Shake-up in Auditor's Office may not be last twist in prolonged drama

The chief lieutenant who was fired by state Auditor Tom Wagner last year reportedly will be returning to her former job in the coming days.

Her new boss will be the woman who beat her in September's three-way Democratic primary.

Kathleen Davies won an appeal of her termination in a closed hearing held last week, according to multiple sources. The ruling has not yet been made public but is expected to be released early next year.

Davies is not the only state auditor candidate named Kathleen who will be reporting for duty at the auditor's office this month.

Wagner on Tuesday announced he has appointed his successor state auditor-elect Kathy McGuiness as his deputy – a post now held by James Spadola, the Republican she defeated last month.

McGuiness will start her new job as deputy auditor Wednesday, a full month ahead of being sworn in as the new state auditor. 

The former Rehoboth Beach councilwoman said she was unaware her former opponent would be working under her when she accepted the short-term appointment.

"I'm not privy to that information," she said when asked about Davies' pending reinstatement.

The shake-up is the latest twist of a lengthy saga in the state auditor's office for more than two years.

Wagner, a Republican first elected state auditor nearly 30 years ago, placed Davies on paid leave in July 2016 and then fired her in December 2017. 

According to a report obtained by The News Journal last summer, the former chief administrative auditor was accused of taking control of the office during Wagner's extended leaves for medical treatment, signing documents in his name, accessing his email and creating a hostile work environment that divided employees and led some to quit their jobs.

Davies, who strenously denied the claims, filed to run for the state auditor seat in March – one month after Wagner announced he would not be seeking re-election, citing his battle with a serious kidney disease. 

She finished second in a three-way Democratic primary that also included McGuiness, then a Rehoboth Beach councilwoman, and Dennis E. Williams, a former state legislator.

On Nov. 30, the board sided with Davies and ordered the auditor's office to restore her employment, multiple sources confirmed. The board's decision has not yet been posted on the board's website.

Davies did not respond to emails and phone messages seeking comment. Wagner said he cannot comment until the appeal decision has been made public.

Spadola also declined to comment about Davies. But he claims it was his idea to replace him with the woman who beat him and Davies.

"Kathy [McGuiness] won fair and square and I think this makes sense for the office and the state," he said. 

Wagner released a statement through Spadola thanking his current deputy for the recommendation and his work since taking the $95,000-a-year job three weeks before the general election.

"In a short time and in a part-time capacity, James helped to get our social media accounts up and running, and continued outreach efforts to state employees," he said in the release. "By appointing Kathy, she is able to start implementing her vision now and hit the ground running before her swearing-in come January."

McGuiness said she is grateful for the appointment because it gives her the authority to begin making changes several weeks early.

"There is only so much I can do from the outside," she said. "This puts the taxpayers first and helps with the transition."

That transition also potentially could eliminate Davies' job.

"I've been working diligently since day one to take a look at reorganizing and restructuring the office," she said. "That process is not about any one individual. It's about what is working, what doesn't and what needs to change." 

While Wagner, McGuiness and Davies working side-by-side could make for some awkward encounters in the break room, the additional staff could be helpful to the office responsible for monitoring the financial transactions of all state agencies and school districts.

Only 14 of the independent agencies 27 full-time budgeted positions are currently filled, according to state officials.

Spadola, a former Newark police officer, said he plans to return to his position as director of partnerships for the Philadelphia-based nonprofit Coded By Kids. He said he plans to donate all of the pay he received while working at the auditor's office to Faithful Friends Animal Society.

Contact reporter Scott Goss at (302) 324-2281, sgoss@delawareonline.com or on Twitter @ScottGossDel.

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