Mudge Rose law firm's involvement in the personal finances and tax affairs of the President in early 1969

In early 1969, Richard Ritzel, a former partner of President Nixon in the Nixon, Mudge, Rose, Guthrie, Alexander & Mitchell law firm in New York (after 1968, Nixon and Mitchell were deleted from the firm's name) was continuing his role of providing legal counsel to President Nixon (through the White House staff) on his personal affairs. It should be noted, as discussed above, that Mr. Ritzel handled most of the arrangements for President-elect Nixon's gift of papers in 1968. On the President's behalf, John Ehrlichman had designated Edward L. Morgan of his staff as the man in charge of the President's personal affairs. Other members of Mr. Ehrlichman's staff who also were involved in the President's personal affairs were Egil Krogh and Charles Stuart. The staff is not aware of any members of the White House staff who had any special expertise in tax matters in early 1969, and as far as the Joint Committee staff has been able to determine, the White House staff in early 1969 relied exclusively on Mr. Ritzel's advice with respect to tax matters.

Mr. Ritzel told the staff that in January 1969 he talked to Messrs. Ehrlichman, Krogh and Morgan about the President's making a gift of papers in 1969 and encouraged them to make the arrangements as soon as possible. Mr. Ritzel did not mention to the staff any discussions of a particular amount for the gift or of whether the gift would be a one-year gift or a gift large enough to make use of the carryover period. Mr. Ritzel's correspondence with Mr. Krogh in February 1969, however, which is discussed below, gives the impression that at least Mr. Ritzel did not believe there was an intention to make a bulk gift in 1969 at that time. In his letter he suggests that Messrs. Krogh and Morgan should meet with him to discuss a program for the President's finances, a meeting which the staff understands never took place.

On February 13, 1969, Mr. Krogh wrote a letter (Exhibit I-6) to Mr. Ritzel in which he stated that when Ed Morgan gets back from Europe in early March, 10 he (Mr. Krogh) and Mr. Morgan could come to New York to talk about the President's finances. The letter further indicated that they had to complete a review of all of President Nixon's personal affairs by April and that it would help if they could sit down with Mr. Ritzel to discuss what they would be thinking about. This letter suggests that at this time the White House staff was relying on Mr. Ritzel's legal advice with respect to the tax affairs of President Nixon.

On February 25, 1969, Mr. Krogh sent a second letter to Mr. Ritzel (Exhibit I-7) in which he also enclosed a memorandum dated February 6, 1969, from John Ehrlichman to the President. This memorandum is the one specific written indication the staff has of the President's intentions at that time concerning the gift of papers, since the memorandum was returned to Mr. Ehrlichman with the President's comments at the bottom. The subject of the memorandum was "Charitable Contributions and Deductions." The staff believes this memorandum is important because it indicates the intentions of Mr. Ehrlichman and also of President Nixon in February 1969. For

19 Mr. Ehrlichman and Mr. Morgan were with President Nixon on his European trip which took place at the end of February and beginning of March 1969.

this reason, the complete memorandum is set forth in the report and reads as follows:

"As you know, we arranged for the maximum 30% charitable gift-tax deduction in 1968 by donating a portion of your papers appraised at the necessary amount to the United States. Again this year you are in a position to make charitable contributions up to 30% of your adjusted gross income. Of this 30% maximum deduction, 20% can be for any charitable enterprise designated in the code. For over 20%, up to a maximum of 30%, the gift must be to a governmental entity for a public purpose. This would include a gift of your papers.

"I would suggest that we arrange a schedule of charitable contributions from sales of your writings, so that each year you can give to those charities you select 20% of your adjusted gross income. The remaining 10% will be made up of a gift of your papers to the United States. In this way, we contemplate keeping the papers as a continuing reserve which we can use from now on to supplement other gifts to add up to the 30% maximum.

"Regarding the gift of proceeds from publication of the preface to SIX CRISES by LADIES' HOME JOURNAL, we are arranging for LADIES' HOME JOURNAL to pay the proceeds directly to Boys Clubs of America and Young People of America, Inc., the organization which supports Jimmy McDonald. While we will have to account for these proceeds in gross income, the amount will be deductible as a charitable contribution."

This memorandum suggests that as of February 6, 1969, Mr. Ehrlichman was thinking in terms of a year-by-year gift of papers to supplement any assignment of income to charitable organizations for the 30-percent maximum charitable contribution deduction. It does not make any reference to the possibility of a bulk gift of papers.

The President wrote at the end of the memorandum "Good" and "Let me know what we can do on the foundation idea." Since the memorandum does not mention foundations, it is not clear what President Nixon was referring to when he wrote "the foundation idea." However, Mr. Krogh's covering letter appears to clear this up.

