Analyzing the AFT

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[JHop]

July 22, 2009

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.

Questions: 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. Thus, I am wondering who leaked Mr. Daniel’s report. Governor Palin and her attorney, Van Flein, are twisting this into a big breach of confidentiality that was harmful to Palin’s rights. A breach of confidentiality does not negate the underlying violations. Nonetheless, the complainant, Ms. Chatman, could not have leaked it. Mr. Daniel’s report, unless he actually reviewed it with her (which would be unlawful), would never have been shared – only the Board’s report is later shared with the complainant. At this point, only Mr. Daniel’s office, the Personnel Board, and the Governor had access to this report. So, who leaked it? Van Flein said yesterday that, “It is a clear violation of Alaska law that Mr. Daniel explicitly reviewed with Ms. Chatman prior to her illegal actions.” Does he have any proof of this? Specifically, that Ms. Chatman was briefed or leaked the report? Ms. Chatman denied it in an interview with KTUU.  If Mr. Van Flein does not have evidence of this, he has once again defamed a private citizen by insinuating that she is a liar and a criminal. It was not in Palin’s interests to have this report leaked. I am wondering what she is going to do about it now.

I assume that she still has tricks and favors up her sleeve – which is why this whole ethics complaint procedure is terrible.  It is so shrouded in secrecy that the public is denied the right to have legitimate claims investigated and heard by an impartial adjudicating body. It seems inherently unlawful if claims are being dismissed and whitewashed out of loyalty to the state or the Governor (who appoints the Personnel Board); and that the Governor is afforded automatic confidentiality that only she can lawfully waive. On its face, the process offers an unfair and unfounded advantage to the Governor; reforms are required to level the playing field. I think, on her behalf, that monetary sanctions should be imposed for intentionally frivolous complaints. There should also be clear guidelines to outline what a sufficient complaint must entail before it will be explored by the Board; any complainant should have the option to appeal to a judge. The Governor should not be so inundated with complaints that she cannot perform her official duties – unless she really is just that unethical and corrupt. Time will tell.

Bottom Line: Keep an eye on AFT. In my opinion, this is only the beginning.


**Please see Addendum to Original Post on Page 2 (compares the AFT to other legal defense funds)**

**Please see Addendum 2 to Original Post on Page 4 (compares hypocritical AFT press release to AFT memo)**


Thoughts? Comments? Questions? Concerns?

[AntiAnti]

THANK YOU.  You write very clearly.

In the time between when Palin ceases to be Gov. and the end of the trust what is the status of the other beneficiaries?  Can they continue to apply for withdrawals with no need to give a reason?  Can the minor beneficiaries still have their guardian apply?

[Jaime from Wasilla]

Thank you for this analysis Jhop. I have been fighting Sarah Palin and her questionable ethics since she was mayor of Wasilla, and I am relieved to see some action revealing the truth finally beginning to stick.

[curiouser]

 

Kudos for your hard work JHop!!!

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.

It seems important to me that Daniel's considered the website and that he should have also based the report on the instrument itself.  What would you think of qualifying your statement?

One question for now:  Could withdrawals be considered separate from a category of expenditures and not subject to the quarterly reports?

[Writing from Alaska]

I also skimmed the actual legal document linked from the website and had some of the same concerns, especially about the use of the money for any expense incurred as governor - !?!

The other question I had was in reference to the limitations on contributions. It seems to say that people can only donate $150 but in the document with more complete information that you cite here, it also talked about 'gifts' up to $13,000. That was the part I was interested in understanding as it seems to mean that you can only give $150 at one time but could give up to $13,000 for the year. Perhaps I misunderstood the point of that section but would be interested in a more thorough analysis. Somewhere between losing patience, lack of time and lack of knowledge I gave up trying to figure that out.

As for your question, who is Kathleen Cole, I believe that is addressed in the investigator's report. She has held Palin appointments in the past, and is defined as someone who could expect to benefit (or could have during the Palin administration) from the 'gifts' that she as trustee can bestow upon the governor from the trust. It remains to be seen if that argument still holds water since Palin is leaving office, however, there is no doubt that Palin used her position as governor to encourage donations to a trust that will benefit her financially. What else is there to say? And, it would be worth knowing if Cole's work on behalf of Palin will garner her benefits in the Parnell administration as he seems so determined to follow in Sarah's shoes, so to speak. I just hope he doesn't start wearing Naughty Monkeys!! Oh, I feel a Dr. Chill coming on!

(It also would be interesting to see if they end up having to transform it into a fund to benefit elected Alaskan officials from frivolous complaints - perhaps it can't really 'belong' to Sarah Palin. If it is just for Sarah - well, there we go. Ethical violation written all over it.)

[pacos_gal]

Thank you JHop for taking the time to both review and to write this.  It goes toward clarification on this issue. 
What remains are questions as to what happens now?  And does this go any further than the leak.

I think one of the main things of interest at this specific point in time is the who leaked this document to the press.  They are no fans of Palin and the leak itself does not negate the findings within the report itself, so there is no benefit that I can see for Palin's side in this.  In fact, it would have been better for all of them if it had never been disclosed, then it truly would have gone away, as so many others have. 

Also, too,  could the leaker please leak a little more.    Thanks.

