UPDATE: Joan McCarter
Justice Thomas’ lawyer, Elliot Burke, refutes the story saying: “The loan was never forgiven. Any suggestion to the contrary is false. The Thomases made all payments to Mr. Welters on a regular basis until the terms of the agreement were satisfied in full.”
Sen. Wyden stands by the committee’s work, and challenges Thomas to prove the loan was paid: “If Justice Thomas disputes that conclusion he has an obligation to provide proof to the committee. Carefully worded statements from high-priced lawyers are not a substitute for facts,” Wyden said.
Supreme Court Justice Clarence Thomas loves to hang out in his fancy motor home, spending his vacations in RV camps and Walmart parking lots. That’s the story he likes to tell, anyway. What he doesn’t talk about is how he got that RV, much less how fancy and expensive it is.
Now Oregon Democratic Sen. Ron Wyden, who chairs the Finance Committee, is shedding some light on that. His committee has been looking into Thomas’ finances, and it has discovered that Thomas never paid back most of the $267,230 loan he took from his longtime friend Anthony Welters to buy the luxury Prevost Marathon Le Mirage XL motor home.
“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.
Thomas bought the used motor home in December 1999, with the loan from Welters. The New York Times reports that in today’s dollars, the loan—and the vehicle—would be worth $493,700. The loan terms were generous: It required no money down, annual interest-only payments (on a 7.5% interest rate), and the principal due at the end of five years. According to the records the committee obtained from Welters, Thomas appears to have made just one of those interest payments in December 2000, with a check for $20,042.23.
At the end of that five-year period, in 2004, Welters extended the agreement for an additional 10 years with the same interest-only payment agreement. As the Times notes, Thomas should have had the money to pay the whole loan off—he received $500,000 the previous year, part of the $1.5 million advance he was getting for his autobiography.
The next document the committee obtained is a “handwritten note from Mr. Welters to Justice Thomas, dated November 22, 2008, stating that Welters would no longer seek further payments on the loan.” Also, the note states that Thomas “had paid interest only on the loan, indicating that the principal of $267,230 had not been repaid.”
It goes without saying that Thomas did not disclose this apparent gift of $267,230 in his 2008 financial disclosure form for the court. Thomas hasn’t provided his IRS returns to the committee for review, so it’s not clear if he claimed it on his taxes. Wyden called on Thomas to “inform the committee exactly how much loan was forgiven and whether he properly reported the loan forgiveness on his tax return and paid all taxes owed.”
“This was, in short, a sweetheart deal,” 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,” Hamersley continued. “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.’”
Asked for comment, Welters told the Times, “As anyone who has borrowed from or lent to family or friends knows, it’s simply not the same as a bank.” But as the Times points out, that’s not what the IRS thinks. The forgiven principal balance of the loan, as well as any of the unpaid interest, would be considered income.
The Finance Committee will continue its investigation, Wyden promised, and he said he had “directed the committee to share our findings with the Judiciary Committee to evaluate the ethics implications of this disclosure.”
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