Money Line Parlay: How Did the Kavanaughs Afford Their $1,225,000 Home?
On 27 February 2006, at the height of the real estate bubble, Brett and Ashley Kavanaugh purchased a home in the village of Chevy Chase, Maryland, a tony suburb of Washington. The house, a handsome four-bedroom built in 1922, had a purchase price of $1,225,000 — half a million dollars more than the sellers had paid just six years earlier. As Steve Reilly has revealed, the initial mortgage on the property was for $980,000:
The family’s total stated assets at the time of the loan came to $121,000, with the bulk of that “vehicles and other personal property,” as opposed to liquid assets. Meanwhile, the Kavanaughs held $25,000 in credit card debt on their First USA/Bank One Visa card. Their net worth was $91,000 — less than half of what they somehow managed to produce for the closing.
So where did the $245,000 down payment come from?
When asked about this during his Senate questioning, Kavanaugh stated:
The Thrift Savings Plan loan that appears on certain disclosure reports was a Federal Government loan to help with the down payment on our house in 2006. That government loan program is available for federal government workers to help with the purchase of their first house. In our case, that loan was paid back primarily by regular deductions from my paycheck, in the same way that taxes and insurance premiums are deducted from my paycheck. That loan has been paid off in full.
This explanation fails to answer the question. In 2005, Kavanaugh disclosed that the total value of his Thrift Savings Plan account was $70,000:
Seventy thousand, the amount of equity available to draw from on a loan, is less than a third of the down payment amount he wound up paying.
The following year, Kavanaugh disclosed that the outstanding debt on the TSP loan was between $15,001 and $50,000:
Taken together, the two documents suggest that the original TSP loan was for around $45,000. If so, where did the other $200,000 come from?
The answer is not readily apparent. At the time of the home purchase, Brett Kavanaugh was a federal employee, drawing an annual salary of $62,026. (He’d been nominated for the federal judgeship but was still waiting to be confirmed.) Ashley Kavanaugh worked at the George W. Bush Presidential Library Foundation and the Community Foundation for National Capital Region, neither high-salaried positions. Her retirement plan was worth $1,000. There was no other income, and no gifts reported. As for investments, as Kavanaugh testified last month: “Since our marriage in 2004, we have not owned stocks, bonds, mutual funds, or other similar financial investments outside of our retirement accounts.”
It is true that mortgage brokers in the go-go early 2000s were notoriously laissez-faire when it came to loan approval. I recall being “pre-approved” for a loan amount of up to $425,000 back in 2003, when I was making about $40,000 a year, and I recognized, if the bank did not, that there was no earthly way I could have afforded that much house. High on the fumes of the real estate bubble, lending institutions were plainly cool with the risk of foreclosing on properties.
Even so, the Kavanaugh loan is a head-scratcher. At four percent interest, the mortgage payments would have been $4,600 a month, or $55,200 a year. In other words, the mortgage payments alone were more than what Brett Kavanaugh took home in 2006 after taxes. And that doesn’t include property taxes, homeowners insurance, or maintenance costs — the last of which, as he painstakingly explained in his Senate written testimony, and as I previously reported, cost a pretty penny:
Over the years, we have sunk a decent amount of money into our home for sometimes unanticipated repairs and improvements. As many homeowners probably appreciate, the list sometimes seems to never end, and for us it has included over the years: replacing the heating and air conditioning system and air conditioning units, replacing the water heater, painting and repairing the full exterior of the house, painting the interior of the house, replacing the porch flooring on the front and side porches with composite wood, gutter repairs, roof repairs, new refrigerator, new oven, ceiling leaks, ongoing flooding in the basement, waterproofing the basement, mold removal in the basement, drainage work because of excess water outside the house that was running into the neighbor’s property, fence repair, and so on.
Not only did the Kavanaughs buy a home well beyond what they could conceivably afford, but they bought an older home that was apparently a money pit. (That it needed so much work should have been made clear during the home inspection, required before lenders issue mortgages.)
Why would any bank with a functional abacus approve such a terrible loan? And why would Brett and Ashley Kavanaugh agree to it?
Within a year of buying the house, the family was deep in credit card debt. By the end of 2006, the Kavanaughs had three credit cards, in addition to the TSP loan. Each loan was “Code K,” which specifies a range between $15,001 and $50,000. We can assume the TSP loan was for almost $50,000, and that the $25,000 listed in credit card debt in 2005 remained, the balance perhaps transferred to the other cards. Given the $15,000 bottom end of the “Code K” range and generous credit card limits offered at the time, it is likely that all three cards were maxed out. Kavanaugh’s combined debt was between $60,000 and $200,000 — but given what we know of his already-onerous obligations from 2005, the total amount owed must have been no less than $100,000.
Put another way: by the end of 2006, Brett and Ashley Kavanaugh owed five financial institutions, combined, a cool million dollars.
How did the Kavanaugh family manage to navigate this financial tightrope without going broke? Brett Kavanaugh is an only child, from a family of means. His father, Everett Edward Kavanaugh, Jr., is not Fred Trump wealthy, but he probably had plenty of cash on hand in 2006, before the financial crash. As with Fred and Donald Trump, perhaps father bankrolled son. Kavanaugh even hints at this benign explanation in his statements. The TSP loan was taken “to help with the down payment on our house in 2006,” with help here perhaps meaning to contribute to part of, with the bulk of it coming from Everett Edward Kavanaugh, Jr. He also explains that they never “received other kinds of gifts from anyone outside of our family.” His parents are certainly not “outside” of his family.