[curiouser]

Who is Kristan Cole?

Not sure if you're making the case that K.Cole is not qualified to be a trustee or if you're seriously wondering who she is.

Re Trust term...I'd leave that one alone.  It is an ambiguous clause and similar to the other trusts. 

You make a most effective case for the discrepancy between the emphasis on the aft website and the trust instrument.   Also, and, of course, the withdrawals are an unquestionable personal benefit.

Thanks again for your hard work!

[UK Lady]

JHop, Thank you, that made things much clearer. It would be very nteresting to know how this got leaked.

I cannot understand how the web site was used for info, and not the actual fund set up.

This whole fund stinks. What is the next step legally, who is now investigating? Does anyone know?
Can we get Shannyn Moore to read this?

Does anyone in the Pallin clan still have access, does Kristan Cole?

[the problem child]

I also skimmed the actual legal document linked from the website and had some of the same concerns, especially about the use of the money for any expense incurred as governor - !?!

The other question I had was in reference to the limitations on contributions. It seems to say that people can only donate $150 but in the document with more complete information that you cite here, it also talked about 'gifts' up to $13,000. That was the part I was interested in understanding as it seems to mean that you can only give $150 at one time but could give up to $13,000 for the year. Perhaps I misunderstood the point of that section but would be interested in a more thorough analysis. Somewhere between losing patience, lack of time and lack of knowledge I gave up trying to figure that out.
 

I have also had those concerns about the completely open ended purposes since I first read that danged document.

However, I think that the reference to 13,000 gifts is gifts out of the fund, not into it. There is a 150/ donor/ year limit into the fund. But the gifts out of the fund are another matter. These are the per person / year limits for the benefited individuals.

[JHop]

Who is Kristan Cole?

Not sure if you're making the case that K.Cole is not qualified to be a trustee or if you're seriously wondering who she is.

I meant it as a legitimate question. I do not know anything about her other than the brief info in the report. I assume Alaskans have a better idea of the specific projects she has been associated with on Palin's behalf, etc. I also didn't research it and probably should have.

[UK Lady]

JHop, I remember that K. Cole was involved in the Mat-Su Dairy debacle, other stuff too but can't remember. Her mother was indicted on fraud, I think that was a trust fund.

[ds55]

JHop, I remember that K. Cole was involved in the Mat-Su Dairy debacle, other stuff too but can't remember. Her mother was indicted on fraud, I think that was a trust fund.

Andrew Halcro article re:  Mat-Su Dairy debacle.
http://www.andrewhalcro.com/palins_agriculture_board_got_fraud

[UK Lady]

JHop, a bit more on K. Cole

http://www.fracturedfriendships.com/blog/who-kristan-cole-sarah-palin-s-bff

[UK Lady]

Article with more info on K> Cole and mother's fraud, it was a trust fund

http://blowpoppalin.blogspot.com/2009/06/kristan-cole.html

[roswellborn]

JHop,
If I remember rightly, Cole's mother has had legal issues in the past, I believe having to do with real estate.

Nan

[roswellborn]

JHop,
I do have a question that I didn't see addressed above. 

In Paragraph 3.(a) Rights of withdrawal... In the PDF, at the bottom of p 2 and dribbling over into the beginning of p 3, it says:

Except as otherwise provided herein, said power of withdrawal shall not be cumulative from year to year, must be exercised separately for each calendar year in which any such addition or additions are made, and shall be  exercisable only by written notice to Trustee of the amount Donee wishes to withdraw, but no purpose for said withdrawal need be shown.

The boldface is mine - and there is my question.  "no purpose need be shown"... does that mean what it sounds like it means?  That they can just waltz up to the "AFT" machine and haul out as much as they want (up to 13K for the year) and not even have to justify it in any shape, form or fashion?  Just "Kiss-my-grits and hand me the dough" is enough?

(wondering how I could finagle one of these things myself!  - NOT)

Nan

[Jaime from Wasilla]

My only knowledge of Kristan Cole is that she is one of the most visibly successful real Estate brokers in the Valley.  Any property she sells has a big bill board with her picture on it. Her reputation in real estate is pretty good.

[JHop]

JHop,
I do have a question that I didn't see addressed above. 

In Paragraph 3.(a) Rights of withdrawal... In the PDF, at the bottom of p 2 and dribbling over into the beginning of p 3, it says:

Except as otherwise provided herein, said power of withdrawal shall not be cumulative from year to year, must be exercised separately for each calendar year in which any such addition or additions are made, and shall be  exercisable only by written notice to Trustee of the amount Donee wishes to withdraw, but no purpose for said withdrawal need be shown.

The boldface is mine - and there is my question.  "no purpose need be shown"... does that mean what it sounds like it means?  That they can just waltz up to the "AFT" machine and haul out as much as they want (up to 13K for the year) and not even have to justify it in any shape, form or fashion? 

Nan

yes, it is their personal ATM. ridiculous, i know.

[Jackie2]

Jhop-as this fund could be considered their personal atm - isn't their website & fund drive for legal fee donations a fraudulant activity?

Therefore a downright dirty scandal as Dennis Zaki was referring to?

[curiouser]

JHop - about Kristan Cole.  See the Douglas PDF pages 6-7.  He lists a bunch of Palin-Cole relationships.