(I received this in my email today from an East Coast lawyer...we'll call her JHop. She and I have just started corresponding and when she told me she'd done an analysis of the Alaska Fund Trust document (the PDF "legal document" linked on their site...the same one that sent me through the roof because of its blatant violations of the Ethics Act), I was very pleased that she was willing to send it to me.
JHop does an incredible job of keeping the legal jargon to a minimum (unlike the purposely-unintelligible-piece-of-crap she's analyzing) and I highly recommend that everyone read her very enlightening conclusions at the end. When I first read the AFT "legal document," I have believed from the very beginning that this "fund" has little to do with legal defense and everything to do with the Palins trying to use her position to increase their wealth...my opinion. I believe this analysis comes to a similar conclusion.)
I thought that I would take a closer look at Governor Palin's Alaska Fund Trust (hereinafter "AFT"). I am not writing to contest any specific finding in Mr. Daniel's report; for my purposes here, I accept them as valid. Instead, I want to highlight some of the issues that were not properly analyzed or, in some cases, mentioned at all in Mr. Daniel's report.
The Law & Ethics: To understand any of this, we need to know at least some legal basics. Trusts have specific, quirky legal rules; each state is different. It is not my specialty and I do not purport to be an expert; but I have a general knowledge, and enough of it to have genuine concerns about the AFT.
In brief, there are common requirements for a valid trust: 1) a settlor; 2) delivery of legal title; 3) property in the trust; 4) a trustee: who holds legal title for benefit of beneficiary; 5) at least one beneficiary; 6) intent: to create the trust for a lawful purpose; and 7) a lawful purpose: a trust cannot call for commission of crime, destruction of property, or a violation of public policy.
The purpose of the trust is the sole reason for its existence and it must be followed closely. Once a trust's purpose is established, it cannot be changed or modified without dissolution or court intervention. As for the Executive Branch Ethics Act (hereinafter "EBEA"), there is only one vital provision for analyzing the AFT. Under AS § 39.52.120, a "public officer may not use, or attempt to use, an official position for personal gain, and may not intentionally secure or grant unwarranted benefits or treatment for any person." The EBEA also states that "a public officer may not . . . accept, receive, or solicit compensation for the performance of official duties or responsibilities from a person other than the state." AS § 39.52.120(b)(2).
Issues & Concerns: The most fundamental flaw with Mr. Daniel's report is that it is not based on the trust instrument that created the AFT; it is based upon the website that describes the AFT. He quotes the website to state that the AFT:
"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."
Mr. Daniel cites this as fact and continues to quote from the website throughout his report. The website, of course, was designed, written, and is maintained by Governor Palin and her staff. It is obviously based in self-interest, and in particular, to generate donations for the AFT. It is, by no means, a neutral source for legal analysis or for an unbiased conclusion of law.
Ironically, the trust document is posted directly on the AFT's website; thus, there is no reason why Mr. Daniel's report is not based on the AFT's legal document. It should be noted that the original complaint does not cite directly from the trust document. Nevertheless, when considering the trust language itself, the allegations against Governor Palin are seen under a much different light - specifically, a darker, shadier, murkier light.
The Trust Language & Details: Rather than analyzing the AFT on quotes written by Governor Palin's staff, the legal and ethical issues associated with it must be analyzed using the specific language that created the trust. Below, in italics, are several key portions of the AFT; my brief comments follow:
"KRISTAN CHERYL COLE, as Settlor, and KRISTAN CHERYL COLE, as Trustee, establishes THE ALASKA FUND TRUST, a trust for the payment of expenses or amounts incurred, undertaken or paid in connection with claims, allegations, investigations, accusations, complaints, legal inquiries, requests, and proceedings, including the response and defense thereof, arising out of or by virtue of the activities of or performance of duties as, or on Governor Sarah Palin, in her capacity as (or as a result of her being) the Governor of Alaska."
This introductory clause is the only language that mentions a legal defense fund or anything to do with legal proceedings at all. It ambiguously includes anything "arising out of or by virtue of the activities of or performance of duties" for Sarah Palin "as the Governor." It is an umbrella clause and catch-all. This, however, is not the purpose of the trust. It may be used to circumstantially demonstrate the intent of the trust. But it is not the official and stated purpose of the AFT.
SARAH PALIN, who is the current Governor of the State of Alaska, has incurred and is responsible for various expenses in connection with or otherwise as a result of SARAH PALIN's service as Governor of the State of Alaska including without limitation, various investigations of her conduct as Governor of Alaska.
