State auditor sides with Two Harbors officials in handling of mayoral conflicts

DULUTH — Two Harbors Mayor Chris Swanson may not have always disclosed how his business dealings overlap with his role as an elected official, the State Auditor's Office said in a report released Thursday that suggested the city implement more robust disclosure requirements for elected officials.

The auditor's office said in its report that it initiated a months-long investigation after receiving concerns about alleged conflicts of interest. The agency reviewed relevant city documents and business filings records with the secretary of state.

The city of Two Harbors had fielded similar complaints, leading the City Council to ask City Attorney Tim Costley to review Swanson's tweets, a podcast appearance and a website aimed at North Shore tourists. Costley offered the opinion that Swanson had violated the city's communication policies and, as an elected official and entrepreneur, used his position for personal gain.

The state auditor said that was the correct call.

"There is no reason to second-guess the decisions by Two Harbors city officials," State Auditor Julie Blaha said in a statement. "Based on our review, the actions of the City Council and the city attorney were decided properly. In addition, the city attorney was the proper person to offer the City Council the facts and conclusions."

In February, the state asked Two Harbors officials for cooperation looking into disbursements from the city to several businesses with ties to Swanson's immediate contacts — including Burlington Station, Garage Starts, Callie's Sweets and First Day Events. They found scenarios where Swanson has been inconsistent in disclosing his relationship to some companies.

Swanson called the news a good day for Two Harbors. He said there has been misinformation spread about the auditor's interest in his businesses.

"Today the findings came back, and they were not that the city gave me any money," he said.

City Council President Ben Redden did not immediately respond to a request for comment.

Swanson has been under fire for the past seven months, starting when word spread about his appearance on the "Ask a Billionaire" podcast where he suggesting building an underwater hotel in Two Harbors. He also was quoted in a New York Times article about cryptocurrency — a topic he was regularly posting about on Twitter.

With the limelight came public scrutiny and a successful campaign to get a recall vote on the Aug. 9 primary election ballot.

In June, the City Council voted unanimously to ask Swanson to resign. He has said he will not step down. Swanson wasn't at that council meeting or any that have followed.

The state's investigation found several instances where Swanson stated a connection to the local businesses he is involved with, but there is not always documentation to back it.

In one case, one of his employees filed the business listing for First Day Events with the secretary of state — information Swanson passed along to council members. At a later City Council meeting, he said he had no interest in the company that was tapped to help organize the city's first Festival of Sail. The company did not end up contracting with Draw Events, which is behind the festival.

"Given the confusion caused by the mayor's business ties and their impact on his role as mayor (and vice versa), the city may benefit from implementing the use of economic interest disclosure statements for its elected officials," the state suggested in its report.