Jury returns verdict in Delaware Auditor Kathy McGuiness criminal corruption case

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A jury found Delaware Auditor Kathy McGuiness guilty of three public corruption misdemeanors on Friday.

They found McGuiness guilty of conflict of interest, structuring and official misconduct. Each carries the potential for one year of imprisonment, though the likely sentence will be probation. McGuiness will be sentenced at a later date.

The jury returned not-guilty verdicts for the two felonies that McGuiness faced, theft and witness intimidation, after about four hours of deliberation over Thursday afternoon and Friday morning.

Leaving the courthouse, McGuiness said she was "very disappointed" by the verdict.

"I have a great team so I look forward to working again with them to rectify the situation," McGuiness said.

Her attorney, Steve Wood, said he intends to seek a retrial and ask Judge William C. Carpenter Jr. to acquit his client on legal technicalities.

McGuiness becomes the first statewide-elected official to be both criminally charged and found guilty of a crime while in office. The Democrat took office in 2019 as auditor, a position tasked with investigating and safeguarding public spending throughout state government and local school districts.

Lead prosecutor Mark Denney declined to comment on the verdict as he departed the courthouse. In a written statement, Delaware Attorney General Kathy Jennings, whose department prosecuted McGuiness, thanked whistleblowers and witnesses who "came forward and made accountability possible."

"Our office’s — and the jury’s — message is clear: abuse of office will not be tolerated in Delaware,” Jennings said.

McGuiness' team have repeatedly labeled the prosecution and case against her as "biased" and "unfair." Outside the courthouse, she took that further.

"I will say I believe it is political and that is all I will tell you," McGuiness stated.

Earlier this year, McGuiness filed to run for reelection. After the verdict, she said she will continue her campaign. Both McGuiness and Jennings have been mentioned in political circles as potential candidates for governor in 2024.

McGuiness was indicted in October by prosecutors in the Delaware Department of Justice, which began investigating her in spring 2020, according to trial testimony.

She has resisted calls to resign and Delaware's Democratic lawmakers had previously punted on seeking her ouster. After the verdict, Senate Democratic leadership on Friday called for McGuiness to immediately resign.

A spokesperson said House Democratic Leadership could not be reached for comment Friday. A spokesperson for Gov. John Carney sent a written statement that said the governor "finds it difficult to understand" how McGuiness can "continue to serve the people of Delaware effectively." Travis Williams, spokesman for the Delaware Democratic Party, said the organization believes McGuiness should no longer hold office.

McGuiness mounted a legal defense through Wood, who spent decades as a state prosecutor and top official in the Delaware Department of Justice before his career in private practice.

Before Friday, she had not publicly discussed the case, but fought the charges in pretrial litigation claiming the nepotism and other issues at the root of some of the charges is commonplace in Delaware government and that Department of Justice officials ran an "incompetent" and "biased" investigation.

Wood echoed that argument outside court Friday, stating that "important political leaders" have hired their "children and spouses."

"I'm not going to name names," Wood said.

Her three-week trial occurred in Dover, steps away from her state offices. The proceeding saw testimony from nearly 30 witnesses, a mix of state officials explaining the documents entered in evidence as well as former employees, some of whom described a "toxic" workplace overseen by McGuiness.

CLOSING ARGUMENTS: Jury begins deliberation in auditor's criminal corruption trial

The conflict-of-interest misdemeanor the jury convicted McGuiness of centered on her hiring her daughter to work in the office.

Her daughter told the jury that McGuiness hired her and her childhood friend to part-time jobs in 2020. The daughter testified that she continued working remotely while in college and continues to work in the office as of when she took the witness stand.

Prosecutors argued the daughter was hired as other part-time employees saw a reduction in work during the pandemic. They argued she was given other special privileges in a way that violates the state's conflict-of-interest laws.

Wood presented emails to argue that her daughter did in fact work for her pay. He argued that some other part-time employees were treated similarly and that prosecutors didn't interview enough part-time employees to make a valid comparison.