Here, in the first section, there is no mention of a legal defense fund. It simply says the funds can be used for "various expenses" (anything that has monetary value) . . . "in connection with or otherwise" (having anything at all to do with being Governor) . . . "including without limitation, various investigations" (for an infinite list of expenses which happens to include investigations of any kind).
It is the desire of the Settlor to provide the legal and proper means to accept transfers of money, property, and services (including pro bono legal services) for the purpose of defraying, paying, or satisfying the fees and costs that have been and will be incurred by SARAH PALIN and others (hereinafter "Covered Individuals") in connection with or otherwise as a result of SARAH PALIN's service as Governor of the State of Alaska, all in a manner consistent with and in compliance with the laws of the United States and the State of Alaska.
Also in the first section, the ATF further omits any mention of a legal defense purpose, instead morphing into an overly ambiguous and seemingly unlawful instrument. Here, the language simply states that the trust will collect anything valuable, no matter what it is or its intended use, to pay all "fees and costs" by Palin for anything "in connection with or otherwise as a result" of her position as Governor. There is no purpose or clarifying clause to explain why money is being collected.
Trust Purpose. The sole and exclusive purpose of this Trust is to provide a proper means for the acceptance of money, property, and services, including, if necessary, pro bono legal services, to provide for all reasonable, necessary, and appropriate fees or charges incurred by (i) SARAH PALIN as a result of the fact that she is Governor of the State of Alaska or as a result of the performance of her duties as Governor of the State of Alaska; and (ii) Covered Individuals.* [...] In addition, the purpose of the Trust shall be to pay all reasonable, necessary, and appropriate expenses of Trustee's counsel and such other and usual, customary expenses and services that have been or may be incurred in connection with the above-stated purpose . . . Trust funds may be used for no purpose other than those specifically provided herein. *For purposes hereof, a "Covered Individual" shall be any other person determined by the Trustee, in the Trustee's sole and absolute discretion, to (i) hold a "covered staff' position within SARAH PALIN's administration and/or an employee in the office of the Governor of the State of Alaska; and (ii) hold a covered relationship with SARAH PALIN, including without limitation, a family member, such as a parent, spouse, child, grandchild, sibling and other close family relationship.
This is the most important clause in the AFT document (or any trust document). It is the reason for the trust's existence and necessity. There is NOTHING in the official purpose of the AFT related to legal defense or legal proceedings or ethics complaints. In fact, the purpose of the trust is for any expense at all incurred by Sarah Palin "as a result of the fact that she is Governor . . . or as a result of the performance of her duties as Governor." Those are the only limitations instilled by the purpose clause.
So the purpose of the AFT is to collect money for...basically anything and everything, short of overt criminal activity. This includes legal expenses, of course, along with everything else under the sun. It also covers her family and staff, as well as "any other person determined by the Trustee."
After close interpretation, there is nothing stated about the AFT that could infer its specific intent was a legal defense fund. It is disingenuous to imply otherwise - as the AFT's website does, and consequently, Mr. Daniel's report echoes.
Rights of Withdrawal (a) Each of the beneficiaries of this trust, shall, in each calendar year, have an absolute and unrestricted power to withdraw from this Trust . . .
Without even a hint of ambiguity, this clause gives Sarah Palin (and her family and staff) the "absolute and unrestricted" power to withdraw funds from the AFT. It spells out in simple, clear, and concise language that no limitations exist for Palin's ability to use the AFT however she pleases. It says nothing about an intent for legal defense or a purpose to be used to defend against ethics complaints.
Qualification of the Trustee. The Trustee hereunder, or any successor trustee appointed in accordance with this instrument, if an individual, shall be at least 25 years of age. Such Trustee shall not be a member of the SARAH PALIN's immediate family, her counsel in any pending legal proceeding, or a member, partner, associate, or employee of the firm employing that counsel [...] In addition to said powers enumerated above, the Trustee shall, subject to applicable law, determine in her sole discretion what is income and what is principal, to allocate to income or principal or apportion between them any receipt, gain, loss, or expenditure as is deemed just and equitable in the circumstances of each case, as it arises. The exercise by the Trustee of any discretion granted hereunder in good faith shall be binding and conclusive on all persons.
Who is Kristan Cole, does she have an association with any firm that has ever advised Palin? A trustee is entrusted with fiduciary duties to the trust, not an individual beneficiary. The trustee here is given the specific powers to determine what is income and principal, what is profit or loss, and what is "equitable in the circumstances of each case." She is given complete, full reign of all business decisions connected with the AFT - including disbursement of funds, investment of funds, and the revocation of the trust itself. She even determines who the beneficiaries are. It is unconscionable the amount of power she has considering her close relationship with the beneficiary and the personal benefits they both gain through their professional/personal relationship.
