Alaska Dispatch

On Thursday, when the time came for independent counsel Timothy Petumenos to give former Alaska Gov. Sarah Palin her comeuppance for putting private fund-raising above the public trust, he picked as the venue the "Adventure Room'' of the Hotel Captain in Cook in downtown Anchorage.

The symbolism was almost as thick as the media that crowded the smallish space in the basement of one of the city's long time cornerstones. The hotel was built by Wally Hickel after the Good Friday earthquake in 1964 destroyed much of Alaska. A visionary and a booster for development of the 49th state, Hickel later served two separate terms as governor before helping to propel Palin into that office. He rejected her not long after as her short stint in the executive mansion turned into adventure after adventure.

First there was Troopergate, which began when she tried to get her ex-brother-in-law fired from the state police force. Then came the ethics complaints, mostly unsuccessful, filed by her opponents by the bucket loads, and then the run for Vice President on the Republican ticket that saw her parading across the country warning that Democrat Barack Obama had a history of "palling around with terrorists.''

In between were the pregnancy kept secret almost until the day Alaska's middle-aged governor delivered a baby with Downs Syndrome, and the revelation the Republican candidate of squeaky clean "family values'' had an unmarried teenage daughter also about to have a baby. Finally there was Turkeygate -- the video-taped beheading of some poor Thanksgiving turkeys behind Palin as she prattled on to an Alaska reporter about the ugliness of national politics. That was followed by the abrupt mid-term resignation as governor. But the adventure didn't end there.

Palin went on to write a best-selling book, "Going Rogue,'' that made millions, sign a gig with Fox News worth millions more, and become the self-proclaimed "pit bull in lip stick'' as she contended, wrongly, that there were "death panels'' hidden in Obama's proposal for national health care.

The pitbull was nowhere to be found Thursday when Petumenos unveiled a settlement between Palin and the state agreeing that she'd illegally created something called "The Alaska Fund Trust'' to raise more than $360,000 to defend herself against those state ethics complaints and more. Petumenos highlighted the more, noting the trust's "'Crummy Provision' that permits a beneficiary under the Trust to demand withdrawals from the Trust for any reason whatsoever."

The settlement agreement, which was worked out largely between Petumenos and Thomas Van Flein, Palin's personal attorney, went on to say that the provision was merely included to "prevent the donors from being required to file gift tax returns (with the IRS) in connection with their donations." But Petumenous pointed out that the way the trust was written there was nothing to stop Palin from using the money for anything she wanted.

The more than $360,000 in donations collected while she was governor, the settlement said, could have been used for reduction of "private debts, payment of private income taxes and, theoretically at least, are subject to demand for any purpose. Thus the Trust itself contemplates personal gain and financial benefit" to the governor in violation of the Alaska Ethics Act.

For that reason, Petumenos said, Palin has been ordered to -- and agreed to -- refund the money of everyone who contributed to the Alaska Fund Trust when she was governor. He added that Palin had put the fund in limbo after ethics complaints were first filed more than a year ago and appeared to be cooperating fully with the subsequent investigation into the fund.

Thousands of citizens around the nation are expected to get refunds now. Most donations were less than $150, said Petumenos.

The Alaska Department of Law will be in charge of seeing that the refunds are made. If donors refuse to accept them, there is a provision for forwarding the money into a fund for a non-profit organization.

Van Flein listened to Petumenos's presentation, and later held his own informal discussion with the press. He said he had warned the then-governor that the proposed trust might not meet the letter of the Alaska law and should be run past the state Ethics Board before proceeding. Palin overruled that advice, he said. She had seven lawyers advising her -- six of them big-time litigators from the Lower 48 -- and she chose to accept their advice instead, Van Flein said.

"What I said (to her) was the prudent thing to do was to submit it to the review board," Van Flien said. "The other lawyers said it was not necessary.''

They were of the view Palin's position was "air tight,'' Van Flein added, and probably would argue with Petumenos's ruling. But the ex-governor, he said, had made a decision to settle the case and move on instead of fighting.