In his covering letter to Mr. Ritzel, Mr. Krogh tells him of the White House plan to make charitable contributions each year up to a maximum of 30 percent of adjusted gross income and refers him to the enclosed John Ehrlichman memorandum. Mr. Krogh's letter comments on the President's note on the memorandum expressing interest in the possibility of establishing a charitable foundation which might own and use for charitable purposes the right to the President's various publications. This presumably is the "foundation idea" referred to in the John Ehrlichman memorandum. The letter asks for Mr. Ritzel's help in establishing the foundation.

Since Mr. Krogh's letter suggests that the President wanted to pursue the idea of setting up a foundation, possibly to receive his papers, it implies that he may not have wanted to make his 1969 gift until the foundation was set up and arrangements could be made for having his papers given to the foundation (although it is noted that. both deeds make provision for the papers to be housed in the Nixon Library when completed).

On February 28, 1969, Mr. Ritzel wrote to Mr. Krogh (Exhibit I-8) in reply to his earlier letters. Mr. Ritzel first reminded him that

it was necessary to get a final appraisal from Ralph Newman for the 1968 gift. The letter states, "If the figures prove to be higher than anticipated, it will have to be taken into consideration in making any gifts this year." The "figures" here are Mr. Newman's valuation of the 1968 gift, and Mr. Ritzel is saying that if the 1968 gift is valued at more than the President could deduct on his 1968 return, there would be a carryover which could be deducted in 1969 and, therefore, would reduce the amount of any gifts needed to be made in that year to receive the maximum charitable contribution deduction.

Mr. Ritzel also stated in reply to Mr. Krogh's second letter that some statements in Mr. Ehrlichman's memorandum troubled him and he was not clear on the formation of a foundation. He indicated that he did not think a foundation is necessary for their purposes in view of the special statutes dealing with gifts of Vice-Presidential and Presidential papers to the government for the purposes of ultimately using them in a library. This suggests that one of the main purposes for the foundation was to establish a library for housing President Nixon's papers and other items.

Mr. Ritzel stated further:

"If you will recall, it had not been our plan to give any of the Presidential papers, within the near future, to the Government since Newman made it quite clear to us that the volume of Vice Presidential papers which we had would undoubtedly take care of the deduction for a number of years, and the thought was that we would use the oldest first, with the hope that we would be able to get the full deduction for practically the entire life of the President. Again, I think a more detailed comprehensive plan must be evolved, taking into consideration, also, other gifts the President has in mind to make via the assignment of the proceeds received for publication of the President's writings."

This letter by Mr. Ritzel gives the impression (although on this point, it is not conclusive) that as of the end of February he was not thinking of advising a bulk gift of papers to be made by President Nixon in 1969, but rather another increment to cover the charitable contribution deduction available in 1969. This is also evidenced by his concern with other gifts the President may have wished to make and a possible assignment of proceeds received for publication of Presidential writings. In addition, as of this time, Mr. Ritzel fully understood the tax consequences involved, and as indicated above, the staff has no information that the White House staff relied on anyone else for tax advice as of this time. (The Ehrlichman memorandum, for example, contains several errors about what was the tax law at that time.) This leads the staff to believe that at the end of February there was not an intention on the part of Mr. Ritzel or on the part of Mr. Krogh (who as indicated above was standing in for Mr. Morgan while he was in Europe) to make a bulk gift; in fact, there does not appear to be an intent to actually make a gift for tax purposes in the early part of 1969, but rather an intent to get together to make the arrangements for how they wanted to handle all of the President's personal finances which included setting up a foundation. and the Presidential Library, making arrangements for an assignment of income from his writings, and as discussed below, establishing a procedure for future gifts of his papers.

Evidence relating to President Nixon's intentions presented by his attorneys

The brief dated February 19, 1974, furnished the staff by the attorneys for President Nixon (Exhibit I-3) stated that near the end of February 1969 the President had further discussions with Mr. Ehrlichman concerning the donation of his pre-Presidential papers. It asserted that President Nixon expressed his intention during these discussions to make a gift during 1969 of as great a volume of papers as he could treat as a deduction in that year and the statutory carryover period and to give any remaining papers later. It further stated that Mr. Ehrlichman conveyed this intention to Mr. Morgan and gave him staff responsibility for implementing it immediately.

