Delaware is investigating UI trust fund vulnerabilities for possibility of more thefts by state employees

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Delaware’s Auditor of Accounts has an open investigation into the 2023 theft of more than $181,000 from the unemployment insurance trust fund by a former state employee, Gov. John Carney recently told WHYY News.

Officials have struggled to address questions raised by the exclusive reporting, such as why the state did not reveal the embezzlement publicly until Delaware Department of Labor (DOL) officials were contacted last month by WHYY News.

Former unemployment insurance administrator Michael Brittingham created a fraudulent tax account that listed his company NEWAGE Management LLC as the employer. He had his assistant cut two checks to his LLC in January and March 2023. Brittingham took his own life in April 2023 after the theft came to light and he was placed under investigation. The money has yet to be recovered.

Delaware employers pay into the trust fund, which pays out jobless benefits. Former state Auditor Tom Wagner, who held the position for about 30 years, said current state Auditor Lydia York’s investigators are likely looking into the real possibility that this kind of embezzlement of the UI trust fund could happen again.

“That’s a big pool of money. And to me, it’s very vulnerable money because if you don’t have the controls in place and you work there, you’re gonna know if the controls are good or not,” Wagner said.”If you don’t get greedy, you can steal $50,000 to $80,000 a year and nobody’s going to notice.”

Laura Henderson, who works in the UI Office and gave a witness statement to the Delaware State Police about the embezzlement, said she agrees there is a possibility that money could be stolen again by a state employee.

“The controls are not in place to prevent it from happening again,” she said.

York’s office has said it’s against its policy to comment on the existence of an investigation. Her spokesperson said any evidence of a crime is turned over to the Delaware Department of Justice.

A special report released by her office in March said her inquiry began on Jan. 9. The report called the fund “unauditable” because independent auditors could not prove how much money was actually in the state’s UI trust fund for fiscal year 2023. York’s report came after accounting firm CliftonLarsonAllen issued a “disclaimer of opinions,” meaning it couldn’t rely on the state’s documentation to confirm bank statements that there was about $390 million in the reserve. The report failed to disclose the theft of taxpayer funds. An audit of federal assistance programs released Friday also noted significant internal control issues with the trust fund, but similarly failed to mention any theft of public dollars.

The accounting issues and employee embezzlement are both separate and connected, said state officials. But the lack of robust internal controls over the trust fund is a top issue cited in recent AOA reports on the unemployment insurance trust fund.

Some state lawmakers and open government advocates say the state should have made the theft of taxpayer money public sooner.

“I’m really disappointed that the public and us as members of the General Assembly had no idea about this until the news article came out,” said Republican state Sen. Brian Pettyjohn. “We knew from [Auditor of Accounts Lydia] York’s report there were serious problems in terms of the auditability of the fund. But to know there were more problems, including theft of funds from the unemployment fund, which is a fund paid for by our businesses that have employees in the state, it’s really disturbing.”

Carney said the state did not make the 2023 embezzlement public before being contacted by WHYY News last month because it was a police matter. Delaware State Police Sgt. Evan Holmes, who conducted last year’s investigation, retired from the agency in September 2023 and started working for the Delaware Department of Justice in February. A spokesperson with DOL confirmed the police investigation is closed.

Brittingham, who began working for DOL in February 2019, pleaded guilty in September 2019 to a Class G felony for the theft of $1,500 or more for stealing over $42,000 from his homeowners association. He was serving out a suspended sentence and probation as he was being promoted within the UI Office.

The governor said Brittigham was able to steal the money because the office was overwhelmed due to the coronavirus pandemic. To blame “robust internal controls” over the fund, Carney explained, conflates the issue.

“During the pandemic, we had this incredible surge of people trying to get unemployment benefits, most of whom were eligible for that payment,” he said. “There were tricksters who wanted to get in there and get, without the right reason, the payments from the state. And so the audit of all that is ongoing.”

According to the auditor’s special report, the office is not looking into people who may have put false or misleading information on their applications for jobless claims to get money from the trust fund. The auditor’s office does not investigate crime.

Wagner said the trust fund has lacked sufficient internal controls for more than a decade, adding there was only so much his office could do to try to get agencies to make changes.

“Embarrass the agency,” he said. “I mean, the only real power the auditor has from a purely auditing perspective, not doing the criminal side of a lot of things, but just a pure audit is you just continue to write somebody up and count on the press to get it out there.”

Henderson said while the pandemic made it easier for Brittigham to take money from the fund, other factors also contributed, including lack of oversight. She said the UI office could take some concrete steps to help prevent this situation from happening again.

“If you had a primary person who had authority to make decisions on large payments, to approve large payments, that would be a good one,” she said. “Number two would be that when rules are about to be broken and someone alerts you to it, don’t say, ‘Hey, just do it.’ You have to change the system that allows people to authorize people to break the rules. I think that’s the biggest one.”

The agency is currently working to modernize its outdated systems.