An investigator has determined former Gov. Sarah Palin's legal defense fund broke state ethics law and said Palin has agreed to settle the matter by having the trust return more than $386,000 to donors.
Tim Petumenos, an Anchorage attorney hired by the state Personnel Board to investigate, said Thursday the legal defense fund violated state law because it "constituted using public office to obtain private benefit." He said the fund, which was set up while Palin was still governor, inappropriately said it was the "official website" of Palin, and made reference to her work in public office. Petumenos upheld an ethics complaint that was filed 15 months ago against the trust.
The trust has 90 days to return all the thousands of donations it received before she resigned as governor last summer, according to the settlement agreement signed by Palin.
Palin advisers created the Alaska Fund Trust in April 2009 to help her pay legal bills she incurred defending herself in the "Troopergate" investigation and a series of other ethics complaints. Palin's personal lawyer, Tom Van Flein of Anchorage, "strongly advised" the trust be vetted by the Alaska Department of Law to make sure it was legal under Alaska ethics law, Petumenos wrote.
But Palin instead chose to follow the advice of another attorney who recommended against seeking input from the attorney general, and instead to simply contest the "inevitable" ethics complaint when it came, Petumenos wrote in his report.
"The prudent thing to have done in my opinion would have been to go to the attorney general in advance," Petumenos told reporters on Thursday.
That's especially the case since this was the first attempt at such a trust agreement in Alaska and ethics complaints were considered likely, he said. "Governor Palin was nevertheless following the express advice of one of her attorneys who told her the Trust complied with all laws and was indeed unassailable," Petumenos wrote in his report.
That advice came from Randy Evans, a prominent former counsel for the Georgia Republican Party who has advised Newt Gingrich and others on ethics issues. Evans said Thursday that other, unauthorized, legal defense funds for Palin were being started and action had to be taken to get one set up to be called "official."
"We had rogue trusts popping up, and delay meant defrauded contributors," said Evans, a partner in the Atlanta office of McKenna Long &Aldridge.
Evans said in a Thursday e-mail that he remains convinced the fund was valid. He called the issues raised by Petumenos "manufactured." He's said the trust was patterned after trusts of previous presidential candidates and other high profile public servants.
Numerous public figures including Ted Stevens, Hillary Rodham Clinton and John Kerry have set up such legal defense funds, although Petumenos said this was the first done in the state that was subject to Alaska's ethics act. Palin's personal lawyer, Van Flein, said there were seven lawyers advising Palin and all believed it was legal.
A new legal defense fund was set up for Palin on Thursday, called the Sarah Palin Legal Defense Fund. That fund is led by Tim Crawford, who is treasurer for Palin's political action committee, SarahPAC. A message from the fund to Palin supporters on Thursday solicited contributions and said the independent counsel's ruling against the Alaska Fund Trust was part of a "witch hunt."
Kim Chatman, an Eagle River resident who filed the ethics complaint against the Alaska Fund Trust, on Thursday called Palin greedy for starting a brand new fund. Palin had made millions since resigning as governor, with a bestselling book, speaking engagements, a commentator position with Fox News and the upcoming show "Sarah Palin's Alaska," to appear on the cable channel TLC.
"This woman has made a lot of money; why would she go out and beg for more money?" she said. "I don't understand it."
Palin's lawyer, Van Flein, said the legal expenses arose from Palin's time as governor, and officeholders shouldn't have to go bankrupt to serve in office.
"These claims, every one of them, arose out of her duty as governor and her public service. And to me this is really a public debt that she has taken the burden on privately. So I don't expect her and I don't think the public expects her to take out her own checkbook to pay for what is really a cost of doing business as a public official," he said.
Petumenos said there's nothing illegal about Palin having a legal defense fund as a private citizen. The Alaska Fund Trust is allowed to keep the $33,546 collected after she resigned as governor, although her lawyer said it will go to pay expenses of the trust. As of March, the fund had spent $87,680 on legal and other expenses, he said.
The trust was frozen and Palin did not receive money from it, Petumenos said. Former Palin spokeswoman Meghan Stapleton wrote Thursday on Palin's Facebook page that the ethics complaints were political attacks. She wrote that the legal defense fund's website called it Palin's "official" fund in order to distinguish it from others created on Palin's behalf that might not follow the law.
That was not meant to suggest Palin was using her office to raise money, she wrote. "Governor Palin's prime directive was simple -- if this fund could be set up lawfully, she would support it. If not, it would not have her support," Stapleton wrote.
Petumenos said the evidence supports Palin's contention that she did not "knowingly" break state ethics law with the legal defense fund. But he said that doesn't change the fund's being illegal.
TWO INVESTIGATORS, SIMILAR CONCLUSIONS
Petumenos was the second independent counsel hired by the state's Personnel Board to investigate the ethics complaint Chatman filed against Palin over the fund on April 28, 2009. The first, Anchorage attorney Tom Daniel, last summer found "probable cause" that Palin's Alaska Fund Trust violated state ethics laws. Daniel left the case in January because Palin alleged his law firm, Perkins Coie, had a conflict of interest.
Perkins Coie is a national firm that represented Barack Obama's presidential campaign and handles legal issues for many prominent Democratic groups. In his report, Petumenos, a former prosecutor, said he started from scratch in January and reached a similar conclusion to Daniel's report.
Petumenos said Palin's fund violated the law in two ways: It used the governor's official position for her personal gain, and the fund's trustee, Kristen Cole, was also a public official who provided a "substantial private benefit" to the governor. Palin had appointed Cole to the royalty oil and gas advisory board and the state agriculture board, which put her on the creamery board, he wrote.
Chatman, who filed the ethics complaint against the fund, questioned Petumenos' conclusion that Palin didn't knowingly break the law. She said she was glad to see the money has to be paid back but wants to see proof that it actually happens. Petumenos said the Alaska Department of Law will be supervising the payback.
Petumenos said he issued subpoenas for documents and deposed five witnesses, including Palin. The terms of the trust showed that its benefits to Palin weren't limited to legal fees, and that her family, and other members of the executive branch, could also tap into the fund. No one else had been designated beneficiary, though.
Palin lawyer Van Flein said he did not know how much Palin owes in legal bills from the complaints.
Palin supporters last year estimated the bills were more than $600,000. Some of those expenses were from "Troopergate." A report commissioned by the state Legislature determined in that case that Palin abused her power in allowing her husband and top aides to push for the firing of a state trooper who was Palin's former brother-in-law. But Petumenos, who investigated it at the time for the Personnel Board, came to the conclusion Palin did not abuse her power.
Legal expenses also came from other ethics complaints that were lodged against Palin, nearly all of which were dismissed by the Alaska Personnel Board. The complaints are supposed to be confidential, so there could be some pending.
Find Sean Cockerham online at adn.com/contact/scockerham or call him at 257-4344. Daily News reporter Richard Mauer contributed to this story.