The $267,230 RV Clarence Thomas said he ‘scrimped and saved to afford’ was financed by wealthy friend
The Senate committee found that Thomas made some interest payments on the loan from businessman Anthony Welters that was given in 1999, but didn’t repay “a substantial portion of the loan” that was used to purchase a luxury RV. Thomas did not report the $267,230 in debt forgiven on his ethics forms, according to the investigation, which raised the question of whether he reported it on his tax returns and paid taxes owed, which the committee is still seeking to answer.
Welters told the Times the loan was “satisfied” in 2008, but no information about the terms of the loan or how the debt was satisfied were provided, according to the Senate report. A November note from 2008 from Welters reviewed by the committee indicated that Welters “would no longer seek further payments” from Thomas because he “believed that Thomas had paid interest greater than the purchase price of the bus.”
Because Thomas potentially had $267,000 forgiven and he failed to repay the principal of the loan, the Senate committee said it would have created “a significant amount of taxable income” that may not have been reported on tax forms as it wasn’t reported on his 2008 Financial Disclosure Report; the Internal Revenue Service considers debt forgiveness as income.
As described by the Times, when the loan came due, in 2004, Welters granted a 10-year extension “despite the fact that the previous year Justice Thomas had collected $500,000 of a $1.5m advance for his autobiography, according to his financial disclosures. Then, in late 2008, Mr Welters simply forgave the balance of the loan, according to the committee’s report.”
A contemporaneous note, the committee said, showed Welters saying Thomas’s “interest only” payments exceeded the value of the RV. But evidence did not back up this claim, with Welters having given investigators only one copy of a canceled check from Thomas, for the annual interest amount.
Michael Hamersley, a tax lawyer told the Times: “No bank behaving in a commercially reasonable, arms-length manner would have given that loan in the first place. And a bank doesn’t just say, ‘Oh gee, you’ve paid a lot in interest – we’re good, no need to pay back what you actually owe.’ ‘“This was, in short, a sweetheart deal’ that made no logical sense from a business perspective”.
He (Anthony Welters) provided Justice Thomas with financing that experts said a bank would have been unlikely to extend — not only because Justice Thomas was already carrying a lot of debt, but because the Marathon brand’s high level of customization makes its used motor coaches difficult to value.
He (Anthony Welters) would not say how much he had lent Justice Thomas, how much the justice had repaid and whether any of the debt had been forgiven or otherwise discharged. He declined to provide The Times with a copy of a loan agreement — or even say if one existed. Nor would he share the basic terms of the loan, such as what, if any, interest rate had been charged or whether Justice Thomas had adhered to an agreed-upon repayment schedule. And when asked to elaborate on what he had meant when he said the loan had been “satisfied,” he did not respond.
“‘Satisfied’ doesn’t necessarily mean someone paid the loan back,” said Michael Hamersley, a tax lawyer and expert who has testified before Congress. “‘Satisfied’ could also mean the lender formally forgave the debt, or otherwise just stopped pursuing repayment.”
Thomas didn’t respond to questions.
“Today the committee has the answer to one of the pressing questions raised by reporting about his arrangement with Justice Thomas – was the loan ever repaid? Now we know that Justice Thomas had up to $267,230 in debt forgiven and never reported it on his ethics forms,” Wyden said. “Regular Americans don’t get wealthy friends to forgive huge amounts of debt so they can buy a second home. Justice Thomas should inform the committee exactly how much debt was forgiven and whether he properly reported the loan forgiveness on his tax returns and paid all taxes owed. I have also directed the committee to share our findings with the Judiciary Committee to evaluate the ethics implications of this disclosure.”