EFiled: May 31 2022 09:56PM EDT

Transaction ID 67677194
Case No. K22C-05-030 RLG
IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

KATHLEEN DAVIES, :
:
: Case No.
Plaintiff, :
:
v. :
:
OFFICE OF THE AUDITOR OF :
ACCOUNTS FOR THE STATE OF :
DELAWARE :
Defendant. :
:
:
:

COMPLAINT

Plaintiff, Kathleen Davies (“Plaintiff”), by and through her undersigned

counsel, files this Complaint against The Office of The Auditor of Accounts

(“OAOA”) for the State of Delaware (“Defendant”) and hereby alleges, upon

knowledge with respect to her own acts and upon information and belief as to all

other matters, as follows:

PRELIMINARY STATEMENT

Defendant’s elected chief executive, Kathleen McGuiness, is currently the

indicted Auditor of Accounts for the State of Delaware. Plaintiff, Kathleen

Davies, was her Chief Administrative Auditor. Plaintiff held this title in name

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only and was essentially stripped of all job duties when she raised concerns about

conduct she observed while working for the Defendant. While employed for

Defendant, Plaintiff noticed that the OAOA was engaged in a scheme to flout

state procurement law in the award of contracts. Plaintiff surmised that the

Defendant cast aside well-established policies and procedures of the OAOA and

under Delaware’s state procurement law, circumventing safeguards to prevent

enrichment of the personal contacts of elected officials.

When the Plaintiff refused to participate or otherwise approve improper and

unlawful policies and procedures for conducting audits, reported the deviations from

the law and proper policy to OAOA internally, or questioned the Auditor of

Account’s conduct and actions she was isolated, bullied, intimidated, disciplined,

and ultimately retaliated against. When Plaintiff sought to retain documents and

information regarding Defendant’s retaliatory behavior, demands to approve or

develop unlawful and improper policies, and other materials related to efforts to

circumvent the law respecting contract procurement, she was reprimanded, forced

out of her job due to a campaign of abuse and the resulting psychological trauma,

and ultimately improperly and unlawfully terminated. The Plaintiff has been under

the care of a medical professional related to symptoms caused by this treatment

and has lost wages and employment opportunities related as a result of the

unlawful termination.

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 JURISDICTIONAL
STATEMENT

The exercise of Jurisdiction in this matter is appropriate in this case pursuant

to 10 Del. C. § 3103, and 19 Del. C. § 1704.

THE PARTIES

1. Kathleen Davies (“Plaintiff”) is a resident of Kent County, Delaware

and former Chief Administrative Auditor for the Office of the Auditor of Accounts

of the State of Delaware.

2. The Office of the Auditor of Accounts for the State of Delaware

(“Defendant” or “OAOA”) is a State of Delaware agency, currently headed by

Kathleen McGuiness (“Auditor of Accounts” or “Auditor McGuiness”), the current

Auditor of Accounts for the State of Delaware, who is being prosecuted for

corruption by the Delaware Department of Justice. Other then-employees of the

Defendant involved in the actions serving as an underlying basis for this complaint

are Spiros Mantzavinos, former Chief of Staff to the State Auditor (“Chief of Staff”),

and Elizabeth Vasilikos, the former First Deputy State Auditor (“First Deputy”).

3. Plaintiff was hired as Chief Administrative Auditor for the Office of the

Auditor in 2010.

4. Defendant was elected to be the State Auditor of Accounts in

November 2018.

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 FACTUAL BACKGROUND

5. Shortly after the Auditor of Account’s election, the Plaintiff noticed

irregularities in the execution and administration of OAOA functions. For example,

the Plaintiff noticed that the State Auditor deviated from well- established Auditor’s

office and State of Delaware policies related to the awarding of contracts for

services to the Auditor’s office. In particular, the OAOA was contracting with

various CPA firms with the express intent of fragmenting the contracted services to

avoid the public procurement process for public contracts. Further, the work

assignments repeated work already assigned or completed by Defendant’s employees.

The Plaintiff first became aware of the Auditor of Account’s efforts to fragment

contracts in a conversation with the First Deputy Auditor. Plaintiff had objected to

and refused to approve new policies and a new auditing manual which contained

material that was not consistent with the relevant auditing standards and that would

flout the proper functioning of audits at the office. Plaintiff raised a concern that she

did not have all information needed to assess the policies, and the First Deputy

Responded that she would not provide information related to the entities or

individuals to receive contracts to conduct the audits because the Office of the

Auditor was attempting to fragment contracts to keep the total amount of those

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contracts under a certain threshold.

