[S]ince 2005, Coventry’s former clerk and treasurer has been the focus of four investigations involving financial fraud — notably the disappearance over more than a decade of an estimated $1.4 million in town funds — with the only legal consequences being a conviction on two counts of state income tax evasion, for which she did community service.
But federal and state investigators may finally be closing in on Cynthia Diaz, who was Coventry’s elected town clerk, treasurer, and its delinquent tax collector during the years the town’s money went missing.
VTDigger has obtained a copy of a letter, sent by the U.S. Department of Justice to dozens of Coventry taxpayers, that refers to a criminal grand jury probe involving the town. The letter, dated Oct. 30 last year, confirms that the FBI, Justice Department and state police are working together. It is a request for town taxpayers to provide the U.S. Attorney’s Office in Burlington documentation showing how they paid their taxes.
“If you do not comply with this voluntary request within 30 days,” the letter says, “it is likely that you will be served with a federal grand jury subpoena that requires you to produce all records and/or testify before a federal grand jury in Burlington or Rutland.”
The purpose of obtaining the records would be to determine whether the town taxes Diaz collected ever made it to the bank.
The U.S. Attorney’s office in Burlington declined comment on the grand jury proceedings and on any investigation of Diaz. Grand jurors serve terms of 18 months and review multiple cases over an extended period of time. Their role is to decide whether or not accusations warrant prosecution, as well as to issue subpoenas.
Jeff Graham, a private auditor contracted by federal investigators, said that 80 responses to the Oct. 30 letters remain outstanding. He declined to comment otherwise on the probe.
Until last fall, Graham had been assisting the town of Coventry in its efforts to determine the extent of its losses. He said he sent a similar round of letters to town residents, but most of the recipients ignored them.
The FBI has been in contact with the town, on and off, since 2011, according to public records.
State and local investigations into Diaz’s dealings with the town have been frustrated for years.
Diaz has consistently denied any wrongdoing. Efforts to reach her for this story were unsuccessful.
Diaz was first elected Coventry town clerk, treasurer and delinquent tax collector in 2004; a year later police opened the first of what would become a series of investigations involving allegations of financial mismanagement and fraud by Diaz.
In 2005, the Newport Police Department opened an investigation into allegations of embezzlement from Diaz’s time as a bookkeeper for a local paving company, but, despite finding that she had been writing checks to herself without permission, Orleans County State’s Attorney Keith Flynn in 2007 did not proceed with any prosecution.
In 2006, although a state police investigation found that Coventry town money was missing, and that Diaz’s bookkeeping practices were, in the words of the investigators, to benefit herself, that case also was dropped by the Orleans County state’s attorney.
In 2008, the office of Vermont Attorney General William Sorrell picked up the investigation. Despite discovering that, among other things, Diaz was writing town checks to herself, the state chose to focus on tax evasion. In 2011 Diaz pleaded guilty to two counts of evading state income tax. Her sentence was reduced to 100 hours of community service.
In 2009, it was the turn of the Vermont Department of Motor Vehicles to look into allegations that Diaz had mishandled money for snowmobile registrations; the investigation ended when Diaz reimbursed a witness the $294 he’d paid directly to her to register his snowmobile. The registration fee never did make it to the DMV, which handles snowmobile registrations.
Diaz was also, for several years, the bookkeeper for the Coventry town school. She was fired in 2011, around the time the school discovered it was missing an estimated $20,000. The school board had been aware of discrepancies in Diaz’s bookkeeping practices for some six years before it acted to fire her.
The allegations and investigations notwithstanding, Coventry voters continued to elect Diaz to positions of responsibility, that gave her control over the town’s money, and over its master list — the document that determines the value of every town property and the resulting taxes owed by the property owner. Voters finally voted Diaz from office last June — after the town’s insurer, the Vermont League of Cities and Towns, paid Coventry $500,000, the maximum claim allowable, in compensation for the missing town funds.
The disappointing results of the previous probes aside, Coventry Selectman Scott Morley, who’d worked closely with Graham when he was auditing the town’s records, said he believed the ongoing federal investigation will “come out on the right side of history.”
“I suspect it won’t be much longer,” he said, “before everything has been concluded.”
