Justice Thomas' RV loan forgiven, Senate inquiry finds

The terms of the private loan were as generous as they were clear: With no money down, Justice Clarence Thomas could borrow more than a quarter of a million dollars from a wealthy friend to buy a 40foot luxury motor coach, making annual interestonly payments for five years. Only then would the principal come due.

But despite the favorable nature of the 1999 loan and a lengthy extension to make good on his obligations, Thomas failed to repay a “significant portion” — or perhaps any — of the $267,230 principal, according to a new report by Democratic members of the Senate Finance Committee. Nearly nine years later, after Thomas had made an unclear number of the interest payments, the outstanding debt was forgiven, an outcome with ethical and potential tax consequences for the justice.

“This was, in short, a sweetheart deal” that made no logical sense from a business perspective, Michael Hamersley, a tax lawyer who has served as a congressional expert witness, told The New York Times.

The Senate inquiry was prompted by a Times investigation published in August that revealed that Thomas bought his Prevost Marathon Le Mirage XL, a brand favored by touring rock bands and the super wealthy, with financing from Anthony Welters, a longtime friend who made his fortune in the health care industry.

In a statement to the Times this summer, Welters said the loan had been “satisfied” in 2008. He declined to answer whether that meant Thomas had paid off the loan in full nor did he respond to other basic questions about the terms. But while a number of questions remain, he gave a much fuller account to the committee, which has the authority to issue subpoenas and compel testimony.

The documents he volunteered indicate that, at the very least, Thomas appears to have flouted an ethics rule requiring that he include any “discharge of indebtedness” as income on required annual financial disclosure reports. In addition, the IRS treats debt forgiveness as income to the borrower.

Sen. Ron Wyden, D-Ore., who leads the Senate Finance Committee, 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.”

Thomas did not respond to questions sent to him through the Supreme Court's spokesperson.

In recent months, amid a series of reports of ethical lapses, the Supreme Court has faced intense public pressure to adopt stricter ethics rules, with several justices publicly endorsing such a move. Much of the controversy has centered on how wealthy benefactors have bestowed an array of undisclosed gifts on Thomas and his wife, Virginia Thomas.

But in terms of its combined monetary and image-crafting value, few of those benefits can rival the motor coach.

For years, the vehicle has served as a central trope of the justice's “just-folks” persona: In speeches, interviews with “60 Minutes” and other television programs, and a hagiographic documentary financed by conservative supporters, Thomas has extolled the joys of driving the motor coach through the American heartland.

Always left out of that telling, however, was just how much the motor coach cost — and how the financially hard-pressed justice managed to acquire it. According to title and other records unearthed by the Times, he bought it used in December 1999 for $267,230. (In today's dollars, adjusted for inflation, that would be $493,700.) The title listed Welters as the lien holder.

The two men were close, bonded by similarly impoverished childhoods and the shared professional experience of working first as aides to Republican senators on Capitol Hill and later as political appointees in the Reagan administration. As Welters put it in his statement to the Times: “I loaned a friend money, as I have other friends and family. We've all been on one side or the other of that equation.”

Still, it would have been exceedingly difficult for Thomas to obtain a bank loan for the coach — let alone one with the terms Welters offered. According to industry experts, even financial institutions that specialize in recreational vehicles are reluctant to lend on used luxury motor coaches like the Prevost Marathon, in part because their high level of customization makes them difficult to value. Moreover, financial disclosures and other records show that the Thomases relied primarily on his judicial salary for income and were already carrying a heavy debt load. By contrast, the experts said, most buyers are high-wealth individuals who can pay cash, or put a substantial amount down and have excellent credit.