6. During the spring of 2019, the State Auditor contracted for hotel facilities

located five blocks away from Defendant’s Offices to hold multi- day training events

exclusively for the Auditor’s Office when there was an adequately sized training

room that had been used regularly during the same period for staff training.

Furthermore, the State Auditor disregarded the Budget and Accounting Manual’s

prohibitions with respect to food and drinks, and snacks for the multi-day event. The

amount of food and drinks purchased were well in excess of what was required for

the session and the excess was used to supply the break room with snacks and drinks.

7. Additionally, in May of 2019 the Auditor McGuiness attempted to

demand that work be performed without regard for the professional code of conduct

or standards relevant to the audit assignments, attempted to force Plaintiff to approve

and provide “sign off” on improper policies and standards, and continuously

intervened in an effort to override the application of these professional standards.

Further, Auditor McGuines attempted to force the Plaintiff to sign-off on incomplete

and non-compliant work. These repeated demands to approve the incorrect and

improper policies, coupled with the above-mentioned discussion with the First

Deputy Auditor, prompted the Plaintiff to request the Whistleblower and

Workplace Violence reporting contact for the State of Delaware from then Chief of

Staff Mantzavinos. The Chief of Staff ultimately failed to take any action to address

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Plaintiff’s efforts to report unlawful activity and facilitated or assisted in carrying

out the campaign of harassment against Plaintiff.

8. After requesting the noted reporting contacts, the abusive conduct

perpetuated by the Auditor of Accounts intensified. Auditor McGuiness continued

to retaliate against Plaintiff and repeatedly refused to follow Delaware State Merit

rules and State of Delaware Human Resources policies and procedures. These actions

included but were not limited to refusing to file Plaintiff’s workers’ compensation

claim, failing to provide Plaintiff with her pension service record upon separation,

and refusing to allow the Plaintiff the same training and certification

accommodations provided to other staff in the Office.

9. In one instance, the Auditor McGuiness interfered with the Plaintiff’s

professional certification by moving the payment for licensure renewal from the

Plaintiff to another staff member in an effort to cause irrevocable harm to the

Plaintiff’s professional credentials. Plaintiff ultimately had to take action on her own

to remedy this, and was given no notice or information about the Auditor of

Account’s decision to interfere with her certification.

10. Further, the Auditor of Accounts and the Chief of Staff would regularly

engage staff in playing games of corn hole toss directly in the center of the work

areas at various hours throughout the workday outside of time allotted to said

employees for regularly scheduled breaks and lunch periods. Plaintiff refrained from

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objecting to this conduct for fear of additional retaliation but refused to participate

in behavior that amounted to a waste of taxpayer dollars during working hours.

11. Whenever Plaintiff raised concerns in compliance with the OAOA’s

own policy and procedures regarding the noted irregularities, unlawful behavior

regarding procurement law, and improper content within the policies being foisted

upon Plaintiff, which were in fact violations of state law and office policy, she was

either admonished and berated directly by the Auditor of Accounts, the Chief of Staff,

or the First Deputy, and ultimately subjected to further retaliation.

12. In February 2019, Plaintiff began treatment with a medical professional

to address stress and anxiety caused by the treatment of Plaintiff at work. Once

Defendant began to receive reports from Plaintiff regarding various illegal behavior

or deviations from policy and after Plaintiff’s refusal to cooperate in Defendant’s

unlawful and illegal demands, Defendant’s mistreatment of Plaintiff and acts of

abuse, adverse employment actions, and ultimately retaliation intensified. Beginning

on or around September 2019, Plaintiff was taken out of work by order of her treating

physician on short term disability because of Defendant’s, and in particular Auditor

McGuiness and her managerial employees’ abusive actions, which include but are

not limited to the following specific types of conduct, noted herein by way of specific

examples:

A. Denying Plaintiff access to a computer or a state e-mail address and

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 placing plaintiff in a small office without windows, isolated from other

staff.

B. Removing all job functions from Plaintiff and relegating her solely to

reviewing hard copies of materials related to the review of old office

policies, writing manuals that were simultaneously contracted out to

CPA firms, and working on a training program without any intent to

utilize the training. Essentially, Plaintiff was tasked with busy work

unrelated to her actual job duties.

C. Ignoring Plaintiff’s request for additional work assignments.

D. Demanding that the Plaintiff sign an auditing policy for sue within the

OAOA that was developed by an outside CPA Firm, for a CPA firm,

without Plaintiff being able to confirm that the policies were compliant

with state law, policies, and the appropriate auditing standards. Plaintiff

refused to sign this policy, consistent with her prior refusal to participate

in unlawful or improper activity.