Petumenos said the responsible thing for any public official in Palin's position to do would have been to send the proposed trust to the Department of Law for review before it got to the point of legal action.

"That was my position,'' Van Flein said. "I give advice. (But) this was a very, very prominent attorney'' offering a different opinion.

Van Flein refused to name the attorney. He also defended Palin against accusations she might have been "lawyer shopping,'' the practice of looking for the attorney who tells you what you want to hear. All of the attorneys advising Palin were specialists in arcane areas of the law, Van Flein said, and the governor chose to take her trust advice from the one most familiar with trust law, although not with Alaska ethics law.

Despite Van Flein's statements about Palin's actions, the negotiated settlement's version of events tries to push a portion of the blame on stalwart Palin aide Meghan Stapleton. When the news first emerged in July 2009 that Palin and the state had begun discussing a settlement of the trust complaint, Stapleton accused state officials of breaking the law.

"It appears suspect that in the final days of the governor's term someone would again violate the law and announce a supposed conclusion before it is reached,'' she said then.

The settlement agreement puts her deep in the goo, claiming she was the one charged with figuring out how to pay for Palin's legal defenses.

The state had a contract with Van Flein's firm to pay $100,000 for the legal services for the governor, but Palin's lawyer never collected. Palin and her lawyers argued that her official and personal lives were so intertwined that to accept public money to defend the governor would risk accusations she was taking state money to pay for private issues. The trust fund was to solve this problem. It solicited donors online with a pitch to help the governor pay her legal bills, though she could have used the money in other ways.

Stapleton was supposed to be the one to "oversee the project....Ms. Stapleton was then serving as an independent consultant in a managerial capacity to SarahPAC, a political action committee funded by private sources.''

Stapleton, the settlement suggests, took lead roles in fundraising and public relations.

"Governor Palin was not involved in the details of the drafting of trust documents or its supporting website, but she was given the opportunity to review drafts and to comment on them. She was also briefed by Ms. Stapleton on the substance of the legal advice being given by the various attorneys and personally sat in on a few but not the majority of the conferences with attorneys and advisors who were working on the Trust and website.''

Stapleton resigned from Palin's staff in February. That was shortly after Petumenos took over the ethics investigation. The regular media mouthpiece for Palin, Stapleton said she was quitting to spend more time with her husband and 2-year-old daughter.

Whatever Stapleton did or might not have done, Petumenos said, it doesn't absolve Palin from her ethics responsibilities.

"It is the responsibility of every public official to make sure they are complying with the act,'' he said.

One of those who appeared to join Palin in tiptoeing along the margins of the act was the ex-governor's old friend Kristan Cole. She agreed to serve as the trustee for The Alaska Fund Trust event though she "was herself a public official who holds positions on important boards and commissions'' in Alaska. Cole was appointed to most of those by Palin.

Public officials, Petumenos suggested, shouldn't be trying to see if they can make the law bend to fit their needs; they should be trying to "err on the side of the most ethical determination you can make.''

Erring on that side is, ironically, what brought Palin to power. She gained her toehold in Alaska statewide politics by accusing Republican state chairman Randy Ruderich of using his state office to engage in partisan politics in violation of the state ethics law. Ruderich argued that the Republican e-mails and memos he sent from his office didn't amount to much.

Some supporters of Palin have already begun to argue the same of the ethics settlement.

"Sarah Palin's enemies have scored another victory in their vicious campaign to smear, bankrupt, and force this dedicated public servant and conservative leader out of politics!" the Sarah Palin Legal Defense Fund said.

Even as Petumenos was calling the ex-governor's old trust fund illegal, the new fund was being set up and e-mails were being sent out soliciting funds. The e-mail was labeled "Defend Sarah,'' and asked people to send money to "pay the legal fees to rebut these relentless, frivolous lawsuits."

"This ruling is nothing but a political hatchet job designed to embarrass Governor Palin, destroy her financially, and smear her good name. But YOU can help restore her good name!"

Contact Craig Medred at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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