A former claims adjuster who worked for a company in Alaska that has a state contract to process workers compensation claims testified to an special prosecutor that Gov. Sarah Palin’s office requested that the firm deny a benefits claim filed by Palin’s ex brother-in-law in the spring of 2007.

The claims adjuster, Johanna Grasso, was interviewed by Steve Branchflower, the special prosecutor appointed in July to investigate whether Palin fired Public Safety Commissioner Walt Monegan because he refused to fire Palin’s former brother-in-law, Mike Wooten, an Alaska state trooper who was engaged in a bitter divorce and child custody dispute with Palin’s sister.

Earlier this month, Branchflower had spoken with Murlene Wilkes, who runs Harbor Adjustment Service, where Grasso was employed, and questioned whether she was pressured by Palin or anyone in the governor’s office to deny workers compensation claim filed by Wooten. Wilkes told Branchflower there wasn’t any pressure to reject the claim.

But then Grasso contacted a tip line set and left a message stating that she recalled that Wilkes told her Palin’s office wanted Wooten’s claim denied.

Branchflower contacted Grasso and under oath she testified that Wilkes told her Palin’s office did say that Wooten’s workers compensation claim should be denied.

At a hearing a this month where he sought authorization from the Legislative Council to issue subpoenas-one of which was for Wilkes-in the case Branchflower he read a portion of Grasso’s testimony related to the request by Palin’s office to deny Wooten his benefits.

“Well I remember at one point in the conversation she had mentioned or said something to the effect that either the governor or the governor’s office wanted this claim denied and I remember my response being, why? I don’t care if it’s the president that wants the claim denied I’m not going to deny it unless I have the medical evidence to do that,” Grasso testified, according to Branchflower.

Wooten began receiving workers compensation benefits in January 2007. That same month, Palin’s husband started to follow Wooten. He took pictures of the trooper hunting, and on a snowmobile, purportedly to prove that Wooten was not too sick or injured to work. In April of 2007, Wooten received a letter stating that his workers compensation benefits had been denied.

Johanna Grasso, the former claims adjuster who testified this month that Palin’s office became involved in Wooten’s case, signed the letter.

In Wooten’s workers compensation file there is apparently a photograph taken in 2007 by Palin’s husband, Todd Palin, of Wooten riding a snowmobile when he was supposedly out on disability.

According to John Cyr, executive director of the Public Safety Employees Association which represents Wooten and other state troopers, Wooten was approved for workers comp benefits in January 2007 because he had suffered a back injury when he pulled a dead body from a wrecked automobile and slipped on icy pavement.

After Wooten started receiving workers comp, Todd Palin began following him around “snapping pictures,” Cyr said.

Cyr said Wooten received his benefits totaling $11,000 without any problems until “somewhere between the end of March and the first of April.”

Then, “out of nowhere [Wooten's] workers comp claim was contravened, which basically means he got a letter saying he wasn’t entitled to benefits anymore,” Cyr said in an interview.

After Wooten “hired an attorney and filed a counterclaim against the state,” there was a settlement in November 2007 in which Wooten underwent a back operation, Cyr said.

“This was a serious injury and he was flat broke and had to file for bankruptcy because his claims were denied,” Cyr said, accusing Palin of abusing her power. “There was absolutely a personal vendetta against this trooper by the governor and the governor’s staff.”

According to documents in Wooten’s case, another apparent factor in denying his disability claim was a preexisting condition from the trooper’s days in the U.S. Air Force.

The Public Record reported Monday that Wilkes, who testified under oath a couple of weeks ago, is said to have changed her story and confirmed Palin’s office said Wooten’s workers compensation claim should be denied when confronted by Branchflower with the contradictory information, according to three state officials knowledgeable about her subpoenaed testimony.

However, Wilkes’s sister, Carol Lindsey, in a series of email exchanges, vehemently denied that her sister changed her story during her testimony. Lindsey said the suggestion that Wilkes recanted her previous statement was an “outright lie.” 

“I can only say that [Murlene] will tell anyone and everyone who asks her that she gave a statement and she has never changed that statement,” Lindsey said. “Beyond that I have no information. The story that she has changed her statement is a lie. You could ask her.”

A message left for Wilkes at Harbor Adjustment late Wednesday was not returned. Her attorney, Robert Erwin, a former Alaska Supreme Court justice, was out of the office Wednesday afternoon and did not return a message left for him. 

Erwin’s daughter, attorney Roberta Erwin, represented Palin’s sister, Molly McCann, in divorce proceedings from Wooten.

Lindsey did not say whether Wilkes told her the substance of her testimony.

“I do not know the particulars of the case as this is a confidential matter,” Lindsey said in an email.

However, in a transcript of a conversation between Frank Bailey, Palin’s director of boards and commissions, and Alaska State Trooper Lt. Rodney Dial, Bailey confirms that the governor’s office interceded to some degree in Wooten’s workers compensation after Todd Palin took the photograph of Wooten on a “snowmachine”. 

“The situation where [Wooten] declared workers comp, but then was caught on an eight-mile snowmachining [sic] trip days – days after, you know, that – that started coming up there,” Bailey said. “So we collected statements that we forwarded on to workers comp.”

“Frank Bailey was getting people to say that [Wooten] was lying on his workers comp form,” Cyr said. “The governor’s family was following Mike around everywhere. They forwarded that information to the workers comp division.”

Wilkes recently succeeded in renewing her company’s $1.2 million state contract despite lower competing bids. When the contract was renewed this year, Wilkes’s firm got a raise to $1.5 million even though there were at least three other bids that came in at $1.2 million.