E. Instructing the Plaintiff that everything in the OAOA’s offices was

considered Confidential and that nothing that occurred in the Office was

to be discussed outside the OAOA, including Plaintiff’s concerns about

illegal conduct. When Plaintiff referenced reporting conduct or

providing copies of documentation to private legal counsel, she was

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 advised that such behavior amounted to insubordination and would

result in disciplinary action.

F. Admonishing and berating Plaintiff for utilizing the only printer

available in the office and forbidding Plaintiff from contacting IT

support despite contrasting directives contained in OAOA and State

policy.

G. Entering Plaintiff’s office on multiple occasions per week for the sole

purpose of screaming, yelling, and hurling verbal abuse at plaintiff,

screaming at plaintiff within inches of Plaintiff’s person such that the

Auditor of Account’s breath struck Plaintiff’s face and in such a manner

that caused Plaintiff to fear physical injury or assault.

H. Disciplining Plaintiff for advising Auditor McGuinness that she wished

to confer with legal counsel or inform legal counsel of actions and

behaviors occurring at the Auditor’s Offices.

I. Barring Plaintiff from having interactions with all other employees

throughout the day aside from the occasions wherein Plaintiff was

conferring with HR about discipline or related issues or being berated

and verbally assaulted by Defendant.

J. Issuing Plaintiff a termination letter and proceeding to terminate

Plaintiff from her job effective April 10, 2020, including for allegedly

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 violating a nonexistent policy regarding Plaintiff sending evidence of

Defendant’s illegal activity and retaliation to her personal e-mail

address, despite the fact that Auditor McGuiness and Defendants agents

had sent Plaintiff various communications related to work to her

personal e- mail address. Plaintiff had sent these e-mails to her personal

e-mail address for the purpose of preventing spoliation of evidence and

in order to further report Defendant’s unlawful conduct. Defendant’s

act in issuing an illegal ex post facto terminating Plaintiff for the illusory

policy was motivated by a desire to prevent Plaintiff from reporting

Defendant’s illegal conduct to any and all public bodies, and for the

purpose of destroying Plaintiff’s credibility.

13. The State Auditor, First Deputy, and Chief of Staff regularly utilized

their personal emails in addition to their State emails for communication and

corresponded with the Plaintiff on her personal email account.

14. Plaintiff’s work assignments were stripped away from her, and she was

often given assignments with impossible deadlines, or opaque instructions to develop

a pretextual basis to reprimand or terminate her. Further, in June of 2019 the Auditor

of Accounts prevented Plaintiff from having access to her State of Delaware e-mail

account.

15. The Plaintiff was subsequently subjected to official discipline on the

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basis that she allegedly failed to disclose that she had retained an employment lawyer

to assist her with the improper punishment that she was being subjected to.

16. Plaintiff filed multiple grievances regarding the retaliatory and

improper discipline imposed upon her, and advised that the constant coercion,

bullying, harassment and intimidation, in part due to her efforts to follow appropriate

policy and law, was causing her to have to work in fear of termination on a daily

basis.

17. Upon information and belief, the purpose of this discipline and Auditor

McGuiness’s abusive behavior towards Plaintiff was to punish the Plaintiff for

questioning the abnormal and unlawful behavior exhibited by the Defendant and to

prevent Plaintiff from sharing witnessed irregularities with the public. Plaintiff was

continually subjected to verbal bullying, persistent written reprimands, and

intimidation tactics either directly by the Auditor of Accounts, or by First Deputy

and/or Chief of Staff, to include restricting her internet access, attempting to

discontinue her membership to valuable professional associations, suspension from

the office for sending documents to her personal email, and ultimately termination

for sending the emails in question.

18. Plaintiff was often reprimanded in front of subordinates, which further

undermined her authority in OAOA and made it difficult for her to perform her job

duties.

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 19. As noted above, in the fall of 2019 Plaintiff was removed from work by

her physician due to symptoms that she was suffering as a direct result of the work

conditions that she was being subjected to. Plaintiff’s Short-Term Disability (“STD”)

initially expired on December 17, 2019, but Plaintiff had leave time to use after the

STD expired.

20. Plaintiff ultimately was able to extend her STD, but prior to the

extension the Auditor of Accounts sought to withhold her pay, and terminate her

based on absenteeism, as opposed to applying Plaintiff’s sick leave and annual leave

until she was able to return to work or exhausted her STD, at which point a state

employee administratively separates from State employment by operation of state

law.

21. On March 10, 2020, the Plaintiff’s STD ended, and per the State of

Delaware’s policy the Plaintiff administratively separated from State employment.

