Company run by GOP Senate candidate John James lost tax exempt status after failing to create promised jobs

click to enlarge Republican Senate candidate John James says his company "added 100 jobs in Michigan and east of the Mississippi" under his leadership. Documents show the company lost its tax exempt status after it failed to create the jobs it promised — all while James lined his pockets. - Reuters/Rebecca Cook
Reuters/Rebecca Cook
Republican Senate candidate John James says his company "added 100 jobs in Michigan and east of the Mississippi" under his leadership. Documents show the company lost its tax exempt status after it failed to create the jobs it promised — all while James lined his pockets.

In 2017, as much of the nation was still nursing a major hangover following the election of President Donald Trump, there was a very real possibility that Michigan could have a celebrity-turned-politician of its own — with none other than Kid Rock, the performer from Macomb County once crowned "Boob of the Year" by Metro Times, threatening to run for one of Michigan's Senate seats. Eventually, the "Bawitdaba" singer admitted on Howard Stern's show that he had no intention of actually running, and the whole thing was just a joke meant to drum up publicity. But soon after, a different self-described "outsider" running to be the Republican candidate emerged: Army veteran and Detroit-area business leader John James.

As a patriot, a businessman, and a rare Black Republican, James proved irresistible to Fox News, who gave him his first national television interview on Fox & Friends. "Some say he could be the future of the GOP," fawned host Ainsley Earhardt.

In the short segment, James touted the number of jobs his company created under his leadership — a line that would be repeated many more times on the campaign trail, more or less verbatim, in the following months.

"I'm over there fighting for Iraqi freedom, and there are not enough people back here fighting for people here in the state of Michigan," James said. "So I got out of the military and I joined my family business, a small automotive logistics company in Detroit, and grew the company from $35 million to $137 million in revenue and added 100 jobs in Michigan and east of the Mississippi."

James's alleged business acumen likely helped catch the eye of President Donald Trump, who endorsed him in 2018. "Just met John James of Michigan. He has every single quality to be your next Great Senator from Michigan," Trump tweeted. "When the people of Michigan get to know John, they will say he is a true star. Also, distinguished Military and a Combat Vet!" But Trump's Midas touch did little to help, with James losing to incumbent Democrat Debbie Stabenow in November of that year, 45.8% to Stabenow's 52.3%.

This year, James is giving it another shot, this time against incumbent Democrat Gary Peters.

Like Trump, James's company appears to be master dealmakers, at least for themselves. According to documents obtained through the Freedom of Information Act from the Michigan Economic Development Corporation and reviewed by Metro Times, under his tenure James's company took nearly $2 million in tax breaks from the state, a condition of which was that the company had to create 108 jobs. In fact, according to the documents, James's company actually lost more than 30 jobs under his leadership, and the MEDC revoked its tax-exempt status after it failed to create the jobs it promised.

The John James campaign did not respond to numerous requests for comment by deadline.

Based on the documents available, the company does not appear to have been subject to a "clawback" clause, or being forced to return the money for violating its agreement. But the facts laid out in documents run counter to another claim that James has made repeatedly on the campaign trail: that he's against "free handouts" from the government.

"Send a job creator to Washington who understands that working-Michiganders are looking for a fair hand up, not a free handout," he tweeted in 2017. The next year, he doubled down on the claim. "We believe at West Point that you don't lie, cheat, steal, or tolerate those who do, which is why I've gotten President Trump's endorsement," he said on another Fox News appearance, adding, "I've never taken a handout a day in my life."

Bootstrapping is a big part of the John James story. James Group International was founded in 1971 by James's father, John A. James, as a small transportation company after moving to Detroit from Mississippi with just one truck, one trailer, and one partner. Over the years, the company grew into a global shipping and logistics company, primarily moving parts overseas for the auto industry.

By the late '90s, it formed a subsidiary company, Renaissance Global Logistics, which appeared to have been created solely to take advantage of then-Republican Governor John Engler's "Renaissance Zones" initiative. Launched in 1996, Engler's Renaissance Zones offered businesses in designated areas a break in paying property, income, and utility taxes for about 10 years, described as an "experiment" to see if it would spur development and investment in economically distressed cities. Renaissance Global Logistics was awarded a Renaissance Zone status in 1997 and broke ground in Southwest Detroit shortly after.

