Image: Sarah Palin
Chris Keane  /  Reuters
A lawyer for Sarah Palin said her Alaska Trust Fund brought in almost $390,000 before she stepped down as governor last July.
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updated 6/24/2010 6:11:11 PM ET 2010-06-24T22:11:11

Thousands of donors who contributed to a $390,000 legal defense fund for former Alaska Gov. Sarah Palin will get their money back after an investigator said Thursday the fund was illegal because it was misleadingly described on a website.

State Personnel Board investigator Timothy Petumenos said the Alaska Fund Trust inappropriately used the word "official" on its website, wrongly implying that it was endorsed by Palin in her role as governor.

But Petumenos also found that Palin — the 2008 GOP vice presidential nominee — acted in good faith and relied on a team of attorneys to make sure the fund was lawful and complied with the Alaska Executive Branch Act.

Palin's attorney, Thomas Van Flein, said the trust brought in almost $390,000 before Palin stepped down as governor July 26, 2009. More than $33,000 has since been donated, but Van Flein said that money will go toward $87,680 the trust has incurred in administrative and other expenses.

"She supports this process 100 percent, and I think she agreed to this resolution 'cause it was the right thing to do," Van Flein said. "She never instructed anybody to do anything that would not comply with federal law or state law."

New fund set up
Another defense fund was set up Thursday for Palin as a private citizen to pay off the rest of the debt.

Petumenos, an attorney, said another problem with the Alaska Fund Trust involved the selection of a public official to administer it. Petumenos' report notes that Kristan Cole holds positions on important boards and commissions, including an appointment by Palin to the Board of Agriculture and Conservation.

Thursday's findings are an outgrowth from a preliminary, confidential report by another board investigator that also implicated Palin. Petumenos said the first investigator, attorney Thomas Daniel, withdrew as independent counsel for the personnel board after Palin challenged the participation of his law firm, which had ties to President Barack Obama, who defeated Palin's former running mate John McCain in the presidential election.

The earlier report was issued less than two weeks after Palin announced she was resigning from office last July.

In announcing her resignation, Palin cited the toll of the ethics probes as one of the reasons she was stepping down. She has said she racked up at least $500,000 in legal fees.

‘Ecstatic the truth came out’
Palin's friends and supporters created the Alaska Fund Trust in April 2009, limiting donations to $150 per person. The ethics complaint was filed soon after by Eagle River resident Kim Chatman, who alleged Palin was misusing her official position and accepting improper gifts.

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Chatman said she was glad the case came to a resolution, although she felt it fell short.

"I'm ecstatic the truth came out, but I don't understand how they said this was a good faith effort on her part and they're going to blame it on her attorneys," Chatman said. "She's never accountable for anything."

The multiple ethics complaints include an investigation by state lawmakers over Palin's firing of her public safety commissioner in the so-called Troopergate scandal, as well as a complaint over state-paid trips Palin took with her children as governor.

In the family travel complaint, also investigated by Petumenos, Palin agreed to reimburse the state about $8,000 for costs associated with nine trips taken by her children.

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