I tracked down a verbatim transcript of the "speech" and here's the relevant passage:

Relatives from Canada, too. We have the foundation of the Palin family, one grandfather was born in Manitoba, this was a farming family there. And then another one born in Saskatchewan and we were some pretty funny stories of our relatives who were bootleggers I guess. This was many, many years ago. Don’t blame me. There’s never a boring story when it comes to the Palins. So much exciting stories that you would hear about how they would live in Canada and Alaska, back and forth.

So maybe the press reports of her grandfathers actually being bootleggers were garbled. You can be forgiven for mis-hearing a phrase like:

we were some pretty funny stories of our relatives who were bootleggers I guess.

But it's still worth clarifying who these grandfathers are, and where they were born.

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