In a letter dated March 12, 2020, and hand-delivered to the Plaintiff’s home, the

Defendant proposed termination for communicating unspecified confidential and

protected information to an unspecified third party, among other reasons. This basis

constitutes tacit admission on behalf of the OAOA that Plaintiff was terminated for

attempting to report violations of the law to third parties. Despite the Plaintiff’s

response and objections to the termination during a pre-deprivation hearing, the

Defendant informed the Plaintiff that the Auditor of Accounts was changing Plaintiff

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state employment record to reflect a disciplinary termination, effective April 10,

2020. This illegal ex post facto termination was an additional act of retaliation taken

against Plaintiff, and the basis proffered by Defendant for the unlawful ex post facto

termination are pretextual and without basis in law or in fact.

COUNT I – BREACH OF IMPLIED

COVENANT OF GOOD FAITH AND FAIR DEALING

22. Preceding paragraphs are hereby incorporated by reference, as if set

forth herein in full.

23. Defendant’s and Defendant’s managerial employees’ (managerial

employees in this count include the Auditor of Accounts, Deputy Auditor, and Chief

of Staff) conduct of intentionally providing Plaintiff with work assignments that

were destined to fail, or allowed insufficient time to complete serves as an example

of attempts to manufacture reasons to terminate the Plaintiff.

24. Defendant’s and Defendant’s managerial employees’ actions related to

alleging that Plaintiff violated an unknown, nonexistent, and unenforced policy

against utilizing personal e- mail accounts, despite agents of the Defendant using

personal email accounts for official OAOA purposes, amounts to the manufacture

and fabrication of negative information about the Plaintiff to serve as pretext to

terminate Plaintiff.

25. Defendant’s managerial employees’ conduct surrounding the

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misapplication of State and Defendant’s own policies on Worker’s Compensation

and Short-Term Disability evince attempts by the Defendant to create negative

information about Plaintiff and discredit Plaintiff in an effort to provide a pretextual

basis to terminate the Plaintiff from her employment.

26. Defendant’s managerial employees manufactured false information,

generated, and documented false negative information about the Plaintiff and sought

to discredit Plaintiff as outlined above in retaliation for Plaintiff challenging illegal

activity engaged in by the Defendant, and as a means to discredit and silence the

Plaintiff for speaking up. This is illegal conduct is consistent with intentional

misrepresentations with the intent to injure that provide for liability for breaching

the implied covenant of good faith and fair dealing delineated in E.I. DuPont de

Nemours & Co. v. Pressman, 679 A.2d 436, 444 (Del. 1996).

27. Defendant is liable for the harm caused to Plaintiff due to her improper

and unlawful termination. Defendant placed materially false information in

Plaintiff’s employment file related to Defendant’s unlawful and groundless

termination of Plaintiff, which has obstructed Plaintiff’s effort to secure further

employment in her primary field of expertise, that of public sector auditing.

COUNT II – VIOLATION OF DELAWARE

WHISTLEBLOWER PROTECTION ACT 19 DEL. C. § 1703

28. Plaintiff hereby incorporates the allegations of all prior paragraphs as if

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set forth herein in full.

29. On or about May 2019 Plaintiff advised Defendant, in particular the

State Auditor, the Deputy Audit, and the Chief of Staff, that she believed that

Defendant’s attempts to implement unlawful and inadequate auditing policies would

violate various professional standards and protections designed to ensure proper

financial controls and auditing, and that she would not sign off on policies designed

to facilitate the fragmentation of contracts so that Defendant could circumvent the

requirements of state of Delaware procurement law. Implementing or changing

auditing policies that would prevent proper audits and attempting to engage in

fragmentation of public contracts both constitute violations as defined by the

Delaware Whistle Blower Protection Act, Delaware Code Title 19, Chapter 17.

30. 29 Del. C. § 6903(a) provides that “[a]ny person, who, with intent to

avoid compliance with this chapter, willfully fragments or subdivides any contract

for the purchase of materiel, nonprofessional services, public works or professional

services, shall be subject to the penalties listed in this section.” The state procurement

law, as referenced, is designed to prevent misappropriation of public funds.

Defendant’s effort to modify policies to effectuate circumvention of public

procurement law is a plain effort by Defendant to misappropriate, in derogation of

the law, monies within Defendant’s control, as each state department is provided the

authority to issue contracts for services under certain thresholds without putting said

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contracts out for public bid.

31. Plaintiff questioned the Defendant about deviating from policies and

laws related to appointing contracts to public entities, refused to facilitate or

participate in said violations and deviations, and reported a n d a t t e m p t e d t o

report violations as defined by 19 Del. C. § 1702(6)(b). Plaintiff made internal

reports regarding such violations and refused to participate in conduct believed to be

in furtherance of said violations. Plaintiff also indicated to Defendant on various

occasions that she intended to report violations to public bodies; in other words,

Plaintiff plainly advised Defendant that she intended to “blow the whistle.” By

information and belief, Defendant was unlawfully monitoring Plaintiff’s state e-mail,

and when Plaintiff e-mailed documentation to herself Defendant retaliated against

Plaintiff in an effort to stymie and obstruct efforts by Plaintiff to report Defendant’s

violations.

32. The violations committed by Defendant, namely, improperly using state

resources for Defendant’s own benefit, implementing improper or out of standard

auditing policies and attempting to compel Plaintiff to approve them, and fragmenting

contracts in derogation of public procurement law, constitute conduct by Defendant,

including the Auditor of Accounts, Deputy Auditor, and Chief of Staff that is

materially inconsistent with, and a serious deviation from, financial management or

accounting standards implemented pursuant to a rule or regulation promulgated by

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the Defendant or a law, rule, or regulation promulgated under the laws of this State,

a political subdivision of this State, or the United States, to protect persons from

fraud, deceit, or misappropriation of public or private funds or assets under the

control of the Defendant.

33. Plaintiff was reprimanded, disciplined, subject to severe and traumatic

abuse that placed her in fear of being physically attacked, and ultimately discharged

for reporting and questioning deviations from policy and the law and violations as

defined supra, refusing to participate in violations, and taking action which indicated

that she intended to report violations to various public bodies. In sum, Defendant,

via the Auditor of Accounts and other agents or managerial employees of Defendant

threatened, discharged, and otherwise discriminated against Plaintiff, who was an

employee of Defendant at all times relevant to the conduct described herein, for

engaging in protected activity as defined by 19 Del. C. § 1703.

34. Auditor McGuiness is now subject to indictment and investigation for

criminal corruption as a result of engaging in activity related to the very concerns

raised by Plaintiff.

35. Plaintiff emailed herself documentary evidence of Defendant’s conduct.

36. Defendant, via the Auditor of Accounts and other agents and

managerial employees of Defendant, engaged in a campaign of abuse and retaliation

against Plaintiff, and ultimately improperly processed an ex post facto termination

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of Plaintiff, by Defendant’s own tacit admission, for the purpose of punishing

Plaintiff for engaging in protected activity under the Delaware Whistle Blower

Protection Act, and to prevent her from sharing Defendant’s conduct with the public

or any public bodies. Plaintiff has attempted to gain employment at various state of

Delaware agencies since Defendant placed materially false, fabricated, and unlawful

material in Plaintiff’s personnel file, which has prevented Plaintiff from gaining

employment at various jobs well within Plaintiff’s training and extensive

capabilities. Defendant’s misconduct has directly obstructed Plaintiff from securing

employment in Plaintiff’s field of expertise, that of public auditing.

37. Plaintiff has suffered physical, emotional, and financial harm as a direct

and proximate result of Defendant’s conduct.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff Kathleen Davies respectfully requests that the

Court enter an order:

A. Declaring that Defendant has violated the Delaware Whistleblower

Protection Act;

B. Finding that Defendant has intentionally breached the implied

covenant of good faith and fair dealing;

C. Finding that Defendant engaged in conduct that has destroyed

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Plaintiff’s professional credibility and prevented her from securing

employment within her field;

D. Ordering Defendant to compensate Plaintiff through reinstatement to

her prior position, the payment of back wages, full reinstatement of fringe benefits

and seniority rights, expungement of records relating to the disciplinary action, and

actual damages, in an amount to be determined at trial;

E. Ordering Defendant to compensate Plaintiff for all attorney’s fees and

costs incurred in pursuing this action; and,

F. Any other relief that the Court may deem just and necessary.

OFFIT KURMAN, P.A.

/s/ Anthony N. Delcollo

Anthony N. Delcollo, Esquire (DE 5688)
Thomas H. Kramer, Esquire (DE 6171
Christopher J. Isaac, Esquire (DE 6291)
222 Delaware Avenue, Suite 1105
Wilmington, DE 19801
(302) 351-0903 – Telephone
(302) 351-0915 - Telephone
(302) 351-0911 – Telephone
adelcollo@offitkurman.com
Thomas.Kramer@offitkurman.com
christophet.Isaac@offitkurman.com

Dated: May 31, 2022

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