Disclosure Provisions. The Trustee is authorized and directed to release information to SARAH PALIN and any other beneficiary hereunder and the public the name, amount and date of each donation every thirty days. The Trustee is authorized and directed to release the amounts and categories of expenditures for the benefit of any beneficiary hereunder and the public on a quarterly basis.
A small silver lining to take away from this cloud of corruption. According to this provision, the Trustee is directed to make quarterly reports to the public about amounts and categories of expenditures. The trust was created April 22, 2009. Ironically, today, July 22, 2009, is the three-month or quarter-year mark. We can request a disclosure starting today.
Trust Term and Disposition of Residual Funds. The term of the Trust shall be for an initial period of ten (l0) years and shall be irrevocable. In the event, in the sole and absolute discretion of the Trustee, the purposes for which the Trust is created are fulfilled or no longer exist prior to the expiration of ten (l0) years from the date of this instrument, the Trustee shall terminate the Trust . . . Upon the completion of the Trust, any funds, assets, or property of any kind, whether the same be principal or income, which may be remaining in the hands of the Trustee at the completion of the purposes of the Trust, shall be donated and distributed by the Trustee, in the sole and absolute discretion of the Trustee, to one or more organizations described in section 501(c)(3) of the Internal Revenue Code of 1954 and made exempt from taxation under section 501 (a) thereof.
This is why I think the trust is unlawful on its face and was going to be an eventual problem, even without Mr. Daniel's report. The AFT becomes revocable only when the "purposes for which the Trust is created" are either "fulfilled" or "no longer exist." If that happens, the trust must be revoked and its assets must be donated to 501(c)(3) charity organizations. The AFT's purpose, as ambiguous as it may be, is clear about one thing - the purpose was set up for Palin "as Governor." As soon as she resigns, the trust loses its purpose. Even if she drags her feet and says that the funds are being used for expenses "as a result of" her being Governor, that excuse will only last for so long. For example, even if she says that moving expenses and consulting lawyers about new ethics complaints and a hiring a masseuse to relieve her stress all resulted from her actions as Governor, eventually, at some point in the future when her excuses run out, the AFT will have to be dissolved and the funds donated. I originally thought that Cole could just set up a new trust; but according to the trust language, the funds would have to be given away to charity.
Analysis & Thoughts: I have been primarily focused on the intent and purpose of the AFT. I think the AFT's purpose is unethical on its face. As Mr. Daniel asserted: "There is no doubt that the [AFT] will provide a "gift" to the governor because the trust will provide money that is a benefit to the governor's financial interests." Thus, based on the law and the trust itself (i.e. that it was set up for her "as Governor"), it seems clear that Governor Palin's actions violated the EBEA by receiving personal benefits, if not also violated state and federal law (for example: a misappropriation of funds, corruption or abuse of office, or tax fraud in relation to under-reported gifts). The potential criminal violations are not my purpose here; but I do not think the severity of wrongdoing should be completely ignored as it was in Mr. Daniel's "recommended actions." While Mr. Daniel found "probable cause" that Palin violated the EBEA, he somehow recommended no formal hearing on this matter. He just investigated what he found to be a clearly unethical trust; he also alleged that the under-reporting of gifts could be an issue. But then he recommends the dissolution of the AFT and that this should just be swept under the rug without further exploration. How curious. Mr. Daniel also states that he has "sympathy" for Governor Palin and her multitude of ethics complaints. His personal feelings have no place in an official investigation; they have little effect here anyway, considering the AFT was not created as a legal defense fund at all. It should be noted that if he doesn't recommend formal proceedings, the Personnel Board most likely will not recommend them to the Attorney General. So, unless the AG pursued it on his own, formal hearings would not happen here. This leaked report may change that. Nevertheless, Mr. Daniel's recommended action is a mere slap on the wrist, giving Governor Palin a way to avoid ever taking accountability other than dissolving the AFT. It is a legal whitewash, giving her a graceful exit, and ultimately determining that she is above the law - or at the least, should just not be formally investigated (or punished) in a manner consistent with it.
I think the idea of dissolving the AFT and refusing its funds is a good enough reason for Sarah Palin to quit. Especially if she, as Governor, decided not to ever waive confidentiality, so no one would ever know what ethics decisions were pending or why she was really resigning. And she could just keep her slush fund. Oops.
Bottom Line: Keep an eye on AFT. In my opinion, this is only the beginning --by JHop
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