Administrators of a legal defense fund set up for former Alaska Gov. Sarah Palin have 90 days to return nearly $400,000 to donors, after an ethics investigator determined the fund was illegal.

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, State Personnel Board investigator Timothy Petumenos said Thursday.

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

Palin's attorney, Thomas Van Flein of Anchorage, said he recommended that the fund's status be vetted by state attorneys before it was established, but that advice was not taken.

Van Flein said the trust brought in about $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 because 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."

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

Van Flein said Palin herself never received any money from the first trust, which prompted an ethics complaint against her.

"As soon as it was questioned, she froze all action on it, and waited for the independent council to investigate and make a determination," he said.

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.

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.

Palin's former spokeswoman, Meghan Stapleton, posted a message about the defense fund resolution on Palin's Facebook page, thanking supporters for contributing to the trust and adding that people can contribute to the new fund.

Van Flein was asked whether a legal defense fund was proper for Palin, who has reportedly made at least $12 million from her best-selling book and other media deals in the past year.

"To me this is really a public debt that she has taken the burden on privately," Van Flein said. "So I don't expect her -- and I don't think the public expects her -- to take out her own checkbook for what is really a cost of doing business as a public official."

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Online:

http://www.sarahpalinlegaldefensefund.org/donate.php