the company was paid to $49,900, just $100 under the public bidding threshold.
"The auditor, whose job is to root out fraud, handed out state contracts to a campaign consultant and deliberately avoided oversight meant to protect taxpayers from the very fraud and abuse she swore to root out," Jennings said.
According to investigators, McGuiness approached My Campaign Group again in September 2020 and suggested a second contract under $50,000 but was told the contract should proceed through the public bidding process. Another company successfully bid on that contract and had been paid $77,500 as of February.
Authorities said that when employees in her office became aware of McGuiness' misconduct, she responded by trying to intimidate the whistleblowers, including submitting more than three dozen requests to the Department of Technology and Information for the contents of their email accounts. That allowed McGuiness to monitor several employees' email communications in real time, according to prosecutors, who said McGuiness also monitored the email of a former employee who now works in a separate government agency.
"When her staff discovered her misconduct and did the right thing by speaking up, the auditor, whose job is to be a government watchdog, engaged in an extensive pattern of surveillance and intimidation against those whistleblowers," Jennings said.
"If anyone should know better, it is the state auditor," Jennings added. "Instead, as our investigation has shown, Kathleen McGuiness carried out the very misbehavior that she was elected to stop."
McGuiness, who was elected in 2018, declined to speak with investigators with the state Division of Civil Rights and Public Trust, according to the attorney general, who said the investigation is continuing.
McGuiness, who is expected to surrender to authorities for arraignment this week, did not respond to an email seeking comment, or to a message left on her cellphone.
Her attorney, former state prosecutor Steve Wood, said in an email that McGuiness is "absolutely innocent," and the indictment is "full of misleading statements and half-truths."
Wood said Delaware law does not prohibit family members from hiring family members, and there have been such instances throughout state government, including in the attorney general's office. He also said the contractor McGuiness hired has performed policy development services for other elected officials in Delaware, and that all of the relevant contracts were "entirely lawful."
"The witness intimidation charge is pure fiction, and is clearly the result of fanciful tales spun by former employees with an axe to grind," Wood said.
"Ms. McGuiness will continue to work hard on behalf of Delaware's taxpayers and intends to focus on the job that she was elected to do," he added.
The chairwoman of the Delaware Democratic Party, meanwhile, issued a statement calling for McGuiness to resign.
"To see that she broke the public's trust while executing her official duties is disheartening and downright embarrassing to our party," said Betsy Maron. "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."