East Grand Forks discusses loan in closed meeting; Mayor Stauss recuses himself from issue involving family
East Grand Forks city officials met behind closed doors with their legal representation regarding a large unpaid loan for about two hours Tuesday night.
But they did so without Mayor Lynn Stauss, who recused himself, citing perceptions of a conflict of interest in a matter involving his brother.
The City Council and Economic Development and Housing Authority board met to discuss “possible litigation,” according to a public notice posted on the city’s website last week. The notice cited the attorney-client privilege exception to Minnesota’s open meeting laws.
The city hired Fargo-based attorney Brad Sinclair to help it recover a $510,000 economic development loan used to help build the Boardwalk building that has gone unpaid for more than a decade. Annual $30,000 payments from Boardwalk Enterprises were supposed to start in 2003, but payments haven’t come, city staff members revealed in late April.
Property records show that Dan Stauss, a brother of Mayor Stauss, has been a partner in Boardwalk Enterprises. The two were also listed last year as president and secretary/treasurer, respectively, of Grand Forks-based Hampton Corp. Inc.
The mayor said last week the two businesses are “completely separate.”
The mayor reiterated before the closed meeting that he doesn’t have anything to do with Boardwalk, and said he purposely stayed out of the business from the beginning to avoid a potential conflict of interest.
Stauss said he had no knowledge of the loan.
“Some are going to say, ‘Oh, but you signed it,’” Stauss said, an apparent reference to a June 1999 development agreement with Boardwalk Enterprises that he signed. The development agreement contains references to a $510,000 loan, but the loan agreement itself was finalized later that year without the mayor’s signature.
Stauss said Tuesday there are a lot of items that required his signature.
“They say, ‘They’re all ready, here they are, sign them,’” Stauss told council and EDHA board members. Neither the loan agreement nor the development agreement contain Dan Stauss’ signature.
Mayor Stauss said some in the community, including some council members, believe he has a conflict of interest, which he denied.
Stauss said Tuesday he will “recuse myself from all the conversations, meetings and any discussions regarding this matter from here on in.”
Open meeting question
City Attorney Ron Galstad said discussion Tuesday would be limited to litigation strategy “and no other business will be addressed.” He said it would be detrimental to the city if the discussion were public, because information about legal strategy would be available to “possible litigants” and could affect the city’s ability to collect the loan.
Galstad added that opening the meeting could be detrimental to the public itself, because the money would go back into city coffers if the loan were collected.
Mark Anfinson, the attorney representing the Minnesota Newspaper Association, said he isn’t aware of any court opinion “on this exact kind of situation.”
But Anfinson did point to a Minnesota Supreme Court case involving the Prior Lake American newspaper in which the court said “it’s nearly always improper for a public body to close a meeting based on the attorney-client privilege to talk about a decision that has not yet been made,” according to Anfinson. In that case, city officials closed a meeting to discuss litigation that was threatened before the City Council had acted on a contractor’s permit.
While he said the Prior Lake case isn’t a “perfect analogy” to the East Grand Forks situation, he said it’s “reasonably close” if city officials are deciding whether to file a lawsuit.
Anfinson said he was also skeptical of the city’s claim that the content of the meeting was too sensitive to be public.
A Herald reporter requested that the meeting be open to the public Tuesday.
“The city and the EDA recognize and do not take lightly the public’s right to be informed,” stated a press release issued by City Administrator David Murphy Monday.
Galstad said the city would be issuing press releases concerning future meetings in an effort to keep the public informed. Murphy said a press release would be issued today.
Herald staff reporter Garrett Richie contributed to this report.