To be clear: there is nothing morally or ethically wrong with accepting financial aid from one’s parents. I’ve been fortunate enough to be the beneficiary of such help, my parents received help from their parents, and I will do everything I can to help my kids, when it’s my turn.
In the Kavanaugh scenario, however, something is off. First of all, gift money cannot be used as a down payment — even in 2006, when mortgage brokers operated with the self-restraint of smoked-out meth-heads. The quarter million required for the down payment had to have been in Brett Kavanaugh’s bank account six months before the closing date. If the funds were there, he did not disclose this on his financial statements in 2005 or 2006.
Tim Hogan, a Hawaii-based attorney who specializes in bankruptcy cases, is blunt: “Kavanaugh has a $245,000 unexplained payment in his home closing documents. There you go. I’m a bankruptcy lawyer who hunts frauds for a living. This guy’s documents look fraudulent to me.”
But let’s assume, for sake of argument, that Everett Edward Kavanaugh, Jr. had an “in” at the bank, and managed to secure the loan. Let’s also assume that he not only generated the down payment, and also paid for all of the mortgage payments, leaving Brett and Ashley to cover everything else. Even then, Brett Kavanaugh’s take-home pay in 2006 — he wasn’t sworn in as a federal judge until June of that year — was not enough to cover his young family’s cost of living in Chevy Chase, Maryland. Diapers, babysitters, clothes, dry cleaning, gas, health insurance, life insurance, homeowners insurance, auto insurance, utilities, telephone and cable, donations to the Catholic church, athletic equipment…the expenses add up quick. And the Kavanaughs, with their country clubs and private schools, are not the paragons of frugality.
Moreover, $245,000 is not a Christmas stocking stuffer. If Kavanaugh did receive such significant assistance from his parents, why was he not forthright about their largesse? Surely there is no shame in accepting family help. Did Kavanaugh, like Trump, seek to present a false narrative about the nature of his own wealth? Was he concerned about the tax implications?
Or is there a more sinister explanation?
Rumors of Kavanaugh’s gambling are rampant enough that he was asked about them repeatedly by the Senate Judiciary Committee (see questions #21, 22, and 23). Under oath, Kavanaugh denied ever reporting gambling losses or gambling earnings on his tax forms, and claimed never to have participated “in any form of gambling or game of chance or skill with monetary stakes, including but not limited to poker, dice, golf, sports betting, blackjack, and craps” since becoming a judge in 2006. As his track record of truthfulness is not pristine, his denial here means nothing, except in a future perjury trial.
Because sports bookmaking was until recently illegal everywhere in the United States except Las Vegas, the entire billion-dollar industry operates offshore and underground, and deals mostly in cash. It is certainly possible to obtain $245,000 by, say, betting $25,000 on some outcome at 10-to-1 odds, and winning the wager. The transaction would be anonymous, perhaps done through intermediaries, and the payout could very well be made in cash.
Let me be clear: I have no idea whether or not Kavanaugh bets on sporting events. I have no proof one way or the other. It is more likely, in fact, that his income was subsidized by his wealthy parents than by betting big on his beloved Washington Nationals. Indeed, I would prefer that this were the case. But given: 1) the sudden infusion of a quarter million dollars to buy his house, 2) the wild ebbs and flows of his finances for the last decade, 3) the odd story about his purchasing baseball tickets for “old friends,” 4) his oft-stated love of sports, 5) his propensity to lie, 6) his apparent comfort level with political dark money, and even 7) the permissive stance of the American Catholic Church on certain forms of gambling (i.e., bingo), I will say this: In the absence of proof of his family’s aid with the $245,000 down payment, a big gambling windfall cannot be ruled out as a possibility.
Conversely, gambling losses to underworld bookmakers may require a sudden and urgent infusion of cash. One way to accumulate ready cash is to front a large purchase for a group of friends, charge the purchase to credit cards, and then collect the reimbursements in cash or check. Which is exactly what Kavanaugh admits he did with MLB baseball tickets:
As is typical with baseball season tickets, I had a group of old friends who would split games with me. We would usually divide the tickets in a “ticket draft” at my house. Everyone in the group paid me for their tickets based on the cost of the tickets, to the dollar. No one overpaid or underpaid me for tickets. No loans were given in either direction.
Let me reiterate: I have no way of knowing if Kavanaugh is a high-stakes gambler, and I’m not accusing him of being one. However, if he was telling the truth about not ever gambling, he needs to explain how he managed to come up with $245,000 to pay for his house in 2006, and also, how his massive credit card debt suddenly vanished ten years later. His Senate testimony does not come remotely close to explaining the provenance of that money. Gambling rumors will forever hound him if he doesn’t put them to rest with more details about his finances.
The purpose of financial disclosure, as Kavanaugh himself has pointed out, is to look for conflicts of interest. These conflicts tarnish a judge’s impartiality, which is the most essential qualification for the job. If a sitting Supreme Court Justice is beholden to unknown creditors, we need to know who they are — even if the unknown creditors turn out to be Ma and Pa Kavanaugh. How else can we be sure he isn’t compromised?
One last thing: If the Kavanaughs had hopes of renovating and then flipping the Chevy Chase house, they could not have picked a worse time to buy. In 2008, the real estate market completely collapsed, leading to a global recession that lasted for half a decade. Twelve years and all those home improvements later, the Kavanaugh home now shows an estimated value of $1,342,000 on Zillow.
That was a gamble that didn’t pay off. Depending on what we learn about his shady finances, his decision not to withdraw his nomination might be another.