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City attorney: Two Harbors mayor used position 'for personal benefit or business interests'

The findings were on a range of ethical issues that emerged in light of his underwater-hotel plans.

Chris Swanson
Two Harbors Mayor Chris Swanson listens as residents speak during the public comment period Monday.
Jimmy Lovrien / Duluth News Tribune
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TWO HARBORS — Mayor Chris Swanson repeatedly used his official city position “for personal benefit or business interests,” a violation of the city’s communications policy, the city attorney has found.

Swanson also made several related city code violations, but evidence presented to the attorney did not show any city charter violations.

The findings come in a wide-ranging memorandum of opinion written by City Attorney Tim Costley examining complaints regarding Swanson’s underwater-hotel pursuits, a website soliciting investors in the underwater hotel, tweets about a city cryptocurrency and one of his businesses, using his title as mayor to advance his own financial or private interest and also using information obtained in confidence to advance his own financial or private interest.

Though the opinion was not presented at Monday evening's meeting, it was available in a full council packet available for public review.

Because the opinion was completed Sunday, Swanson asked the council to push back discussion on it so he had more time to review it. He did comment on most of the issues in the opinion during the announcements portion of the meeting.

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It is expected to be considered at the April 25 meeting. Swanson will not be at the April 11 meeting.

After the meeting Monday, Swanson declined to comment to the News Tribune specifically on the memorandum of opinion.

In the opinion, Costley said in all matters he considered, there was no evidence the city entered into any contracts and that he had “no direct evidence that Mayor Christopher Swanson has any personal financial interest in these matters.”

Mr. O interview

In August 2021, Swanson appeared as a guest on the “ Ask a Billionaire Podcast, ” where he discussed plans for a $400 million underwater hotel and submarine with “Mr. O,” which is a pseudonym for a man claiming to be a billionaire. He was later identified as Daniel Victor Hancock, a Las Vegas felon with a history of luring in investors on empty promises .

The Two Harbors underwater-hotel backer has been accused of bilking a widow with the promise of gold bars in a cave if he could just get enough money to hire a geologist to retrieve them.

Costley wrote that Swanson failed to make a disclaimer that opinions were his own and that they are not representative of those of the city of Two Harbors, as required by the city communication policy.

“The representation by Mayor Swanson that part of the plan for the underwater hotel includes an RV park as part of the city’s municipal golf course implies that the city has such a plan,” Costley wrote. “This is not accurate and amounts to a misrepresentation. Making this statement and representing it as city business without using a disclaimer, is a violation of this policy.”

“My opinion is that identifying himself and/or allowing himself to be identified as the mayor of Two Harbors in this podcast, to promote his personal business interest and potential personal profit, is a violation of this policy,” Costley wrote.

During Monday’s meeting, Swanson apologized for the distractions caused by his underwater-hotel idea and that it wouldn’t be in the city limits because it would be underwater in Lake Superior.

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“Needless to say, the past few months for me have been extremely humbling,” Swanson said. “I want to deeply apologize for the distractions that this has caused this council.”

Swanson also told the council he had disclosed plans to the city attorney.

“Tim (Costley), I’m not throwing you under the bus here, but I sat in your office and we had a meeting, and there were witnesses present, and I told you about this Mr. O and economic development project,” Swanson said. “I think that was important to share because I don’t know that people know that.”

Costley responded later by calling that “an incorrect statement” and said he told Swanson at the time that an underwater hotel was a “pipe dream that will never happen.”

“So to imply that I knew something beforehand and that I was involved with Mr. O, or knew that was part of what was going on, I want this council to know that, that is not true,” Costley said.

Lou’s Fish House

The report cites a story from the Duluth Monitor news site explaining that Brian Entzion, of Knife River, met with Swanson and Lake County Chamber of Commerce President Janelle Jones in 2017 to share his vision to buy the Lou’s Fish House building in Two Harbors for his own business.

By 2018, a company formed by Swanson’s wife, Rebecca Swanson, bought the property and later reopened it. Entzion claimed Swanson used the information he provided to influence his wife’s purchase of the property.

