Vermont League of Cities and Towns pays out $500,000 for Coventry insurance claim

Cynthia Diaz

Cynthia Diaz, the Coventry town clerk and treasurer, in her office at the Coventry Community Center. Photo by John Lazenby

COVENTRY–An insurer has confirmed that the town of Coventry is missing at least a half a million dollars.

The Vermont League of Cities and Towns agreed Tuesday to pay the Northeast Kingdom town nearly $500,000 for money local officials say is missing.

Cynthia Diaz, the Coventry town clerk and treasurer, has been accused by local officials of mishandling a total of $1.4 million in tax monies. Diaz continues to hold office despite federal and state investigations and suspicions that she has embezzled funds.

The payout is the highest amount the league could pay for the insurance claim related to allegations of embezzlement. The town’s policy capped out at $500,000.

Once the league pays the claim, the policy will be cancelled and Coventry can no longer protect public money Diaz handles. State law requires that town officials be insured.

If Diaz can’t obtain bonding for a new insurance policy she’ll be forced out, town officials say.

Coventry Selectboard Chairman Mike Marcotte said the town will require Diaz to seek a bond to obtain an insurance policy for the $2.5 million remaining in the town’s checking account. Marcotte and Selectman Scott Morley said they want to protect the money.
 
“That’s real money that is accessible,” Morley said, “and we want to make sure that it’s fully insured.”

Jenny Prosser, the director of municipal assistance and general counsel for the Vermont Secretary of State’s Office, said selectboards set the insurance amounts and it’s up to the clerk to find a bond of that value.

Once the town formally demands that Diaz find new insurance, she has 10 days to find a bond to pay for the policy, Marcotte said.
 
If she fails to do so, Prosser said, the town can declare her office vacant and force her out.

Attempts to reach Diaz on her cell phone Wednesday afternoon were unsuccessful. In previous interviews, the town clerk has denied any wrongdoing. Most recently she said the town’s insurance claim was tantamount to insurance fraud.
 
More than two years ago Coventry hired auditor Jeff Graham to reconstruct its poorly kept books. In late March Graham filed a report listing more than $1.4 million in unaccounted for town funds.

The town’s insurance claim with the Vermont League of Cities and Towns only included missing tax money, a sum of $876,383.
 
The FBI is conducting a probe of Diaz. So are investigators with the Vermont State Police.
 
Several years ago the Vermont Attorney General’s Office and Newport Police Department opened investigations into Diaz for embezzlement, though she was not convicted on the charges.
 
At one point, Diaz had an offshore bank account in the Bahamas and received tens of thousands of dollars in wire transfers from Panama.
 
Five auditors before Graham attempted to make sense of the town’s accounts, but because Diaz did not cooperate, they failed.
 
Graham and Morley witnessed Diaz removing financial documents from the town.
 
For these reasons and others, the selectboard has been trying to distance Diaz from town accounts for years, but state statute has prevented local officials from stripping her of her money-handling duties while she is still elected treasurer. Her terms in that office – and in that of town clerk – expire in 2019.
 
Voters effectively ousted her from her role as delinquent tax collector on Town Meeting Day in March. Until then, she had a large number of local supporters. 

Diaz still has support from people who say they trust her more than the Coventry selectboard.
 
Morley said winning the insurance claim was a big step for the town. But it did not recover all the money lost during Diaz’s tenure. Morley doesn’t know how the town will do that, he said.
 
“It’s important to stay focused and take it one step at a time,” he said.
 
The selectboard needs to prevent the scandal from harming the town further, Morley said. But the bigger issue is residents’ lack of trust in local government.
 
“It’s about more than money,” Morley said. “That’s the hard part.”

Dan Schwartz

Dan Schwartz has worked as a staff reporter at daily newspapers in Alaska, the Four Corners area and Santa Fe, New Mexico, for half his 20s. He has received numerous awards for his investigative reporting on corruption. Read more

Email: daniel.james.schwartz@gmail.com

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  • Steve Baker

    It’s interesting she’s still there.

    • Paul Drayman

      It is strange because there were issues before she was elected the last time. However, she is an elected official and can’t be removed based on accusations. There is due process, which is and has been underway She still has support of many in Coventry.

    • Peter Chick

      I would say disturbing.

  • Donna Boutin

    Don’t understand why they can’t fire her, if she is the one who was handling the money then it’s proof that she embezzled the money ..there has be a lot of embezzlement in Vermont over the yrs..If they can’t get rid of her right off then someone should be overseeing her all the time and she shouldn’t have a key to anything..

  • Robert Lehmert

    “More than two years ago Coventry hired auditor Jeff Graham to reconstruct its poorly kept books. In late March Graham filed a report listing more than $1.4 million in unaccounted for town funds.”

    So, 2 years and 2 months later, shouldn’t an auditor have tracked down where the money went? That’s not much of an audit. This is beyond odd.

  • Elise Eaton

    Unbelievable. Fire her.

  • Barbara Wilson

    Let’s see if I get this straight……The Town Clerk and Treasurer had bank accounts in the Bahama’s with evidence of tens of thousands of dollars wire transferred from Panama and she sits at her desk like she’s just a normal citizen of Coventry???….really ???

  • Robert Spottswood

    Sometimes there is an unexplained, indefatigable base of popular support that discounts all evidence​ that someone may be stealing people’s tax money as they hand it over.

    In those cases I blame the lack of oversight, which seems like the biggest determinant, while the strangest thing is there is rarely a sign of visible wealth. Where does the money go?

    • Paul Drayman

      That is a strange phenomenon. As for me, I’m much to curious to turn my eyes the other way. “rarely a sign of visible wealth”…some of these people are quite disciplined. They can wait for the right time or you can never be sure just what the money is for. This one is not your run-of-the-mill magic act.

  • Mark Cobb Sr.

    We have a town clerk who gets very very defensive when ever you ask about expenses. or question how funds are being expended. I personally think she is embezzling from our town.I can’t prove it,however we have not had a comprehensive audit done in at least 15 years and with the current select board..who have questions as well,we are not likely to have one anytime soon,

  • William Barrett

    I assume this means insurance rates for the rest of Vermont towns will go up. There must be some criminal investigation happening.

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