Her daughter's employment was the root of the felony theft charge as the two shared a bank account the daughter started when she was a child.  She was found not guilty of that charge.

Outside court, McGuiness said it was "difficult" seeing her daughter on the stand. Her daughter attended trial most days following her testimony.

"But she is very strong," McGuiness said. "I love her work ethic. I'm proud of her poise and how she handled herself."

Much of the trial was spent by Wood hammering prosecutors for misunderstanding and making false statements about foundational documents at the center of the structuring charge when they indicted McGuiness last year.

Trial testimony showed that two payments in September 2020 totaling $11,250 to political and issues consultant Christie Gross, who had a contract with the auditor's office, were done in a way that did not follow the exact process outlined in the state's budget and accounting manual.

Prosecutors did not allege that Gross should not have been paid or that she was not hired illegally, but took issue with the process of routing the payments to her. Prosecutors showed emails they said evidence McGuiness orchestrating the non-compliant payments. Wood introduced emails showing McGuiness asking finance employees in her office what to do.

He also presented evidence showing similar missteps involving significantly more money in other state agencies that were corrected with waivers filed after the fact.

RECENT: An embarrassing day for the prosecution in McGuiness' criminal trial

Waivers were not filed to rectify Gross' payments, but the employee responsible for that had quit around that time and another testified she incorrectly budgeted the second by mistake and without orders from McGuiness, according to trial testimony.

Leading up to trial, prosecutors made multiple conflicting statements about what the auditor did and why they think it is a crime related to the structuring charge. In closing arguments, prosecutors argued that the waivers didn't get filed because McGuiness wanted to conceal the contract from authorities that sign off on such waivers.

When asked what she would have done differently, McGuiness replied: "I would have ensured some people kept better paperwork."

McGuiness was also found guilty of official misconduct, a misdemeanor that goes along with the guilty verdicts for conflict of interest and structuring.

Much of the trial also focused on former employees testifying about an office that was rife with tension and division, the foundation of the witness intimidation felony that the jury felt McGuiness was not guilty of.

Prosecutors presented documents showing McGuiness being granted authority to monitor some employee emails. Former employees spoke about being made to chant "confidentiality" as the office's motto at the start of staff meetings.

Some who were working while feeding information to investigators felt they were subjected to unfair reprimands.

Prosecutors contended this was felony witness intimidation, a charge that required McGuiness to both know she was under investigation and take malicious actions aimed at dissuading witnesses' participation in such an investigation.

Wood argued McGuiness didn't know she was under investigation until she was subpoenaed by state investigators shortly before her indictment, that the email snooping could not be considered intimidating because the employees didn't know about it and that reprimands handed down were for legitimate reasons.

After the verdict, Wood criticized Judge Carpenter for allowing the jury to hear references that Wood referred to as "unindicted misconduct," which he said wasn't specifically relevant to the criminal charges.

That could include testimony about her issuing an order for another employee to delete text messages and snapping at an employee for her charging some $60 to a state credit card for satellite radio.

"There is no question that evidence likely affected the jury's verdict," Wood said.

He said this will be one of the basis for future litigation in the case.

Addressing her office's culture, McGuiness referenced the fact that her predecessor held office for decades and that changes that came with her management were "difficult" for some as she tried to make her office better known and more relevant to Delawareans.

When asked whether her conviction will hurt that effort, she said: "I think more people will know Delaware has a state auditor."

Reporters Meredith Newman and Ben Mace contributed to this report.

Contact Xerxes Wilson at (302) 324-2787 or xwilson@delawareonline.com. Follow @Ber_Xerxes on Twitter.

Delaware State Auditor Kathy McGuiness looks at her attorney Steve Wood after a jury returned guilty verdicts against McGuiness Friday, July 1, 2022, at the Kent County Courthouse.
Delaware State Auditor Kathy McGuiness looks at her attorney Steve Wood after a jury returned guilty verdicts against McGuiness Friday, July 1, 2022, at the Kent County Courthouse.

This article originally appeared on Delaware News Journal: Jury returns verdicts in Kathy McGuiness criminal corruption case