Beyond that, the site was also located in a federal "empowerment zone," making it eligible for additional tax credits for employees, including up to $3,000 against federal taxes per employee hired who lived and worked there. According to a 1998 report from the nonprofit Citizens Research Council of Michigan, the two-square-mile site located amid the overlapping zones was "among the most heavily tax-abated in the state." As a cherry on top, James Group International also received $2 million of taxpayer money from the state to clean up the 16-acre site of its headquarters on Fort Street in Southwest Detroit, not far from the Ambassador Bridge.

In 2006, a state law amended the Renaissance Zone Act to allow time extensions, and another amendment in 2008 implemented additional requirements for extensions, including a job creation requirement. In 2010, Renaissance Global Logistics applied for and was eventually awarded an extension of the tax break — on the condition it create 108 jobs and invest $2 million in the Renaissance Zone by Dec. 31, 2015. According to the documents, those 108 jobs were to be added on top of a baseline of 119 jobs.

click to enlarge The MEDC noted that James Group International was supposed to create 108 full-time jobs in exchange for tax breaks. - MEDC
The MEDC noted that James Group International was supposed to create 108 full-time jobs in exchange for tax breaks.

By the time the younger James came on as director of operations in February 2012 following his stint in Iraq, James Group International was a global force. The next year, Crain's Detroit Business ranked it as the biggest gainer of 200 privately held Michigan companies, with revenue growth of 266.7 percent — above even Dan Gilbert's still-ascendant Quicken Loans, which ranked second.

Still, in the wake of the bailout of the auto industry, the company appeared to be having trouble generating the jobs it promised. In a Renaissance Zone report sent to the MEDC on Friday, Jan. 18, 2013, James's brother Lorron, the company's vice president of business affairs, sought to get ahead of the story.

"Before you dive into it, it has come to my attention that, due to a clerical error, the number of employees we had in 2011 was 120, not the 129 that was originally reported," he wrote. "Based on the reporting form, it will appear that we have had negative job growth. Because of the way the flow chart was set up in the reporting document and because of fluctuation of employment due to volatile volume forecasts from our customers, among other things, our result yielded a figure that was less than we started the year with." In the email, Lorron said the company now employed 137, and in the report noted that the presence of Renaissance Global Logistics "had a positive effect on the area, decreasing crime, decreasing blight, and attracting other business opportunities in the immediate area, including a potential new automotive supplier park."

click to enlarge In a Renaissance Zone report sent to the MEDC, John James's brother Lorron, the company's vice president of business affairs, sought to get ahead of the story. - MEDC
In a Renaissance Zone report sent to the MEDC, John James's brother Lorron, the company's vice president of business affairs, sought to get ahead of the story.

It didn't work. Later in 2013, the Michigan Strategic Fund board revoked the company's time extension designation.

James — the future Senate candidate — became president and CEO of Renaissance Global Logistics in the beginning of 2015, the year of the jobs creation deadline. But the promised jobs failed to materialize by the end of the year: according to the MEDC, the company lost 32 jobs. In February 2016, the state warned the company that they had 90 days to meet their end of the bargain, or else they would have their tax status revoked.

The next month, the company tried to amend its Renaissance Zone status. "We respectfully request an amendment in order to adjust our requirements to match those suitable of a business serving the automotive sector," they wrote. "Specifically, we request a modification which reflects our progress to date sufficient to take us to the end of 2017." In its request, the company blamed the job losses on the austerity demanded by the struggling auto industry, noting it had 119 full-time employees at the site at the time of the Renaissance Zone designation, but only 87 by Dec. 31, 2015.

"This is due to the fact that RGL deals exclusively with manufacturers in the automotive industry who, under the auspices of 'Lean Manufacturing,' value processes over people," the company wrote in its request. "As such, our customers demand that we improve processes in order to decrease headcount."

