Sarah Palin: Report She Violated Ethics Laws Is 'Misguided' And 'Factually In Error'

WASHINGTON, July 22, 2009— -- Alaska Gov. Sarah Palin fought back against a report by an independent investigator that she may have violated ethics law by accepting private donations to pay her legal debts, calling the charges "misguided" and "factually in error."

She said, "I am informed that this fund was created by experienced attorneys in D.C. and was modeled after other similar funds established for senators and others. The fund itself was not created by me nor is it controlled by me," the former vice presidential candidate said in a statement through her spokesperson. "Neither I nor my lawyer has received a penny from this fund, and I am informed the Trustee was withholding any action or payment pending final resolution with the Personnel Board. This is the hallmark of legal compliance and prudent conduct."

According to a leaked confidential report filed July 14, State Personnel Board investigator Thomas Daniel found there is probable cause to believe Palin used or attempted to use her official position for personal gain.

Daniel conceded that if the trust was created completely independent of any actions of the governor, it would be difficult to conclude she used her position to solicit the donations. But because she authorized the creation of the trust and allowed her photo and to be used on its Web site, he concluded that the matter needs more investigation.

"An ordinary citizen facing legal charges is not likely to be able to generate donations to a legal defense fund," he wrote.

"In contrast, Gov. Palin is able to generate donations because of the fact that she is a public official and a public figure," his report said. "Were it not for the fact that she is governor and a national political figure, it is unlikely that many citizens would donate money to her legal defense fund."

But Palin's team is emphasizing that she didn't control the fund.

Her lawyer, Tom Van Flein, said Wednesday night in an e-mail to ABC News that Palin's close friend Kristan Cole is the trustee of the fund. Washington lawyer Randy Evans put the trust together as a legal entity. Van Flein also said none of the donated money has been given to Palin yet.

"The Trust itself has been waiting for a legal determination before distributing any money," Van Flein told ABC News.

Daniel's preliminary report also finds probable cause that contributors to the fund might expect something in exchange for their gifts to the governor, another violation of the state's ethics code.

The report states: "I find probable cause to believe that payment of the governor's legal fees by the Alaska Fund Trust will violate the Ethics Act prohibition against a public officer accepting gifts intended to influence performance of official duties."

Van Flein confirmed that Palin did receive the preliminary report a week ago, and her attorneys have been talking to the attorney who wrote it, arguing some of his points.

"Mr. Daniel and I were discussing the issues preliminarily raised, and we were providing to him supplemental information as we believed he got some facts plain wrong and misread the statute. That process of review and discussion is still ongoing. ... That is what makes the unlawful release of the letter prejudicial to the process," Van Flein said Thursday morning in an e-mail to ABC News.

Independent Counsel Sympathetic to Palin

Despite finding probable cause to investigate, Daniel said he was "sympathetic to the argument that the governor should not be required to be personally responsible for the enormous legal bills that she has incurred to defend against an onslaught of ethics complaints, most of which have been dismissed as unfounded."

He suggested that perhaps the state of Alaska should pay Palin back for her personal legal fees pertaining to complaints that were dismissed. That way, she would not need a legal defense fund.

Daniel also pointed out that federal office holders have guidelines for creating funds, but Alaska has no provisions for it.

In the end, Daniel recommended the governor should not receive any payments from the fund and should seek reimbursement from the state.

When reached by ABC News, Daniel declined to comment on the report.

"Preliminary investigations are confidential, so I'm unable to talk about it," Daniel said.

Daniel did confirm to ABC News that the leaked copy of his confident report was authentic but said "whoever made it public violated the confidentiality provision in the Ethics Act."

Latest Legal Distraction

It's the latest legal distraction for the former vice presidential candidate as she prepares to leave office this weekend, and one thick with irony -- the same vehicle Palin is using to fight ethics charges is now being called a potential ethics violation itself.

The investigation into the trust was launched after Eagle River resident Kim Chatman issued a complaint April 27, alleging that Palin was misusing her official position and accepting improper gifts.

"It's an absolute shame that she would continue to keep the Alaska Fund Trust Web site up and running," Chatman said in an interview with The Associated Press.

Palin's attorney is threatening legal action against Chatman, who he said he believes leaked the report.

"All options are open in terms of legal remedies. It is a clear violation of Alaska law that Mr. Daniel explicitly reviewed with Ms. Chatman prior to her illegal actions. We will be contacting the appropriate authorities for review and action," Van Flein said.

The Alaska Fund Trust was established April 22, 2009, to help pay off debts stemming from multiple ethics complaints filed against the governor, most of which have been dismissed.

Palin has said she owes more than $500,000 in legal fees. The governor cited the mounting toll of the ethics probes as one of the reasons she is leaving office.

The fund's official Web site at http://thealaskafundtrust.com states: "The Alaska Fund Trust is the official legal fund created to defend the integrity of the Alaska Governor's Office from an onslaught of political attacks launched against current Governor Sarah Palin, the First Family, and state-employed colleagues. These baseless accusations have cost Alaska more than $1 million in public monies to defend, and Governor Palin has incurred more than half a million dollars in personal debt defending her official actions as Governor."

The fund limits donations to $150 per person. Organizers declined to say how much it has raised, and had hoped to raise about $500,000. A "webathon" last month brought in about $130,000 in pledges.

"We have not met our goal yet to raise enough money to cover her legal fees," Cole told ABC News.