State investigator Tim Petumenos says the violation of the Alaska Ethics Act by Sarah Palin's legal defense fund was not a knowing violation. (Dan Carpenter/KTUU-DT)

State investigator Tim Petumenos says the violation of the Alaska Ethics Act by Sarah Palin's legal defense fund was not a knowing violation. (Dan Carpenter/KTUU-DT)

After 15 months of investigation, a state investigator has found that former Gov. Sarah Palin's legal defense fund was illegal.

Tim Petumenos, who investigated Palin's defense fund for the state ethics board, said Thursday that the fund violated state law -- requiring the return of money given to the fund by several thousand donors.

Petumenos says the use of the word "official" on the fund's website suggested Palin endorsed it as governor. He also said that fund trustee Kristan Cole should never have been involved with it, because she's a public official.

The announcement comes 15 months after a complaint was filed against the fund.

"The independent counsel in this case has found two grounds for finding that the defense fund, as written, does not comply with the Alaska Ethics Act," Petumenos said.

The decision means Palin's legal defense fund must return more than $386,000 to donors, all of it raised while she was in office.

"The two grounds found was that the language of the website that was accompanying this defense fund trust constituted using public office to obtain a private benefit," Petumenos said.

Palin's attorney, Thomas Van Flein, says she worked with seven top attorneys who told her the defense fund was legitimate.

"She relied on their advice and they were a good legal team," Van Flein said. "It just so happens Mr. Petumenos doesn't think that they got it 100 percent right, there; the governor is fine with that. It's not worth fighting about, because she had one instruction: if it's lawful do it, if it's not lawful don't do it."

The woman who helped create the fund, Palin advisor Meghan Stapleton, says she was told the legal defense fund was similar to ones used by other politicians.

"We honored their legal expertise on both sides of the aisle to say this is just like every other trust fund set up like the Clintons, the Kerrys, the Ted Stevens of the world, and you're got no problems -- so go for it," Stapleton said.

Petumenos says Palin did not knowingly break the state ethics law.

"The governor asserted in connection with our investigation that the violation, if there was one, was not a knowing violation," Petumenos said. "Because the trust fund was created and the website was created and drafted fully with the advice of counsel, and with that advice there was a good-faith effort to comply with the act."

Another issue Petumenos found was that the fund's benefits weren't just limited to Palin, and could also be used by members of her family.

A new defense fund for Palin has been created.

Contact Rebecca Palsha at rpalsha@ktuu.com