State Auditor Kathy McGuiness, "whose job is literally to protect your tax dollars from this very kind of spending," was charged with official misconduct and felony theft and intimidation--among other charges--for allegedly hiding contracts from public scrutiny and hiring her teenage daughter after forcing others out of the office, Attorney General Kathy Jennings announced Monday. 

The year-long investigation by the Division of Civil Rights and Public Trust (DCRPT), which included a dozen whistleblowers, confirmed what Jennings called a "clear and a disturbing pattern of not only unethical, but illegal behavior" on the part of McGuiness.

McGuiness, a Democrat, is accused of hiding a contract with My Campaign Group, which campaign finance reports show she used in her 2016 failed bid for lieutenant governor, by making the initial payment less than $50,000--paying just $49,900--$100 less than required to avoid public oversight and negate the state's competitive bidding process for said contract. 

"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," said Jennings.

"Within that contract, she manipulated invoices to avoid direct payment overview by the Division of Accounting," alleged Division of Civil rights & Public Trust Director, Deputy Attorney General Mark Denney alleged.

WDEL asked whether the auditor's contract with Gray Fox, a digital tool unveiled by her office to track American Rescue Plan spending, is also part of the indictment.

"I can tell you our investigation is ongoing," Jennings told WDEL.

Thousands of taxpayer dollars were compromised by her actions, Jennings said. The 11-page indictment against McGuiness, charges her with conflict of interest in violation with the state of Delaware's official code of conduct, felony theft, non-compliance with procurement law by structuring state payments, official misconduct, and felony witness intimidation. 

"The defendant submitted more than three dozen requests to monitor employees' emails, including at least one former employee at a completely separate agency," Jennings said. 

Jennings alleged nepotism led to McGuiness firing one employee and withholding hours from two others who would eventually leave on their own in order to hire her teenage daughter and her daughter's friend, ignoring the obvious conflict of interest.

"Despite that lack of work, the defendant then used her power to hire her daughter and directly supervise her teenage daughter and her daughter's friend. Despite the auditor's clear conflict, neither the daughter nor her friend were interviewed, nor were their positions advertised, nor were their hirings delegated to anyone in the office who had no conflict," alleged Jennings.

She continued to pay them when they didn't show up to work and gave her daughter access to government vehicles, Jennings said.

In August of 2020, Jennings said McGuiness' daughter went to college in South Carolina. 

"For months, despite not coming to work, never logging in remotely, barely ever sending so much as an email, her daughter continued to receive taxpayer checks," Jennings said. "Those paychecks were deposited into an account co-owned by her mother, the defendant."

As of August 2021, McGuiness' daughter remained on state payroll, accruing more than $19,000 in taxpayer funds. Her friend was paid nearly $8,000, the indictment said.

"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," said Jennings. "And when her staff discovered her misconduct and did the right thing by speaking up, the auditor, who's job is to be a government watchdog, engaged in an extensive pattern of surveillance and intimidation against those whistleblowers. If anyone should know better, it is the state auditor....Kathleen McGuiness carried out the very misbehavior that she was elected to stop."

Neither McGuiness' daughter nor her daughter's friend have been charged in the case, but Jennings reiterated the investigation is ongoing.

"We are here today because of the courage of several whistleblowers, who risked professional peril to do the right thing. We are here today because the Division of Civil Rights and Public Trust has done the right thing," Jennings said. "[The DCRPT] have been bulldogs in rooting out public corruption, regardless of party. This kind of work is exactly why we fought to cement the Division of Civil Rights and Public Trust as a permanent, independent fixture in the state of Delaware."

Information pertinent to the investigation is encouraged to contact the Division of Civil Rights & Public Trust at 302.577.5400 or visit de.gov/publictrust.

McGuiness, who's a former Rehoboth Beach City Commissioner, faces anywhere from zero to 13 years behind bars for the charges.

McGuiness responds to indictment

In an email from her attorney sent Monday night, McGuiness proclaimed her innocence, calling the indictment "misleading" and full of half-truths.

Her attorney Steve Wood addressed many of the accusations. He called the charge of witness intimidation "pure fiction."

"[It] is clearly the result of fanciful tales spun by former employees with an axe to grind," alleged Wood.

He noted state law does not prohibit family members from hiring family members, and there have been "many instances" of such employment, including the Attorney General's Office.

"It is also true that, like millions of Americans, Ms. McGuiness’s daughter worked remotely during the COVID pandemic. However, the indictment’s assumption that the only way for a state worker to work remotely is by using the state’s email network is false," Wood said.

Wood also addressed the allegation of skirting public oversight in state contracts. 

"The contractor in question has performed policy development services for other elected officials in Delaware before, including a former governor.  All of the relevant contracts were entirely lawful. There is nothing unlawful about hiring a former campaign consultant to perform legitimate tasks related to government service," said Wood. "The indictment fails to mention that the consultant has provided policy advice for elected officials all around the United States in the past and continues to do so today." 

Call for McGuiness' resignation

The Delaware Democratic Party Chair Betsy Marson called for McGuiness to step down.

"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," said Maron.

Wood said McGuiness will continue her elected duties as auditor.

"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," said Wood. "When the whole story is finally heard, the facts will speak for themselves."

It's believed the indictment is a first-of-its-kind with McGuiness being the first person elected to statewide office to be indicted on felony charges while still holding that office.

Regardless of a conviction, the General Assembly would have the power to determine McGuiness' fate in elected office. This would be the first time in recent memory that power may be tested. 

"The General Assembly makes the call in terms of impeachment or any other action that would be taken with respect to her," said Jennings.

Read the full indictment: