Delaware promises full report to General Assembly in July on unemployment insurance fraud

Delaware department heads in letters to the General Assembly this week defended their actions surrounding the theft of more than $181,000 from the state’s unemployment insurance fund, promising lawmakers a full report on the problems in July after the legislative session ends.

A joint letter penned by Delaware Department of Labor Secretary Karryl Hubbard and Finance Secretary Rick Geisenberger on Tuesday, June 4, pledged to provide a “full accounting of findings and actions to date,” along with a recommended path forward for lawmakers to review in July.

A separate letter sent the same day to legislators by Auditor of Accounts Lydia York also outlined steps her office took regarding the problems within the Division of Unemployment Insurance.

Both letters blamed recent media reports for causing confusion and a “misunderstanding” around the theft of state money, despite the offices being asked detailed questions by reporters that were never answered directly.

“This reporting has unfortunately caused some misunderstandings amongst the Delaware public,” York wrote in the June 4 letter. “While our office normally would not comment on any open investigation, in this extraordinary circumstance I felt it was appropriate to provide the legislature with an update.”

SCANT DETAILS: Delaware offers little explanation for why embezzlement issues never publicly disclosed

The letters to the General Assembly come days after Delaware Online/The News Journal reported that an open government group was calling for a legislative investigation into why an embezzlement problem in the Labor Department’s Division of Unemployment Insurance wasn’t disclosed until news media began asking questions.

“It’s ludicrous to blame the news media for the misunderstanding. The responsibility for clearing that up is for them to do their job in the first place – report criminal activity to the governor, to the General Assembly,” said John Flaherty, a board member of the Delaware Coalition for Open Government. “There is a process in place, and they didn’t follow that even though the law is clear.”

The letters parallel a statement provided by Gov. John Carney’s office when Delaware Online/The News Journal asked questions about what his office was doing to address the matter, whether he was concerned about the lack of disclosure, and if creating an Inspector General’s Office could help address transparency issues.

“Our administration took this theft very seriously,” said Emily Hershman, a spokesperson for Carney. “The Delaware Department of Labor will be notifying the General Assembly this week that they will be providing a report in the coming weeks that outlines the timeline of events, communications, and attempts to recoup the money.”

The Labor Department later confirmed that former unemployment insurance administrator Michael Brittingham was found embezzling more than $181,000 from the state’s unemployment insurance trust fund last year. Shortly after an internal criminal investigation began in April 2023, Brittingham took his own life.

TRANSPARENCY: Why an open government group is calling on Delaware to investigate embezzlement problems

Hubbard and Geisenberger defended the actions taken by state officials, ensuring legislators that when theft from the unemployment insurance fund was discovered, Labor Department officials “immediately notified the Department of Human Resources and the Department of Safety and Homeland Security.”

They said the theft was also reported to the auditor, the Department of Finance, State Police, the Department of Justice, the federal Labor Department’s Office of Inspector General and legislators who serve on the Unemployment Insurance Advisory Council.

“Like in any other investigation involving state personnel and particularly alleged criminal conduct, it has been important to maintain an appropriate level of confidentiality to ensure a full and fair investigation, to provide time to put in place appropriate controls to try to prevent such actions from recurring, and to maximize the prospects of partial or full recovery of the amounts stolen,” the department heads wrote. “Many of these efforts remain underway and will for some time.”

What state officials are now saying

In the letter to lawmakers, Hubbard and Geisenberger say media reports have “conflated” the embezzlement issue with the extensive problems plaguing the division that were underscored in a March 2024 special auditor report.

York’s letter to lawmakers explains that the special report on the Delaware Unemployment Compensation Fund was in response to independent auditors issuing a “disclaimer of opinion” in last year’s comprehensive financial report because the unemployment division had “poor internal controls … that led to a lack of accounting records” needed to complete an audit.

“It is important to understand that the criminal activity described in recent media coverage did not contribute to the disclaimer of opinion on the (annual comprehensive financial report),” she wrote to lawmakers. “That disclaimer was solely related to accounting practices and internal controls within the Division of Unemployment.”

State officials in the letter say the theft was done by exploiting “gaps” in the division’s processes whereby a “temporary worker” was “manipulated” by Brittingham into stealing from the fund.

After Labor Department leaders notified the appropriate departments about the alleged theft, Hubbard and Geisenberger said the employee “suspected of the theft was placed on administrative leave and regrettably died later that same day.”

READ THE MARCH 2024 SPECIAL REPORT FROM STATE AUDITOR

The auditor’s office said they were informed about the embezzlement after Brittingham had died and “immediately began the process of determining whether this fraud was replicable, and if there had been further instances of it.

“Unfortunately, due to the incomplete state of accounting records at the Division of Unemployment, this investigatory work is not yet complete,” York said in her letter to legislators.

Officials across multiple Delaware departments have danced around this issue, seeking to speak “off the record” about what transpired, or avoiding questions seeking clarity on why, for months following the conclusion of the criminal investigation in August 2023, nothing was publicly reported about the theft.

Flaherty said the letters to lawmakers still fail to explain why the embezzlement wasn’t disclosed sooner, which is why the open government coalition continues to call for legislative oversight hearings.

“This is certainly a substantial violation of the public trust,” he said. “We are still calling for oversight investigations by the General Assembly to get to the bottom of this.”

What’s happening to address the problems?

While the Labor Department and state finance officials promise a full report in July for lawmakers to review, the auditor’s office has also provided reassurances that they, too, will provide a complete report.

State auditors are working with the Labor Department to construct last year’s accounting records.

“These records, which must be completed by Department of Labor and the Division of Accounting, are necessary not only to prevent disclaimers of opinion on future (comprehensive reports), but also for us to be able to continue our investigation into the theft,” York said in the letter. “Our ability to both audit the Unemployment Fund and continue our investigation for evidence of further fraud hinges on those records being complete, accurate, and auditable.”

York added that auditors are not leaving the division until their work is finished, and promised a “formal report” when the investigation ends.

“This work is paramount to keeping the State of Delaware transparent and accountable to our constituents,” she said. “It is my sincere hope that our audits and special reports can be resources to help guide your decisions as lawmakers.”

The Democratic legislative leaders who received the letters from department heads said the information contained within begins to answer “some of our questions about the facts of the case and the steps” taken by the various state agencies involved.

“The additional reporting required by Delaware Code, and promised by the auditor and the Department of Finance, are important next steps for public transparency and preserving the public’s trust,” the lawmakers said in a joint statement provided to Delaware Online/The News Journal. “The Legislature takes its oversight role seriously, and upon receiving the promised Department of Finance report, may consider calling a Joint Labor Committee hearing to review the findings and ask additional questions.”

The Republican Caucus in the House of Representatives sent a letter Thursday to Speaker Valerie Longhurst urging a bipartisan-sponsored resolution to empower an investigative committee to probe the apparent systemic issues in the Labor Department.

"Even a casual analysis of the known facts in these cases reveals a lack of proper financial oversight, disjointed accounting procedures, unconnected databases, a failure to follow internal protocols and take needed corrective actions, and employing in a sensitive state financial position a person accused of misappropriating money from other organizations," the Republican representatives wrote, outlining how the committee would operate. "It would be tasked with conducting hearings, soliciting testimony, subpoenaing records, and issuing a report suggesting corrective legislative measures (if deemed necessary)."

Read the letters sent to the General Assembly

Letter from Delaware Department of Labor and finance secretaries by Mandy on Scribd

Delaware Auditor of Accounts letter to General Assembly by Mandy on Scribd

This article originally appeared on Delaware News Journal: Delaware promises full report on unemployment insurance theft in July