In a Jan. 30, 2017 memorandum, the MEDC noted the company "failed to create one-hundred eight (108) new jobs by December 31, 2015 as required per the agreement." The MEDC recommended that the Michigan Strategic Fund revoke the company's Renaissance Zone designation, which went into effect on Dec. 31, 2017 for property tax purposes, and Jan. 1, 2018 for all other tax purposes.

click to enlarge The MEDC noted that James Group International "failed to meet its commitment to create 108 new jobs." - MEDC
The MEDC noted that James Group International "failed to meet its commitment to create 108 new jobs."

Despite the job losses, by the fall of 2017, James launched his first Senate campaign, where he began saying that line — that he created "100 jobs in Michigan and east of the Mississippi."

So what's up with the "east of the Mississippi" part? On one hand, it sure has as a folksy ring to it. And indeed, James Group International has facilities in Michigan and Mississippi, as well as Indiana. It could be that James was carefully trying to hedge his "100 jobs" claim by lumping in jobs in other states across the entire company to offset the Detroit losses. However, it's a moot point, anyway, at least as far as the Renaissance Zone deal was concerned, because the deal required the jobs to be created in the zone.

And even if you consider jobs outside of the zone, according to the company's own figures self-reported to Crain's, it failed to create a single job in Michigan during James's tenure. Data from Crain's shows that James' company cut 35 jobs in Michigan from 2012, the year he joined the company (when the company reported 142 jobs in Michigan), to 2017, the year when he first claimed to have created 100 jobs (when the company reported 107 jobs). The James campaign declined to provide Metro Times with company-wide employment numbers.

According to the company’s own figures self-reported to Crain’s, it failed to create a single job in Michigan during James’s tenure.

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Nevertheless, the Renaissance Zone status proved to be a boon to the company. In a 2010 letter to Detroit City Council requesting a five-year extension of the tax break, the elder James wrote that the tax status gave his company a "competitive advantage."

"In many instances, RGL has been able to outbid its non-Renaissance Zone competitors due in large part to utilizing tax exempt status on many state and local taxes," Daddy James wrote. "As such it has played a major role in RGL's success over the years. In the coming years, maintaining Renaissance Zone tax benefits will be crucial to RGL's long term survival as it seeks to diversify itself away from heavy reliance on the automotive industry. Should RGL'S Renaissance Zone exemption be allowed to expire, RGL would lose a significant competitive advantage which could jeopardize its ongoing viability. More importantly, we would not be able to facilitate the proposed investment."

It's worth pointing out that the Renaissance Zone deal was inked long before candidate James, now 39, joined the company. But he certainly benefited from the deal all the same. According to the MEDC documents, James Group International received at least $1.75 million from the Renaissance Zone deal under James's tenure, from 2012 to 2017, according to Metro Times's calculations based on the annual tax savings reported in the documents. (The reports did not include figures for tax savings in 2012 and 2017, so the actual number is likely higher than $1.75 million.)

All the while, James lined his pockets. According to financial disclosures James filed when he launched his Senate campaign, he received at least $1.6 million in salary and up to $2 million in stock dividend income from his family's company since 2017, the earliest year the figures were available.

And that's not the only time James's company applied for and received government help. According to the Small Business Administration, Renaissance Global Logistics received between $1 million and $2 million through the federal Paycheck Protection Program, which provides forgivable loans to keep workers on payroll amid the coronavirus pandemic.

Yet on the campaign trail, James has railed against government handouts.

"The thing Democratic leadership doesn't quite realize is we don't want free stuff — we want a fair shot," he said at a meet-and-greet in Genesee County in 2018. "And that's what's most important. We were promised life, liberty, and what? The pursuit of happiness. And when you take away that pursuit of happiness, then you take away the root of the value that people feel. And what you do is you create a dependent society — a dependent society that continuously looks for others for blame and also for help."

Funny — that certainly sounds a lot like James, or at least James Group International.

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About The Author

Lee DeVito

Leyland "Lee" DeVito grew up in the suburbs of Detroit, where he read Metro Times religiously due to teenaged-induced boredom. He became a contributing writer for Metro Times in 2009, and Editor in Chief in 2016. In addition to writing, he also supplies occasional illustrations. His writing has been published...
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