CHARLESTON – Two West Virginia Supreme Court justices may have violated the state Ethics Act by driving state vehicles for personal use, according to a legislative audit.
The Legislative Auditor report, released April 16, says Justices Allen Loughry and Menis Ketchum used state vehicles for personal use without claiming it as a taxable fringe benefit.
“The Legislative Auditor finds that the instances documented in this report, taken together with media reports, show a complete lack of regard for the principles of fiscal prudence and responsibility,” the first part of the report states. It was presented to the legislative Post Audits Subcommittee, which includes both Senate President Mitch Carmichael and House Speaker Tim Armstead.
KETCHUM'S COMMUTER CAR
The report says Ketchum regularly used a 2007 state-owned Buick Lucerne to commute to Charleston from his Huntington home for four years. But, the report says he also took the car on some golf trips in Virginia. It says Ketchum obtained permission from his fellow Justices in 2012 to use a state vehicle for his commute, a practice that is common among state agencies.
It says during those four years, Ketchum drove the vehicle 78,423 miles, purchased fuel 312 times and spent a total of $12,250.04. Ketchum stopped using the state vehicle in 2016 and started submitting mileage reimbursements of 15 cents per mile that total $2,028. He reimbursed the state almost $1750 of that because of double billing, a mistake he credits to a court employee.
The report also says Ketchum has paid the state back $1,663.81 for the incorrect travel expenses, and his W-2 forms have been updated retroactively to reflect that the use of the state vehicles should have been reported as income on his federal tax filings.
In a memo attached to the report, Ketchum said he will make amends as needed.
“When the amended W-2s are given to me, I will fully comply by paying any taxes due for use of the state automobile,” he wrote.
LOUGHRY'S USE OF CARS
As for Loughry, the auditor’s report says he used a 2009 Buick Lucerne, a 2012 Buick LaCrosse and other vehicles. It says he reserved a car for 212 days from 2013 to 2016, and that there were no destination listed on 148 of those days.
Many of those days were in December when the Court is on a break.
“One noted pattern of use is that Justice Loughry reserved a vehicle for significant amounts of time in the months of December for three straight years from 2013 to 2015, carrying over into January twice,” the report states. “In those December months, Justice Loughry had reserved a court vehicle for 19 days in 2013, 22 days in 2014, and for 15 days in 2015; each instance over the Christmas holiday.
“Notably, Justice Loughry had a state vehicle for 27 consecutive days through the Christmas and New Year’s holidays from December 10, 2014 to January 5, 2015. The Supreme Court of Appeals was in recess during all the December dates, and no destination or substantiation is listed for any of these time frames. The Legislative Auditor is unable to find any purposes for which Justice Loughry used the vehicles during the December months.”
The report also says the auditor was given a memo written by Supreme Court Security Director Arthur Angus and Deputy Director Jess Gundy that shows “it appears Justice Loughry may have refused to provide destination information.”
“The only person we can recall that failed to provide destination information when asked was Justice Loughery [sic],” the memo states.
The report says other justices questioned in writing whether Loughry’s use of the state car was for business purposes, “to which Justice Loughry made it clear that in his view, he should not have to report a destination or a purpose. His position was that once he said he was traveling on state business that should be the end of any inquiry. In turn, Justice Loughry questioned whether the use of state vehicles by Justices (Robin Jean) Davis and (former Justice Brent) Benjamin was for business purposes.”
The report also questions Loughry’s use of rental cars, noting mileage disparities.
“On many of these trips, there is a widely disproportionate number of miles recorded on the odometer reading section of the receipts, compared to the actual round-trip mileage from the airport to the hotel where Justice Loughry stayed,” the report states, including a table showing seven such cases.
On a 2015 trip to a conference in Montreal, Loughry stayed at a hotel 13.6 miles from the airport where he rented the car. But, receipts show the car was driven 607 miles. For another conference in Omaha, the hotel was 4 miles from the airport, but receipts show the rented car was driven 475 miles.
The total amount spent for rental cars on those seven trips was nearly $2,700 “in unnecessary expenditures,” according to the report.
“Based on this analysis, it appears possible that Justice Loughry, or a travel companion allowed to use rental cars, vacationed on the state’s dollar,” the report states.
In a memo attached to the report, Loughry disagrees with the findings.
“I disagree with the factual and legal assumptions made, the standards and definitions applied, and the conclusions ultimately reached in the draft audit report,” Loughry wrote. “I look forward to working with the court to enact, or further refine, our administrative policies.”
