Palin's Relationship With Fraudster Raises Questions

July 27, 2009 1:18 pm ET — Chris Harris

While she has her share of critics, former Alaska Gov. Sarah Palin also has a number of passionate supporters. Fred Malek is a big one. Yet, in 2004 Malek was fined $250,000 for what the SEC called a "fraudulent scheme." For a woman whose favorite political zinger criticized then-Senator Obama for "pallin' around" with shady figures, she best be careful who she associates with herself.

Fred Malek: Palin's #1 Fan

In the wake of her decision to step down in the middle of her first term in office, former Alaska Gov. Sarah Palin has come under fire for what many in the media deemed as bizarre behavior.  While many Republicans have also been critical of her decision, she is able to claim a large number of supporters.

Fred Malek is one of them. 

The two first met shortly after she was chosen to be Sen. John McCain's running mate.  The Washington Post's Chris Cillizza reported:

Shortly after that selection, Palin and her husband, Todd, spent 90 minutes with Malek at his home in McLean, Va. where they chatted and the campaign filmed footage for several commercials.

Since Palin's resignation, Malek has been what Cillizza described as "the leading defender of Alaska Gov. Sarah Palin." In fact, it was Malek who first put "Palin under his considerable Washington wing" and invited Palin to join many Washington establishment figures at January's Alfalfa Dinner - "a venerable gathering of the city's political elite."

According to disclosure documents filed with the Federal Election Commission, Malek donated $3,671.80 to SarahPAC a mere three days after it launched.

Fred Malek's ties to prominent Republicans date back to President Nixon and beyond.  He served as campaign chairman for President George H.W. Bush and was on McCain's campaign finance committee in 2008.

Yet just because Malek is a member of the Republican Washington establishment doesn't mean he is an acceptable political acquaintance for a 2012 hopeful such as Palin.

Fred Malek: The (Fined) $250,000 Man

As chairman of Thayer Capital Partners, a Washington-based private equity firm, Malek and his venture were fined a combined $250,000 for a "fraudulent scheme" involving the Connecticut state employees' pension fund. 

According to the complaint filed by the Securities and Exchange Commission, former Connecticut State Treasurer Paul J. Silvester invested $75 million of the Connecticut Retirement and Trust Funds with Malek's Thayer Capital Partners.  In return for the investment, Malek agreed to pay William DiBella, a prominent supporter of Silvester's, $525,000 "even though DiBella had no prior involvement with the deal and ultimately performed no meaningful work related to the investment."

The SEC complaint noted:

Thayer, its affiliates, TC Equity Partners IV, LLC (TC Partners IV) and TC Management Partners IV, LLC (TC Management IV), and Malek also violated fiduciary duties to the Pension Fund by failing to disclose to the Pension Fund their employment of DiBella at the request of Silvester. Their conduct, directly or indirectly, violated §206(2) of the Investment Advisers Act of 1940 (Advisers Act)

Accordingly, the SEC ordered Thayer "to pay a civil penalty of $150,000 and Malek to pay a civil penalty of $100,000."

Palin's Pallin' Around With Fraudsters

A run-of-the-mill political alliance with a businessman fined for defrauding public servants is bad enough.  But it's dangerously close to hypocrisy for Sarah Palin, whose favorite political zinger criticized then-Senator Obama for "pallin' around" with shady figures.

If Palin wants to play the guilt-by-association game, she best be careful who she associates with herself.

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