September 25, 2022
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State auditor: Two Harbors mayor may not have disclosed all business interests when they went before city – Duluth News Tribune

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TWO HARBORS — A state investigation into Mayor Chris Swanson found he may not have disclosed interests in organizations that went before the City Council. It also found the council and city attorney “acted appropriately” in reviewing whether conflicts of interest existed.

The 12-page investigative report released by the Minnesota Office of the State Auditor on Thursday found Swanson, who faces a recall election Aug. 9, disclosed his interest in some of his organizations that went before the council but documentation of disclosures for other organizations could not be found.

“The (Office of State Auditor) found instances where city actions involved one or more of the businesses that appear to be connected to the mayor,” the report said. “Documentation suggests that the mayor may have disclosed an interest in some of these businesses. For others, we found no documentation of such disclosure.”

The investigation into the mayor’s business dealings began in February,

the News Tribune first reported.

According to auditor’s report, Swanson disclosed his involvement in Life Garage, LLC as “a mentor and advisor and as the father of Callie Swanson.”

As the News Tribune previously reported

, Callie Swanson is listed as Life Garage LLC’s president, according to a $100,000 loan Life Garage received from the Two Harbors Development Fund, a city-run nonprofit, in October 2019.

The $100,000 loan was funded through a grant from the Department of Iron Range Resources and Rehabilitation to the Two Harbors Development Fund, but Life Garage had borrowed a total of $150,000, according to meeting minutes from the fund obtained by the News Tribune through a city data request.

Callie Swanson received an additional $70,000 in loans from the fund in July 2020 to help fund construction work at Burlington Station, her gift and candy shop in Two Harbors, according to the fund’s minutes.

The report did not mention the loans Life Garage or Burlington Station obtained through the city-run nonprofit, but cited a September 2019 letter from the city attorney at the time saying the fund was a “standalone Minnesota nonprofit corporation” and included the mayor’s disclosure of his connection to Life Garage.

Current City Attorney Tim Costley is separating the nonprofit from the city.

The report said Swanson, a board member of the Friends of the Bandshell Park in 2017 and 2018, also abstained from voting on certain actions related to the group before the council but that the meeting minutes do not say why Swanson abstained.

But meeting minutes in August 2017, March 2018 and November 2019 show the city provided city funds to the Chalk.a.lot festival, but that “these meeting minutes do not reflect a disclosure by the mayor of a connection to the nonprofit corporation.”

The report also suggests Swanson changed his tune on disclosing his interest in First Day Events,

the nonprofit incorporated by his daughter, Ashleigh Swanson, that was organizing volunteers and applying for permits from the city for the upcoming Festival of Sail

after the mayor urged the council to support hosting the event (the group is no longer involved in the event.)

The articles of incorporation also listed Sarah Koster, who was the executive administrative assistant for Garage Starts. Swanson was the CEO of Garage Starts, according to the website at the time (

he no longer appears on the website’s “About” page

).

“City Council meeting minutes indicate that when asked about the business First Day Events, the mayor reported to the City Council that the individual who filed the (Office of Secretary of State) paperwork for First Day Events ‘was his admin and worked for him,'” the report said. “He went on to say that, ‘He thought that he could just abstain from a vote.’ He also reported ‘that his counsel has shared with him that, particularly in small communities, people will have conflicts of interest. His understanding is that he should be transparent, but that people can have contracts as long as they disclose them.’ However, in subsequent meeting minutes, the mayor reported ‘that he has no direct or indirect interest in First Day Events.'”

The Office of State Auditor recommended the city require elected officials complete economic interest disclosure statements going forward.

“If the city required its elected officials to complete similar statements shortly after taking office, the city might be in a better position to identify potential conflicts of interest when they arise,” the report said.

The report listed several additional recommendations the city could take to avoid such issues in the future:

  • Record abstentions from voting due to a conflict of interest in the City Council meeting minutes. Name and reason for abstention should be recorded.
  • Ensure city officials and city employees only serve in a non-voting capacity on the board of nonprofits meant to help local government.

Additionally, the report found the Two Harbors City Council and Costley, the city attorney, “acted appropriately in considering whether certain conduct by the mayor violated provisions of Minnesota Law, the City Charter, the City Code, and the City Communications Policy.
“These determinations are the responsibility of the City Council and the City Attorney in the first instance, and our review revealed nothing to suggest that they were reached improperly or were without support,” the report said.

In a memorandum of opinion, Costley wrote that Swanson repeatedly used his official city position “for personal benefit or business interests” on a number of issues,

the News Tribune reported in March.

Last month,

the council voted 6-0 to urge Swanson to resign.

Swanson did not attend the meeting and has not attended a council meeting since.

Swanson will face a recall election Aug. 9. Two Harbors voters will answer “yes” or “no” to the question:

“Shall Mayor Christopher Swanson be recalled?”

Swanson and other city officials did not immediately respond to the News Tribune’s request for comment Thursday morning.





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