Topics: Barack Obama

Obama's small business advocate has big credibility problems

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Photo - John Arensmeyer, CEO of Small Business Majority, a non-profit advocacy group that vigorously supports President Obama, posed for AP Photographer Jacquelyn Martin on July 11, 2o12.
John Arensmeyer, CEO of Small Business Majority, a non-profit advocacy group that vigorously supports President Obama, posed for AP Photographer Jacquelyn Martin on July 11, 2o12.
Watchdog,Richard Pollock,Barack Obama,President,Commerce,Lobbying,Ethics

Small Business Majority is among President Obama's favorite nonprofit backers, but the advocacy group's leader has a lengthy record of failing to pay taxes and stiffing creditors.

John Arensmeyer, the 501(C)(3) group's high-profile CEO, aggressively uses the advocacy nonprofit to promote Obama's policy agenda, even though his organization, according to the New York Times, has no small business members.

In an October 2012 Huffington Post blog post, Arensmeyer wrote "of course, nobody likes paying taxes, but we have a grave budget crisis on our hands."

That statement was rich with irony because, according to federal and state records, tax problems have plagued Arensmeyer for years.

Federal records show, for example, that from 2005 to 2009 Arensmeyer's group failed to file mandatory IRS 990 tax returns, even though donor records show Small Business Majority got at least $1.4 million in 2008 and 2009.

Failure to file 990's for three consecutive years can result in the forfeiture of a group's tax-exempt status.

Marin County, Calif., court records show four tax liens on Arensmeyer Communications between 1999 and 2001, totaling more than $66,000. A fifth tax lien against Arensmeyer's firm was filed by the Illinois Department of Revenue in 1999 for $4,011.58.

Arensmeyer filed Chapter 7 bankruptcy in 2007 to erase $211,000 in largely personal debt.

The self-professed small business advocate even stiffed a struggling Pennsylvania small business, costing the owner $20,000.

Arensmeyer has been a faithful defender of White House initiatives, including raising the minimum wage, increasing taxes, imposing new banking regulations, and vigorously promoting Obamacare. All are at odds with a large segment of the small business community.

He also has been a frequent visitor to the Obama White House, appearing at 17 White House functions, including private West Wing meetings with Valerie Jarrett's staff, two presidential bill signing ceremonies, a South Lawn event with British Prime Minister David Cameron, and a Rose Garden event when the president sent a jobs bill to Congress that the Senate later rejected.

Arensmeyer has been interviewed by dozens of media outlets on small business issues, and he blogs on them on Huffington Post. He has also appeared on the PBS "NewsHour," "CBS Evening News," Bloomberg TV, Fox News, National Public Radio and MSNBC's "Hardball with Chris Matthews."

In 1999, Arensmeyer Communications, his Sausalito-based company, ordered and received 50,000 CD mailers from Allflex Packaging Products of Ambler, Penn.

Allflex owner Joel Cohen told the Washington Examiner that his company shipped the order to Arensmeyer but was never paid the $20,000 bill. "That was one of the biggest losses we ever took, and I've been in business since 1967," Cohen said.

Cohen said that, when he took Arensmeyer's company to court to collect the debate, "they claimed their business was over a cliff. They were jumping."

However, Arensmeyer's company didn't jump. In fact, the same year he stiffed Allflex, Arensmeyer sold his company in a "multi-million private transaction to Universal Pensions, Inc.," a Small Business Majority spokesman told the Examiner.

The spokesman refused to disclose the sale price, but said it was for a "substantial consideration."

Arensmeyer has also had problems with the news media, telling the San Francisco Business Times in 1998 that his company, ACI Interactive, was one of the fastest-growing private concerns in the Bay Area.

In fact, a Small Business Majority spokesman told the Examiner that "Arensmeyer Communications, Inc., ACI and ACI Interactive are all one company."

The year Arensmeyer refused to pay Allflex, he told the newspaper his company's profits had soared 159% to $2.3 million.

Arensmeyer continues to include the Times endorsement in his biography on the current Small Business Majority website, claiming he was the "founder and CEO of ACI Interactive, an award winning international e-commerce company" that "was cited by the San Francisco Business Times as one of the top 100 fastest growing private companies in the Bay Area."

In 2004, the California Franchise Tax Board suspended Arensmeyer Communications Inc. for "missing multi-years of tax returns," according to board spokesman Daniel Tahara.

Tahara told the Examiner multiple letters were sent to Arensmeyer. "Typically, before a company is suspended, they'll receive a minimum of three letters notifying them," he said.

The firm never notified the board of any change, and the company's name is today listed as "suspended" and "forfeited."

Despite the sale of his company for a "substantial consideration," Arensmeyer filed Chapter 7 bankruptcy in the Northern District of California in 2007. He listed $211,895 in debts owed to 22 creditors, but only $35,000 of the obligations were connected to his business.

U.S. Bankruptcy Court records show Arensmeyer reported a monthly income of $4,153, with his monthly expenses running at $10,155, a monthly shortfall of $6,002.

Among his expenses each month was $4,000 for a mortgage in tony Marin County before property taxes, $280 for "child enrichment," and $250 each month for a clothing allowance. The court accepted Arensmeyer's bankruptcy filing and erased the full $211,000 in debt on April 5, 2007.

The first Small Business Majority filings are reported in 2010 and 2011. Outgoing Small Business Majority chairman Renn Vara told the Examiner that he was "not surprised by that at all, we were moving so quickly that we were discovering certain things along the way to abide by the law."

A Small Business Majority spokesman said "all the tax returns for Small Business Majority Foundation and Inc. have been properly filed." The spokesman did not address the five years for which no returns were filed.

Small Business Majority claimed in its 2010 IRS filing that it received no contributions or grants in 2009.

But, according to the Foundation Search database, $1.3 million in five grants from the California Physicians Service Foundation and the Public Welfare Foundation went to Small Business Majority that year. The physicians group also contributed $175,000 to the Small Business Foundation in 2008.

National Federation of Independent Business President Dan Danner, whose organization represents 350,000 small firms, questioned whether Arensmeyer should be be considered a credible spokesman for the small business community.

"I think if you're going to be held up as a national spokesman for small business or anything else, being transparent or not speaks to your credibility.

"If you're going to talk about everybody ought to pay your taxes and you didn't, that doesn't make you a very credible spokesperson," Danner said.

Tom Sullivan, former small business advocate at the Small Business Administration who is now general counsel for the Bipartisan Policy Center, said he was worried Arensmeyer's problems could have a negative ripple effect beyond his own organization.

"It's not only about poisoning his own well," Sullivan said. "There's a very bad ripple effect if one person is misrepresenting small business," he said.

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