Laws governing Iron Range loans are 'sketchy,' watchdog says

A state agency's support of a company devoted to Democratic fundraising and campaigns is generating criticism from government ethics scholars and some legislators, but it may not run afoul of state law.

Minnesota Legislative Auditor Jim Nobles said he would examine the loans made by the Iron Range Resources and Rehabilitation Board (IRRRB) to Meyer Associates following a Star Tribune story about the deal on Sunday. But state law is "surprisingly sketchy" on the topic of using public funds for partisan political activity, Nobles said.

Meyer, a St. Cloud company whose core business was Democratic fundraising and campaigns, opened a call center in Eveleth with loans it got in 2006 from the IRRRB economic development agency. Meyer folded last year, owing the agency $250,000.

A related Democratic-oriented campaign company, New Partners consulting, bought the equipment that was collateral for the loan and quickly reopened the call center.

"It clearly smells bad," said David Schultz, a political-science professor at Hamline University in St. Paul. "A lot of this sort of has the look of good old-fashioned patronage, and good old-fashioned quid pro quo."

According to Schultz, state and federal courts across the country have ruled that public officials cannot spend public dollars for partisan political purposes. Alaska, for example, specifically prohibits the use of public funds for political activity. Yet Minnesota's weak conflict-of-interest laws don't fully address the subject of using government resources for partisan politics, he said.

Minnesota was at the forefront of campaign ethics and reform two decades ago, but a backlash from lobbyists and political parties and "resting on laurels" caused reform to stall in the 1990s, Schultz said.

The responsibility for enforcing ethics laws is fragmented. The state's Campaign Finance and Public Disclosure Board enforces a law focused on public officials disclosing any personal financial gain from their decisions.

Other statutes restrict the activity of employees in the executive branch, prohibiting them from soliciting funds for political purposes while on the job, but neither appears to pertain to the Meyer deal. One of them says that state employees can't use state time or property for their private interests "or any other use not in the interest of the state, except as provided by law."

Carolyn Trevis, the state ethics officer at Minnesota Management and Budget, declined to discuss the matter. A spokesman issued this statement: "Minnesota Management and Budget, or the state ethics officer, would not be in a position to comment on the merits of a situation without proper due diligence or reviewing the facts of the matter."

The conflict-of-interest gaps in state law have come up before when people have complained to his office about possible misuse of public money for campaigning, said Nobles.

He was asked to investigate whether former Secretary of State Mark Ritchie misused public resources when in 2012 Ritchie campaigned on the job against the proposed Voter ID constitutional amendment and when Human Rights Commissioner Kevin Lindsey opposed both the Voter ID and anti-gay-marriage amendments.

Nobles declined to conduct a full investigation in those two cases because ambiguities in Minnesota law prevented him from "delivering a definitive conclusion," he wrote in a 2013 letter to a legislator.

As for the IRRRB, Nobles said that his office is gathering information on the loans the agency made and details about the political and commercial work Meyer Associates did and that he would use the information to decide any further action. "That action could include a full audit of the IRRRB or a special review focused just on the call center issues," Nobles said.

IRRRB spokeswoman Sheryl Kochevar issued a statement Tuesday saying:

"In 2006, the IRRR board, commissioner [Sandy] Layman and the Pawlenty administration approved this loan in an effort to create jobs on the Iron Range. We welcome the review of that decision by the Office of the Legislative Auditor, and look forward to receiving their recommendations."

Nobles' office is already auditing the IRRRB over the structure of Minnesota's mineral taxes. Based in Eveleth, the IRRRB gets much of its $40 million annual budget for economic development from a tax that mining companies pay on taconite.

Sen. David Hann, R-Eden Prairie, said he thinks the IRRRB should be shut down because he believes the Legislature, and not special agencies, should control tax revenue. But he does not think that the IRRRB broke any laws or ethics rules in its dealings with Meyer.

"This is just an exercise in very bad judgment on the part of the DFL," Hann said.

Jennifer Bjorhus • 612-673-4683