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Lawmakers just gave State Auditor John Dougall a new tool that could allow him to temporarily seize a mysterious $500,000-or-so fund that is tied to the scandal-tainted Utah League of Cities and Towns.

Former league executive director Ken Bullock — who resigned under fire last month for charging $57,000 on league credit cards for travel to see his son play college basketball — has claimed the fund is private, and is controlled by himself and some former league members. But it was used to pay for some activities on behalf of the league.

A state audit last month said Bullock was paid $80,000 from the fund, and questioned whether the money is public and should be under public control.

Dougall confirmed Friday that he is still investigating the fund, called the Utah Municipal Cooperative II. That came after some quick legislative action to allow him to "take temporary custody" of money "if necessary to protect public funds from being diverted from their intended use."

The House added that language Thursday to SB137 that had been winding its way through the Legislature for weeks — and also changed the bill so it could take effect immediately. The Senate then approved the amendment the same day, and it landed on Gov. Gary Herbert's desk Friday.

Lawmakers said little about the amendment, other than Dougall said he needed it for an unspecified ongoing investigation. Dougall had no comment about it when asked by The Tribune.

But Midvale Mayor JoAnn Seghini, former treasurer of the league and — until Friday — a trustee of the fund in question, said, "It was passed by the Legislature to allow seizing" the fund.

Late Friday, Seghini resigned as a trustee of the fund and explained why in a press release.

"I relied on others in administrative positions who stated that the trust's money was private money. I recently discovered that the origin of the Trust's money was, in fact, public money," she wrote.

"Upon this discovery, it has been and continues to be my belief that this money should be immediately turned over to the Utah League of Cities and Towns. When it became apparent that the other trustees were not going to act immediately to dissolve the trust and return the money, I made the decision to resign."

League President Steve Hiatt, who is also mayor of Kaysville, said that lawyers from the league, the fund and the state auditor's office are trying to resolve who owns the money and who should control it.

"I can't say the legislation passed is specifically for this, but I think it's great for the Legislature to ensure in unique situations that funds are protected," he said.

Hiatt said documents obtained by the league show that the fund had about $500,000 as of last June.

He said that founding documents for the fund also showed that it was intended to raise money to benefit the league, and that the cooperative was intended to be disbanded by Dec. 31, 2012, with money transferred to the league.

It never was disbanded as ordered by those original documents. Hiatt said the league and others are investigating whether any later action was taken to extend its existence. "We have incomplete documentation," so he said the league is unsure.

Hiatt added, "It's not a money issue for the league," saying the league is not desperate for the funds. "It's a fiduciary responsibility to the public. Any governmental entity that has money out there that rightfully belongs to it, it would be irresponsible not to pursue a dialogue to determine whether it is being rightfully used."

He added, "We can't just sit back and hope for the best. That would be irresponsible. We have to be proactive."

More details of the fund emerged last month after documents obtained by The Tribune showed the league was paying the online arm of the Deseret News $10,000 a month — $120,000 a year — to place "sponsored stories" on the website of the Mormon church-owned newspaper.

The Deseret News then disclosed that it was paid not by the league itself, but by the mysterious fund through checks written by Bullock. Hiatt said Bullock had told the league that the money came through a private donor, and that no public funds were used.

Depending on what the ongoing audit finds, those sponsored stories may have been funded by public money.