The staff understands that the statements in the brief of the President's intentions, as indicated above, were based on Mr. Ehrlichman's recollection of the events as he reported them to the White House attorneys and the account in the brief was supposedly read to Mr. Ehrlichman's attorney, who approved of it. However, when Mr. Ehrlichman met with the staff, which was before the brief was submitted, he did not inform the staff of this conversation with the President. Mr. Ehrlichman said that it was decided to make a gift of President Nixon's Presidential papers in 1969 at the time of the 1968 gift. He did say, however, that the gift was to cover more years than just 1969. He said that the President had been advised to make a large gift to cover subsequent years, but he did not know by whom. Mr. Ehrlichman did not remember any discussions of a specific figure for the gift. He pointed out that he was more of a conduit between the President and Mr. Morgan and that Mr. Morgan had the principal authority in this regard.

Mr. Ehrlichman said that he pushed Mr. Morgan and Mr. Krogh to finish the personal matters of the President, including their activities on the gift of papers, because he said he wanted them for other things. He indicated that he knew that the papers had been transferred to the National Archives in March 1969 and believed that everything had been done that was necessary to complete the gift by that time. When Mr. Morgan met with the staff, he did not indicate that he was told by Mr. Ehrlichman of the specific intentions of the President to make a large gift to cover 1969 and the carryover period, as indicated in the brief prepared by the President's attorneys. In a memorandum prepared by Mr. Morgan to Mr. Douglas Parker of the White House staff on August 14, 1973, in response to the White House request, he set forth his "basic recollection of the facts regarding the President's papers" and also did not refer to any such conversations. His memorandum (Exhibit I-9) gave no indication that he was following any instructions from the President or Mr. Ehrlichman to make a gift in early 1969. In this regard his memorandum states:

"In February and early March, I was in Europe handling the arrangements for the President's trip.

"I coordinated the transfer of the balance of the President's papers to GSA and the Archives which occurred on March 27, 1969, although I did not supervise the actual transaction." He then went on to discuss his activities in California in April, which will be analyzed below.

Not only does Mr. Morgan not refer in his memorandum to any instructions from Mr. Ehrlichman as to President Nixon's intentions,

but he also did not even refer in any respect to any portion of the transfer of the papers on March 27 as being for gift purposes. This and other information discussed below leads the staff to question whether Mr. Morgan believed that his role with respect to the papers in early 1969 was to carry out an intention of the President to actually make a gift then, rather than to transfer the papers to the National Archives for processing for subsequent gift designations, as discussed more fully below.

Kalmbach, DeMarco law firm's involvement in the personal finances and tar affairs of the President

The President decided to shift the handling of his legal matters from the Mudge, Rose law firm in New York to a California law firm, since the President desired to reside in California when he left the White House. As indicated above, the staff understands that the contemplated meeting between Messrs. Ritzel, Morgan and Krogh on the President's finances never took place and that Mr. Ritzel's February 28 letter to Mr. Krogh was his last involvement in the President's personal affairs in 1969 and 1970 (other than the sale of the New York apartment). Thus, there was a transition in the early part of March with respect to legal advice on the President's personal matters. It was decided to switch the President's legal matters to the California law firm of Kalmbach, DeMarco, Knapp and Chillingworth. The staff has met with both Herbert Kalmbach and Frank DeMarco, and their versions of their firm's involvement in the personal finances and tax affairs of the President are discussed below."

Kalmbach version. Mr. Kalmbach recalls that his firm first began representing President Nixon in March 1969, at which time he was called by H. R. Haldeman and asked to represent the President in connection with the then-pending acquisition of the San Clemente property. Mr. Kalmbach said that it was in either late March or early April 1969 that he was advised by Mr. Ehrlichman that their firm would also be asked to handle the President's personal tax work.11 Mr. Kalmbach indicated that from these two conversations he understood that his law firm would represent the President in the acquisition of the San Clemente property, set up the foundation, and handle the President's personal tax work. He said in his initial staff interview that he does not recall in his conversation with Mr. Ehrlichman any discussion of President Nixon's gift of papers to the Archives and was not aware at that time of any such gift.

Mr. Kalmbach said that he discussed the legal work they were to handle for President Nixon with his partner, Mr. DeMarco, and asked him to handle the documentation of San Clemente, set up the foundation and handle the tax matters. Mr. Kalmbach told the staff that he did not mention the gift of papers to Mr. DeMarco and that he was not aware at this time of any such gift.

In a second staff interview, Mr. Kalmbach stated that, while he had no specific recollection of discussing the papers with Mr. DeMarco, his impression was that he may have done so. Mr. Kalmbach said that he got this impression from seeing his calendar for March 26, 1969, which had Mr. Morgan's name on it. He said that this caused him to think that Mr. Morgan may have discussed the papers with him.

"He was advised by Mr. Ehrlichman that Mr. Edward L. Morgan would be the person in the White House who would be the coordinator on these matters.