Business & Economy

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.”

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