In another WCHS-TV story that aired April 15, reporter Kennie Bass talked to Canterbury about Loughry’s vehicle use.
“Frankly, there really were no excesses that anybody ever noticed anyway until Justice Loughry entered the picture,” Canterbury told Bass. “And he wasn’t willing to tell people where he was taking the car or for what purpose. …
“I’m not sure why he didn’t feel there was a need to tell why he was taking the car or for what court business, but he refused.”
Canterbury said the justices talked about vehicle usage after Davis brought up the issue.
“There were discussions after the inquiries by Justice Davis because it did seem there were a number of weekends and those days in December,” Canterbury said, referring to Loughry’s use of vehicles. “There didn’t seem to be any obvious business use. And he was not forthcoming about why he was taking the car and essentially said it was no one’s business. He was an elected official, a justice of the court. And if he deemed it was appropriate, it was appropriate.
“Unless they’ve changed it since, the official policy of the court is that justices are not to be asked where they are taking the car or for what purpose.”
Supreme Court spending has been under scrutiny since November, when WCHS-TV reporter Kennie Bass first detailed other state Supreme Court expenditures. Since 2009, court offices have undergone extensive renovations. The original price tag was about $900,000 for the first round of renovations. But it since has grown to more than $3.7 million and include more areas of renovations.
Some of the issues that have drawn the most attention by the media, lawmakers and the public are a $32,000 couch in Loughry’s office, a $7,500 wooden medallion inlay in Loughry’s office floor picturing the state of West Virginia, $28,000 rugs in Davis’s office and $130,000 in renovations to Justice Beth Walker’s office just a few years after it had been renovated when Benjamin was in office.
“As troubling as his (Loughry’s) use was, his response when he asked where are you taking it, and he said, ‘I’m not going to tell you that,’” Canterbury told Bass. “That’s pretty troubling, and I think that’s the heart of the matter if anybody is looking at the car use.”
ISSUES WITH W-2s
The auditor’s report says any use of the state vehicles not for business purposes should have been considered a taxable fringe benefit. Commuting is specifically excluded from the definition of business use. Without records separating business and personal mileage, the value of all use of the vehicle is considered taxable income, according to the Internal Revenue Service.
So, the auditor says the Supreme Court has not complied with federal tax law and should have included the taxable fringe benefits on justices’ W-2s between 2012 and 2017. It says the court also knew of the tax issue by 2016 based on a memo written by former General Administrative Counsel Kirk Brandfuss at the request of Davis. The memo was given to former Administrative Director Steve Canterbury, who was fired shortly after Loughry became Chief Justice in early 2017.
The justices discussed the use of state vehicles during a September 2016 administrative conference.
“Thus, the justices and the Administrative Office of the Supreme Court of Appeals were clearly informed of the Court’s responsibility to properly account for the justices’ use of state vehicles and report the taxable fringe benefit associated with this use to the IRS,” the report states. “The decision by the Court to not follow federal and state tax laws is particularly troublesome given the substantial evidence that suggests the Court did, in fact, know how to properly calculate and apply the taxable income from these fringe benefits going back to at least 2012.”
In a memo attached to the auditor report, current Chief Justice Margaret Workman says the IRS audited the court from April 2017 until earlier this year. She says the court does not believe it needs to issue any revised or amended W-2s from 2014 to present, even though Ketchum sought and received his amended W-2s.
“It was agreed that there would be continued communication and a joint cooperation in continuing to improve fiscal procedures and accountability,” Workman wrote.
Workman’s memo also says the court is taking action, including requiring full documentation — including the specific purpose of the use, the destination, the mileage in and out and the specific vehicle assigned — for any vehicle request for court employees or justices.
Workman also said she, Administrative Director Gary Johnson and Administrative Counsel Lori Paletta-Davis met with Legislative Auditor Aaron Allred and his staff.
“It was agreed that there would be continued communication and a joint cooperation in continuing to improve fiscal procedures and accountability,” she wrote.
After the legislative committee meeting today, Workman said the court will cooperate fully with the state Ethics Commission or any other agencies investigating the court.
"I can assure you the court will be responsive, and any and all information will be provided," she said. "We were kind of busy being judges, and not paying attention to administrative things. ... It's going to take a long time to restore public confidence in the judicial system."
The Legislative Auditor will have other reports regarding the state Supreme Court to release at May's interim legislative meetings.