By 1916 Swanson was working for the Public Utilities Protective Bureau. On 11th June 1916, a high-voltage tower of the Sierra and San Francisco Power Company, which served the URR, was dynamited in the San Bruno hills. Soon afterwards the URR offered a reward of $5,000 for information leading to the arrest and conviction of the dynamiters.
Swanson became convinced that Tom Mooney was the man responsible for the bombing. On 13th June 1916 Swanson interviewed Israel Weinberg, a jitney bus driver who had often taken Mooney to trade union meetings. Swanson offered Weinberg a share of the $5,000 reward if he could provide evidence that would convict Mooney of the San Bruno bombing.
Soon afterwards Swanson approached Warren Billings. As well as a share of the $5,000 reward Billings was offered a job with the Pacific Gas and Electric Company if he could provide information connecting Mooney with the San Bruno bombing. Billings refused and reported the approach to Mooney and George Speed, the secretary of the Industrial Workers of the World (IWW).
On 22nd July, 1916, employers in San Francisco organized a march through the streets in favour of an improvement in national defence. Critics of the march such as William Jennings Bryan, claimed that the Preparedness March was being organized by financiers and factory owners who would benefit from increased spending on munitions.
During the march a bomb went off in Steuart Street killing six people (four more died later). Two witnesses described two dark-skinned men, probably Mexicans, carrying a heavy suitcase near to where the bomb exploded.
The Chamber of Commerce immediately offered a reward of $5,000 for information leading to the arrest and conviction of the dynamiters. Other organizations and individuals added to this sum and the reward soon reached $17,000. Offering such a large reward was condemned by the editor of the New York Times claiming it was a "sweepstake for perjurers".
On the evening of the bombing Swanson went to see the District Attorney, Charles Fickert. Swanson told Fickert that despite the claims that it was the work of Mexicans, he was convinced that Tom Mooney and Warren Billings were responsible for the explosion. The next day Swanson resigned from the Public Utilities Protective Bureau and began working for the District Attorney's office. On 26th July 1916, Fickert ordered the arrest of Billings, Mooney, his wife Rena Mooney, Israel Weinberg and Edward Nolan.
None of the witnesses of the bombing identified the defendants in the lineup. The prosecution case was instead based on the testimony of two men, an unemployed waiter, John McDonald and Frank Oxman, a cattleman from Oregon. They claimed that they saw Warren Billings plant the bomb at 1.50 p.m. Oxman saw Tom Mooney and his wife talking with Billings a few minutes later. However, at the trial, a photograph showed that the couple were over a mile from the scene. A clock in the photograph clearly read 1.58 p.m. The heavy traffic at the time meant that it was impossible for Mooney and his wife to have been at the scene of the bombing at 1.50 p.m. Despite this, Mooney was sentenced to death and Billings to life-imprisonment. Rena Mooney and Israel Weinberg were found not guilty and Edward Nolan was never brought to trial.
After the trial one of the witnesses, Mrs. Compton, who had seen the bomber but claimed it was not Tom Mooney and Warren Billings, claimed that Swanson had made threats concerning her husband's job if she testified in court.
The American government became concerned about the Mooney and Billings Case and the Secretary of Labor, William Bauchop Wilson, delegated John Densmore, the Director of General Employment, to investigate the case. By secretly installing a dictaphone in the private office of the District Attorney he was able to discover that Mooney and Billings had probably been framed by Swanson and Charles Fickert. The report was leaked to Fremont Older who published it in the San Francisco Call on 23rd November 1917.
There were protests all over the world and President Woodrow Wilson called on William Stephens, the Governor of California, to look again at the case. Two weeks before Tom Mooney was scheduled to hang, Stephens commuted his sentence to life imprisonment in San Quentin.
In November 1920, Draper Hand of the San Francisco Police Department, went to Mayor James Rolph and admitted that he had helped Swanson and Fickert to frame Mooney. Later two witnesses, Edgar Rigall and Earl K. Hatcher, came forward and provided evidence that Frank Oxman was 200 miles away during the bombing and could not have seen what he told the court at the trial of Mooney. In February 1921 John McDonald confessed that the police had forced him to lie about the planting of the bomb. Despite this new evidence the Californian authorities refused a retrial.