The Coventry case Diaz bond revoked, has ten days

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copyright the Chronicle May 26, 2017

by Elizabeth Trail


COVENTRY — Town Clerk and Treasurer Cynthia Diaz has ten days to come up with a $2.5-million bond or lose her job.

The Vermont League of Cities and Towns (VLCT) paid up on the town’s $500,000 claim on Wednesday, May 24, but said it will no longer cover Ms. Diaz on the town’s insurance.

Under state law, Ms. Diaz will have ten days to come up with a bond on her own. If she can’t, the select board can declare the positions Ms. Diaz holds vacant.

All town clerks, treasurers, and delinquent tax collectors in Vermont must be bonded. In recent years, VLCT has provided insurance to member towns to cover the loss of any money entrusted to officials in lieu of the traditional bond.

In its claim, the town documented losses of $876,383 based on the report of forensic accountant Jeff Graham, who recently completed an exhaustive audit of the town’s finances.

According to a May 23 letter to the select board from Frederick Satink, VLCT’s manager of underwriting, safety and health promotion, VLCT found that “Ms. Diaz failed to faithfully perform her duties as prescribed by law.”

The decision was “based on Mr. Graham’s findings as to the cash-handling practices of the town treasurer,” the letter says.

VLCT’s policy covers the town both for “faithful performance” and for employee theft.

If the loss is found to have been caused by theft, that portion of the town’s coverage would also be canceled as far as Ms. Diaz is concerned, Mr. Satink’s letter says.

Coverage for other Coventry town officials and employees remains in force.

The actual claim that Coventry submitted was for $500,000, the maximum that VLCT will pay for a single incident. After subtracting the town’s $1,000 deductible, the check was for $499,000.

The town is still out of pocket for the rest of the $876,000 that Mr. Graham said he found to have been collected from taxpayers and never deposited. The select board has also spent almost $300,000 on the Graham and Graham audits and ongoing support in its civil suit against Ms. Diaz over the money Mr. Graham says is missing.

And Mr. Graham said he has calculated that Coventry has lost close to $200,000 in penalties and interest. That means it has lost or spent an estimated $1.3-million, Mr. Graham said in February.

Vermont law gives the select board the authority to set the amount of a town official’s bond.

A few years ago, in a very different situation, the Irasburg Select Board used that authority to force a town clerk to resign.

But months ago, Mr. Marcotte decided that Coventry wasn’t going to go down that road.

“People in Irasburg are still angry about that,” he said then. “We’re going to wait and see what the insurance company decides.”

Now VLCT has decided the matter. The only question for the select board was how big a bond Ms. Diaz should be required to carry.

On May 24, the board directed town attorney Paul Gillies to set a minimum $2.5-million bond requirement. That number is based on the amount of money in Coventry’s checking account.

“I’m worried about the next ten days,” town resident Leo Piette said at the May 24 meeting.

As soon as Mr. Marcotte, representing the select board, signed VLCT’s “proof of loss” document at Wednesday’s special meeting, any further losses caused by Ms. Diaz weren’t covered by the town’s insurance.

“As of today, the bond no longer exists,” Mr. Marcotte said.

The money in the checking account includes funds that Ms. Diaz has been asked repeatedly to move into reserve accounts.

“The clerk-treasurer has refused to follow our warrants to move that money,” Selectman Scott Morley said. “And that’s cause for concern.”

“The board’s job is to do everything in its power to protect the town’s money,” Selectman Scott Morley said.

The board has taken a number of precautions to be sure the town’s money is secure. Two signatures are now required to move money or write checks.


contact Elizabeth Trail at

[email protected]

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