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TWO HARBORS – A state investigation into Mayor Chris Swanson has found he may not have disclosed the interests of organizations that appeared before the City Council. He also said the council and city attorney “took appropriate action” in assessing whether conflicts of interest existed.
A 12-page investigative report released Thursday by the Minnesota State Auditor’s Office found Swanson, Swanson, who is contesting the August 9, 2007 election, has expressed his interest in some of his organizations that appeared before the council, but no official documents have been found for other organizations.
“(The state auditor) found instances where the city’s actions involved one or more businesses that appeared to be related to the mayor,” he said. “The document indicates that the mayor disclosed his interest in some of these businesses. For others, we did not find such disclosure documents.”
The investigation into the mayor’s business dealings began in February, the News Tribune first reported.
In an interview with the News Tribune on Thursday afternoon, state Auditor Julie Blaha said the investigation was prompted by “pervasive” concerns about Swanson that people shared with her office, the Minnesota attorney general’s office and the city attorney.
Blaha recognized the city council for not having a conflict of interest with the mayor.
“I suggest that the actions of the city council not only protect the interests of local citizens, but also help protect the mayor,” Blaha said. “I think (the city council) avoided some of the problems because it eliminated a number of contracts.”
Asked if she believed Swanson was indifferent to the mix of business and public service, Blaha said she couldn’t say.
“Frankly speaking, this is the people of Two Ports who will decide on August 9,” Blaha said, referring to the recall election.
According to the auditor’s report, Swanson was involved in Life Garage, LLC as a “consultant and consultant and the father of Callie Swanson.”
As the News Tribune previously reported, Callie Swanson is listed as the president of Life Garage LLC in a $100,000 loan the nonprofit received in October 2019 from the City of Two Harbors Development Fund.
The auditor’s report states that Swanson signed business documents with the state “for the assumed name Garage Starts, LLC, for the owner of the name – Life Garage, LLC.”
Swanson was CEO of GarageStarts, the GarageStarts website said earlier this year (he does not appear on the website’s “About” page).
The $100,000 loan was backed by a grant from the Steel Region Resources and Rehabilitation Department to the Two Harbors Development Fund, but Life Garage borrowed a total of $150,000, according to city meeting minutes obtained by the News Tribune. Question
Callie Swanson received an additional $70,000 loan from the fund to help with construction work on the gift and candy shop at Burlington Station, Two Harbors.
The report did not mention the loans received through the city-run charity Life Garage or the Burlington site, but it did refer to a letter sent in September 2019. Steve Overom, the city’s attorney at the time, said the fund was “only a Minnesota nonprofit corporation” and included the mayor’s disclosure of his relationship with Life Garage. As a result, Overom said the loan did not present a conflict of interest between the city and Swanson.
Mayor Swanson is of the view that actions taken by THDF are not actions taken by the City due to its involvement with Life Garage, LLC, LLC does not violate Section 2.61 Subdivision 2A of the Two Harbors City Code. A copy of a letter provided to The News Tribune by the state auditor’s office.
However, Overom urged THDF board member and Life Garage employee Massey Jones to resign from one of her jobs before THDF considered Life Garage’s loan.
Current City Attorney Tim Costley is now completely separating the nonprofit from the city.
Blaha echoed Orom’s opinion.
“A lot of times, cities generally don’t have the authority to run a nonprofit,” Blaha said. “So it might be a non-profit that does things that benefit the city, but it’s not the city’s profit. So, they don’t have jurisdiction over that, and that’s probably why there’s no contract there.”
In the year Swanson, a Friends of Bandshell Park board member in 2017 and 2018, abstained from voting on some actions related to the group before the council, but the meeting minutes do not say why Swanson abstained, he said.
But meeting minutes from August 2017, March 2018 and November 2019 show the city gave city money to the chalk.a.lot festival, but “these meeting minutes do not reveal the mayor’s relationship with the nonprofit corporation.”
The report also suggests that Swanson has changed his tune by expressing his interest in first-day events, the mayor urged the council, which is organized by his daughter Ashley Swanson, who is organizing volunteers and seeking approval from the city for the upcoming Sail Festival. To support hosting the event (the team is no longer involved in the event).
The articles also mention Sara Koster, the CEO of Swanson’s Garage Starts.
“According to the City Council meeting interview, when the mayor was asked about the first day of business arrangements, the person who provided the City Council (Office of the Secretary of State) with the first day arrangements paper was the manager and worked for him,” the report continued. “He thought he could avoid the vote.” He said. He also stated that his counsel shared with him that, ‘especially in small communities, people have conflicts of interest. His understanding is that he needs to be transparent, but people can have contracts as long as they don’t disclose.’ However, in subsequent meeting minutes, the mayor reported that he had ‘no direct or indirect interest in the first day’s events’.
The state auditor’s office urged the city to have full financial disclosures of elected officials.
“If the city requires elected officials to complete similar disclosures shortly after taking office, the city will be in a better position to identify potential conflicts of interest when they occur,” the report said.
The report lists several additional recommendations the city can take to avoid such problems in the future.
- Record abstentions due to conflict of interest in the City Council meeting minutes. The name and reason for the disallowance must be recorded.
- Ensure that city officials and city employees serve only in a non-voting capacity on the boards of nonprofit organizations designed to assist local government.
Additionally, the report states that the Two Ports City Council and Costley, the city attorney, “considered certain actions by the mayor to be in violation of Minnesota law, the city charter, city code and city communications policy.”
“These decisions are primarily the responsibility of the City Council and the City Attorney, and our review revealed nothing to indicate that they were improperly reached or not supported,” the report said.
In the opinion memo, Costley wrote that Swanson frequently used his official city position “for personal or business purposes” on multiple occasions, the News Tribune reported in March.
Last month, the House voted 6-0 to urge Swanson to resign. Swanson did not attend the meeting and has not attended a council meeting since.
Swanson faces a recall election on August 9. Two Ports voters asked a yes or no question, “Will Mayor Christopher Swanson be recalled?” They answer the question.
City officials did not immediately respond to The News Tribune’s request for comment.
“Today is a great day for two ports,” said an emailed statement to the News Tribune by Ashley Swanson on behalf of Mayor Swanson. The truth is starting to come out,” he said.
The only information on the auditor’s investigation that was made public before the report was released Thursday morning came from an agenda item on the Feb. 14 council meeting. On the agenda, Nicole Bjornrud of the State Auditor’s Office of Special Investigations sent a letter to the city demanding that eight organizations associated with Swanson and his family pay all fees from the city.
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But in a statement, Swanson criticized the resignation or recall committee for misrepresenting the state auditor’s inquiry during the court hearing as an audit.
The state auditor was looking into any spending the city sent to the Swanson-family firms.
Blaha said the lesson for all local officials should be to err on the side of caution with potential conflicts.
“Declare early, declare often,” Blaha said. “The sooner you can get on the table, the less risk you have. Want to avoid accidents? Keep all possible conflicts in front of you.”
This story was updated on July 28 at 4:04 p.m. with quotes from State Auditor Julie Blaha and Mayor Chris Swanson. Additional information from former City Attorney Steve Orom’s letter; PDF of the letter; And a photo of the agenda detailing what the state auditor is looking at. Originally posted on July 28 at 12:36 pm.
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