State prosecutors told a jury on Tuesday that Delaware Auditor Kathy McGuiness ran her office like a family business, tramping on state public corruption laws while benefiting herself, her daughter and harming those who questioned her conduct.
McGuiness’ defense attorney told the jury that prosecutors’ case was born of a biased investigation that ignored facts toward a predetermined end, and that his client is unfairly accused of crimes based on actions that are common among elected officials — including Attorney General Kathy Jennings, the prosecutors’ boss.
Tuesday was the first day in the criminal trial for McGuiness, whose job it is to guard public funds and who is believed to be the first sitting, statewide-elected official to be been criminally charged.
The jury will hear evidence and render a verdict on five charges against McGuiness, who became auditor in 2019.
Those include two felonies and three public corruption misdemeanors. Prosecutors say she gave her daughter a job and special treatment in the office, that she paid a political consultant state money in a way that avoided regulatory scrutiny and that she intimidated employees that questioned her.
Conflict of Interest and Theft
Deputy Attorney General Mark Denney, the lead prosecutor, said McGuiness took state money and found “ways to put money into the pockets of her family and friends.”
McGuiness hiring her daughter, a fact that is not contested by either side, is the root of both a misdemeanor conflict of interest charge and a theft charge. McGuiness’ indictment claims the daughter was paid $19,300 for about a year and a half of work starting in March 2020.
Denney told the jury that evidence and testimony will establish that McGuiness hired her daughter, then a high school senior, as well as her daughter’s close friend to what are regarded as seasonal or casual positions.
He said evidence will show that this occurred without any interview, that other casual employees had fewer hours available to work, that McGuiness’ daughter booked more hours than other employees, that she continued her employment despite enrolling in college in South Carolina and did not use tools like her state email for work purposes.
“This is not a family business. This is not a pizza shop,” Denney told the jury.
The state law that underpins the conflict of interest misdemeanor states that it is illegal for a state official like McGuiness to “participate in the review or disposition” of a state matter in which that state official “has a personal or private interest.”
That personal or private interest is defined by the matter resulting in “a financial benefit or detriment to accrue to the person or close relative to a greater extent than such benefit or detriment would accrue to others who are members of the same class or group of persons.”
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Wood said prosecutors do not have the evidence to prove such a violation.
“It is not a crime for a state official to hire his or her spouse or sibling, parent or child,” Wood told the jury. “Forget what you may think about whether that should be a crime. It is not.”
Wood said McGuiness’ daughter “earned every penny she made.”
He said emails from her private Gmail account will show she did work for the office, that she was paid the same as other students in her position and that benefits like use of the state’s car were a part of job functions that other such employees conducted.
McGuiness is also charged with felony theft tied to her daughter’s employment because McGuiness’ name was on the bank account into which her daughter’s paychecks were deposited.
“You will see zero evidence that Kathy McGuiness received any financial benefit from hiring her daughter,” Wood told the jury.
Structuring
McGuiness is also charged with a misdemeanor known as structuring tied to a no-bid contract the auditor’s office awarded to local political consultant Christie Gross in December 2019.
Denney said McGuiness approached Gross and told her if the contract was worth less than $45,000, they would not have to put the contract out for bid. Denney noted Gross worked for McGuiness during her failed campaign for lieutenant governor in 2016.
At the time, payments over $5,000 using statement required approval from state accounting regulators. Denney said that multiple invoices from Gross’ company were less than $4,500. Some invoices exceeded that amount but were paid from separate funding sources, Denney told the jury.
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Wood again argued this isn’t illegal.
He told the jury that the law prosecutors accuse McGuiness of breaking only speaks to splitting one contract into multiple contracts to avoid the $50,000 threshold for state work to be competitively bid, not splitting payments.
He also noted that regulators approved some of the payments to Gross’ consultancy firm, asking the jury what motivation McGuiness would have to conceal some payments when others were approved.
He told the jury the law requires that prosecutors prove that McGuiness knowingly subdivided payments to Gross in order to skip out on necessary approvals and, he claims, that she had no idea such might be a violation of any rule.
He told the jury he will introduce emails that show the state attorney who provides legal counsel to the auditor’s office warned only about subdividing total contract amounts, not individual payments.
He also argued that it is common for those hired by candidates to then take state jobs or contracts once the candidate wins an election.
He said he intends to call to the witness stand employees for the Delaware Department of Justice, the department prosecuting McGuiness, that both worked for Attorney General Kathy Jennings political campaign and later worked in a state-funded job once she was in office.
“Look at what the Attorney General herself does,” Wood told the jury. “I’ll hasten to add: it is not a crime.”
Prosecutors have said this is an oversimplified comparison.
Wood previewed emails in which the legal counsel for the auditor’s office, who is technically a civil attorney in the Delaware Department of Justice, advising McGuiness to seek to fill her office’s ranks with political guidance from leaders of the Delaware Democratic Party.
Witness intimidation
Felony intimidation is the most serious charge McGuiness faces. Denney told the jury that she submitted some 42 requests to state technology officials to monitor her employees’ emails. He compared that to the Office of Gov. John Carney, who he said had filed fewer than five such requests.
He said witnesses will show McGuiness took steps to restrict employee’s social media activity for nonwork-related content. He said former employees will discuss how some who questioned misconduct were put on performance improvement plans, reprimanded and steps were taken to prevent leaks from the office.
“There are a lot of stories,” Wood told the jury, before beginning to cut at the credibility of witnesses the state will call.
He said the work of the auditor’s office requires confidentiality and McGuiness’ efforts to ensure that was not intimidation, but her “trying to run her office in a professional way.”
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He argued that prosecutors don’t have the evidence to show that she “knowingly and with malice” sought to intimidate a whistleblower or potential witnesses because McGuiness had no idea she was under investigation until late last year.
Some of the alleged acts of intimidation occurred after she was indicted.
Beyond the evidence and legal arguments, Wood argued that prosecutors simply cannot be trusted.
Last month, presiding Judge William C. Carpenter ruled that prosecutors cannot use certain evidence because the state’s primary investigator on the case included false information regarding payments made to Gross, the contractor at the center of the structuring charge, on a search warrant application he filed while McGuiness was under investigation.
Wood went through the search warrant pointing out each falsity, stating “ask yourself if you can trust them now.”
Denney told the jury the false information was the product of investigators “not fully” understanding the accounting of how Gross was paid.
Trial is expected to stretch through most of next week.
Contact Xerxes Wilson at (302) 324-2787 or xwilson@delawareon
