RV loan to Clarence Thomas was forgiven, raising tax and ethics questions, Senate report says

Senate Finance Committee Chair Ron Wyden (D-Ore.) called Wednesday on Supreme Court Justice Clarence Thomas to tell the committee whether he declared more than a quarter-million dollars of loan forgiveness on his tax filings.

Wyden released a report by the committee’s Democratic staff that details a loan that Thomas received from a friend, Anthony Welters, to buy a luxury Prevost Marathon motor coach in 1999. The report said Thomas made some interest payments on the $267,230 loan, but that it was declared settled by Welters in 2008 without Thomas repaying a substantial portion - or perhaps any - of the principal.

The New York Times reported on the loan arrangement in August. Welters told the news organization at the time the loan had been “settled” in 2008, but would provide no details on what that meant.

But Welters supplied documentation of the loan to the Senate committee, and “now we know that Justice Thomas had up to $267,230 in debt forgiven and never reported it on his ethics forms,” Wyden said in a news release.

Wyden’s statement continued: “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.”

Federal ethics law requires top officials from all branches of government, including Supreme Court justices, to file annual disclosures listing investments, gifts, outside income as well as their liabilities, so that the public can assess potential conflicts of interest.

A Supreme Court spokeswoman did not immediately return a request for comment after Wyden released the results of his investigation. The Times said Thomas did not respond to its submitted questions about the Wyden report.

Welters said in a statement: “I believed Justice Thomas satisfied the loan. Because the loan was made 25 years ago and completed 15 years ago, bank statements - which I sought - no longer exist. . . . While I understand the attention given who this involves, the difference between what you’re comparing to and what happened here is that a friend lent another friend money. As anyone who has borrowed from or lent to family or friends, it’s simply not the same as a bank.”

The Supreme Court is facing intense criticism from Democratic lawmakers and transparency advocates because it does not have an ethics policy that applies specifically to the justices. The scrutiny has followed news reports primarily centered on Thomas’s failure over many years to report lavish vacations, private jet travel and other benefits from wealthy benefactors.

Thomas has said he did not think he was required to disclose the gifts from personal friends.

Four of the justices have in recent months said publicly that the Supreme Court should or will take steps to tighten its ethics policies.

Welters, a wealthy longtime friend of Thomas and his wife Virginia who made his money in the health care industry, voluntarily provided documents to the Senate committee, according to the report.

They show that on Dec. 6, 1999, he lent the Thomases the entire purchase price of the motor home with an annual interest rate of rate of 7.5 percent. That was comparable to market rates, but the agreement said that over the course of five years, Thomas would make only interest payments.

Welters was able to provide the committee one check of $20,042.23 from Thomas, which the staff calculated would be the annual interest payment on a $267,230.00 loan at the 7.5% rate. Welters was not able to provide other checks, the report said, although he said remembered Thomas making some.

The committee staff said it reviewed a handwritten note dated Nov. 22, 2008, from Welters to Thomas that said Thomas has been paying Welters interest on the loan.

The note said that after Thomas’s upcoming payment, Welters would no longer seek further repayment from Thomas. The report said “Welters believed that Thomas had paid interest greater than the purchase price of the bus, and that Welters did not feel it was appropriate to continue to accept payments even though he had the right to them.”

If Thomas had made the yearly payments through 2008, they still would not have equaled the original loan price.

“The new evidence obtained by the Committee raises a number of potentially serious tax questions for Justice Thomas,” the report said. “The revelation that Justice Thomas had up to $267,000 in debt forgiven and failed to repay the entire principal of the loan would have generated a significant amount of taxable income for Justice Thomas.”

The report continued: “The tax code makes clear that in instances where debt is canceled, forgiven, or discharged for less than the amount owed, the borrower must report the amount canceled or forgiven as income for tax purposes.