AG Kathy Jennings seeks to dismiss defamation suit by former state Auditor Kathy McGuiness

Though the recent ruling by the Delaware Supreme Court could mark the final chapter in the criminal case against former state Auditor Kathy McGuiness, the 'Kathy-v-Kathy' saga will continue to some extent in civil court.

On Tuesday, the state's high court upheld McGuiness' conflict of interest criminal conviction and overturned her other misdemeanor conviction, giving prosecutors the choice to try that charge in front of a new jury or drop it.

Whatever prosecutors decide, a separate court is now set to evaluate Attorney General Kathy Jennings' effort to have a judge toss the civil defamation case filed by McGuiness against the attorney general as well as prosecutors and an investigator responsible for the criminal case.

Additionally, Christie Gross, a consultant that prosecutors made central to one aspect of their case against McGuiness, has joined as a plaintiff seeking defamation damages against the Department of Justice officials.

Original lawsuit: Former state auditor sues Delaware attorney general for defamation tied to criminal case

McGuiness' lawsuit against prosecutors was originally filed in federal court in August and claims that Jennings unfairly prosecuted and defamed McGuiness, who was convicted of misdemeanors tied to her work as auditor and lost her reelection bid in 2022.

The prosecution centered around allegations that McGuiness gave her child a do-little job in the office, criminally intimidated her employees and rigged payments for a state contract to avoid oversight. She was convicted of crimes associated with hiring her daughter and the state-contract payments, but the presiding judge tossed the conviction tied to the contract payments shortly after trial. She was sentenced to probation and lost her reelection bid.

Editor's Note: Read the most recent complaint and state's motion to dismiss at the end of this story.

Consultant claims defamation

Since the lawsuit was first filed, Christie Gross joined in on the defamation claims against Jennings.

Gross’ role in the McGuiness case was center to a criminal charge prosecutors referred to as "structuring." Essentially,  prosecutors accused McGuiness of using the purse and power of her office to promote her own political brand and taking steps to hide that spending from state regulators.

They claim she hired Gross’ consultancy firm and then fragmented payments in that contract to avoid scrutiny from state regulators.

The crime got top billing in Jennings' statements to the press announcing the charges, a press conference that is now foundational to the defamation claims. Jennings went into the background of how Gross and her firm, My Campaign Group, first worked with McGuiness during her failed 2016 campaign for lieutenant governor.

Editor's Note: A video of the press conference can be seen at the top of this story.

Jennings said once McGuiness assumed the role of state auditor in 2019, she went back to Gross and "informed her of a loophole that would allow them to avoid the competitive bidding process" by structuring a contract with the Auditor's Office under the $50,000 threshold over which state contracts must be competitively bid.

She called it a “sweetheart deal” and claimed McGuiness fragmented payments to stay below a threshold that would have triggered additional review by officials in the state’s Division of Accounting. The criminal charges centered on multiple payments that prosecutors claimed were fragmented in such a way.

Eventually, prosecutors conceded that all but one of those payments had been approved by regulators and at trial centered the charge on the fact the payments were split between funding sources and were not accompanied by certain accounting forms. The defense noted that the absence of such forms is common in state government and never results in criminal charges against other state bureaucrats.

Previously: State auditor has two criminal guilty verdicts upheld, one tossed ahead of election

The jury found her guilty of the charge, but presiding Judge William C. Carpenter, now retired, tossed the conviction. He said there was no evidence of intentional manipulation to avoid accounting reviews and described the situation as a “comedy of errors and not criminal conduct.”

Gross’ claims of defamation track closely with McGuiness.

They say that the structuring charge was based on information prosecutors knew to be false. The lawsuit claims that Jennings’ statements at the press conference implied that Gross and McGuiness knowingly entered into an unethical contracting agreement. It also claims that Jennings’ unfairly described Gross as a “campaign” consultant when her work also includes communication and public policy expertise.

It claims these false statements have caused Gross and her firm to suffer “severe monetary damages.”

State seeks to dismiss suit

Earlier this month, an attorney representing Jennings and the other defendants filed motions seeking to McGuiness’ lawsuit tossed.

“This is not a case about protecting and vindicating fundamental rights,” the brief states. “Instead, this case has been brought merely as revenge.”

The Appeal: The case before Delaware's Supreme Court over former Auditor Kathy McGuiness' conviction

The arguments for dismissal center on the fact that the jury found McGuiness guilty of some of the crimes relevant to her lawsuit, that prosecutors enjoy certain immunity from civil claims as part of their work and that certain defendants didn’t even speak at the press conference cited as defamatory by McGuiness.

Ron Poliquin, McGuiness' attorney, has not responded to the motion to dismiss in court filings. McGuiness declined comment when reached by text message.

Beyond the defamation claim, McGuiness is also claiming that her constitutional rights were violated by prosecutors inserting false information into a sworn search warrant affidavit at the outset of the case. In a written statement, Ron Poliquin said "we look forward to uncovering who was part of that team and helped draft the search warrant with the false facts - something denied by McGuiness during her criminal trial."

"This is yet another sad, desperate, and wasteful attempt by the ex-auditor to change the consequences of her actions," said Mat Marshall, a spokesperson for Jennings, in a written statement. "We’ve heard this tirade before. It was rejected and she was convicted by a jury of her peers. That she continues to proclaim her innocence is not news.”

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

McGuiness updated complaint by Xerxes Wilson on Scribd

McGuiness Motion by Xerxes Wilson on Scribd

This article originally appeared on Delaware News Journal: Jennings seeks to dismiss defamation suit by former auditor McGuiness