Costley said if that’s true, and because the information shared in the meeting would be considered “trade secret information,” it would be a violation of city code, which says using nonpublic information for financial or personal interest is “unlawful.”

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“If unrefuted … it is my opinion that mayor Swanson received information in his official position as mayor of the city which was used to further his financial or other interest,” Costley wrote.

And, as with the other four issues Costley considered, he said Swanson used official city position “for personal benefit or business interests,” which is prohibited by the communications policy.

Swanson addressed the issue during Monday’s meeting, confirming he had met with Entzion but that it didn’t influence his wife’s purchase of the building.

“I don’t think you can expect somebody when they come to you and say they want to purchase your house and eight or nine months later, they still haven’t made a purchase agreement to think that they’re super serious,” Swanson said. “I’m sorry, Mr. Entzion, but that’s how business works. You got to show that you’re serious.”

Bandshell fundraising

According to a complaint made by former Two Harbors city planner Mark Johnson in 2020, then again in February 2022, Swanson was using his mayoral title and official city email to solicit funds for Friends of the Band Shell Park, which is hoping to replace the bandshell in Thomas Owens Park with a performing arts center.

At the same time, Johnson said that Swanson’s company Garage Starts was billing the bandshell group $65 for each call he had trying to solicit funds from Johnson.

Swanson serves as Garage Starts CEO, according to its website .

Costley said Swanson failed to include a disclaimer clarifying that he was not speaking in his official capacity as mayor, which violates city code. Additionally, Swanson violated the communications policy by “using an official position for personal profit or business interest.”

“I emailed using my mayor email account,” Swanson said Monday. “I should not have done that.”

VibeTwoHarbors.com

Costley said an unfinished but live website for the underwater-hotel project, VibeTwoHarbors.com , also violated city code and communications policy over Swanson’s use of his mayor title without a disclaimer and for using his city position “for personal profit or business interests.”

A contact form on the Vibrant Two Harbors website asks “individuals who are looking for high-return investments” to fill in their contact information so that “Mayor Swanson will be in touch.”

“To seek investors and promote his personal business interest and potential personal profit is, in my opinion, a violation of this policy,” Costley wrote.

Swanson on Monday said the website was made “with the hopes of showcasing the cool things for interested businesses that want to make investment in your community.”

Because there is no contract between the city and Vibrant Two Harbors, there is no city charter violation.

The website also touts his daughter’s Two Harbors businesses, Lou’s Fish House, Callie’s Sweets and Burlington Station, as “finished projects” by the Vibrant Two Harbors team.

“One could reasonably assume from this representation that there is a business relationship between Vibrant Two Harbors and these three entities. I do not have independent proof of any connection,” Costley said, adding that Swanson said he invested $1.7 million in Callie’s Sweets during the Mr. O podcast.

“If such a connection is shown in the future, and the City Council voted to promote that business in any way, further analysis would be required,” Costley said.

Tweets

Swanson has used his “Mayor Chris Swanson” Twitter account, @MayorSwanson , to tout the possibility of establishing an official city cryptocurrency for Two Harbors. He also used it to promote his Garage Starts business.

Costley said both are violations of city policy.

When Swanson tweeted about the possibility the city gaining revenue from a cryptocurrency, then using revenues to mine more and also put some in an investment fund where residents can then vote on its use in city projects, it was represented in a way that sounded like an official plan or policy as Swanson did not include a disclaimer, Costley wrote.

“The president (Joe Biden) has recently tweeted how he sees cryptocurrency as the future,” Swanson said Monday. “I didn’t think people would think that I was making an official statement for the city of Two Harbors.”

Costley wrote that his promotion of Garage Starts on Twitter violates the communications policy because he is “using official city positions for personal profit or business interests.”

“The communications policy also prohibits creating social media account names that are tied to the city,” Costley wrote. “In my opinion, use of the title ‘Mayor Chris Swanson @mayorswanson’ on Mr. Swanson’s personal Twitter account is a violation of this policy.”

Read about how this story was produced.

READ MORE FROM JIMMY LOVRIEN
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Jimmy Lovrien covers energy, mining and the 8th Congressional District for the Duluth News Tribune. He can be reached at jlovrien@duluthnews.com or 218-723-5332.
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