Mr. Kalmbach indicated that after April Mr. DeMarco and Mr. Morgan were in close contact on tax matters, and that he was not, but rather that he was specifically involved in the negotiations on the San Clemente property.

DeMarco version.-Frank DeMarco's written statement to the staff dated February 5, 1974 (Exhibit I-10) indicates that his law firm's involvement in the personal business and tax affairs of the President commenced in early March 1969, when they were advised that the President desired to find property in the southern California beach area "to make his home upon his retirement from the presidency." He said that Herb Kalmbach worked on this and reported directly to Mr. Ehrlichman. Mr. DeMarco stated that Mr. Ehrlichman advised Mr. Kalmbach during the course of that assignment that the President desired to have other personal legal affairs handled in California and Mr. Ehrlichman asked Mr. Kalmbach if their law firm would undertake this work.

Mr. DeMarco indicated further that during the month of March Mr. Kalmbach advised him that Mr. Morgan, who was the deputy counsel to the President, would be the man in the White House and on the President's personal staff with whom he was to work in coordinating the President's personal legal affairs.

Mr. DeMarco indicated that during the last 2 weeks of March and the first 2 weeks of April 1969, his principal activity was in reviewing the title reports, surveys and other details relating to the proposed purchase of the San Clemente property. He said that Mr. Kalmbach handled the negotiations with respect to the terms of the sale directly with the sellers, and he was assigned to draft the escrow instructions. He indicated that it was during this 4-week period that he learned for the first time of the possible formation of the Richard Nixon Foundation, which was to be a nonprofit corporation in the California law. He said that he was asked by Mr. Kalmbach at the direction of Mr. Ehrlichman to do preliminary research with respect to the requirements of qualification of the foundation under California law. He was advised again that Mr. Morgan was to be his contact on this matter. Alleged discussion of gift in early April 1969 by Morgan and

DeMarco

In his statement to the staff, Mr. DeMarco indicated that to his "best recollection" his first direct contact with Mr. Morgan occurred during the first week of April 1969 in a telephone call which he received from him and in which he was advised that the President had made a gift of certain of his pre-Presidential papers which had been stored in the Executive Office Building. DeMarco stated that he believed that a gift had been made of all papers which had been shipped to the Archives. Mr. DeMarco indicated that Morgan related to him the history of the 1968 gift and advised him that for appraisal purposes the President had used Ralph G. Newman from Chicago, who was a recognized appraiser of private papers. Mr. DeMarco said further that Mr. Morgan indicated they would use Mr. Newman in connection with the valuation of the 1969 gift and that he believes either Mr. Morgan or Mr. Kalmbach furnished him the information how to reach Mr. Newman. (Mr. Kalmbach has told the staff that he did not discuss the papers with Mr. DeMarco.)

Mr. DeMarco also indicated in his statement that his recollection is that a $500,000 figure came from his first conversation with Mr. Morgan "in which he (Morgan) indicated to me that that was the general amount of the gift that had been made." In his earlier meeting with the staff, Mr. DeMarco said that they had assumed an adjusted gross income of $300,000, a figure he said Mr. Morgan had gotten from Vincent Andrews, Inc., so that the maximum usable deduction would be $90,000 (30 percent of $300,000) per year or $540,000 for the full 6 years. He said that they thought of this as a "ball park" figure. (See below Determination of $500,000 figure by DeMarco.)

This is the first mention of a $500,000 figure of which the staff is aware. It should be noted, as indicated above, that Mr. DeMarco did say that it is his "best recollection" that his first direct contact with Mr. Morgan occurred during the first week of April 1969.

Mr. Morgan, however, told the staff that he does not recall this conversation in early April with DeMarco, nor does he remember discussing a $500,000 figure. He said this both in his interview with the staff and in his written statement to the White House dated August 14, 1973 (Exhibit I-9). In this statement to the White House he said:

"In April, I made a trip to California regarding several matters. Apparently, Mr. DeMarco indicates that I called him and said the President wanted to make a gift of about $500,000. I have no reason to doubt this, although I do not have a specific recollection of that call. I do remember that there was considerable work being done regarding the President's estate, his property, etc. in contemplation of the San Clemente purchase, so it seems logical to me that we were working on his tax situation at that time and decided to make the next gift."

DeMarco's alleged telephone call to Newman in April 1969

DeMarco's version.-In his statement to the staff (Exhibit I-10), Mr. DeMarco indicated that a few days after his telephone call to Mr. Morgan in early April, he had a telephone conversation with Mr. Newman but does not recall whether he called Mr. Newman or Mr. Newman called him. Mr. DeMarco stated that in his first conversation, Mr. Newman explained to him his appraisal procedure, confirmed with him what had been done in connection with the 1968 gift, and said that "he was, in fact, currently finalizing his detailed appraisal of the 1968 gift for purposes of the 1968 income tax return for the President."

Mr. DeMarco said further that from his best recollection from the conversation, Mr. Newman said that he would go to Washington within the next few days and "commence the work because he was planning to leave for an extended tour of Australia or Japan, I am not sure which, later in the month." Mr. DeMarco said that it was in that conversation that he discussed the value of the 1968 gift and he related to Mr. Newman that the estimated size of the 1969 gift was $500,000, a figure based on the President's anticipated income.

Mr. DeMarco indicated in his statement that he "cannot be absolutely certain at this time of the exact date of the telephone conversation with Ralph Newman." He said that he based his recollection of the conversation and the date on certain other occurrences which he listed as follows:

"(1) I found in my file a penciled memorandum attached hereto as Exhibit '1' which I believe to be the notes of my first conversation with Mr. Newman. The notes indicate that he said he would 'go into Archives and segregate enough to satisfy this require ment.' This I interpreted to be the $500.000 1969 installment which had been discussed. He indicated he would give a 'horseback figure on what else is there', that he 'will do a preliminary survey for 2-3 days, will come back in month for detailed exam and segregation.' That conversation concluded and the notes show that I'm to call Ed to call Archives-Ralph will be there on Monday.' I believe that the 'Monday' referred to in the memorandum was Monday, April 7, 1969. This recollection is supported by the affidavit contained in Mr. Newman's final written appraisal of the subject matter papers wherein he states that he did 'from the sixth to the eighth day of April 1969' examine the papers;

"(2) On or about June 12, 1973, I had a telephone conversation with Mr. Newman regarding the same subject matter. That telephone conversation was prompted by the fact that I had been asked to make a statement to Nick Kotz, a reporter from the Washington Post, respecting the circumstances of the gift, and I wanted to refresh my recollection by talking to Mr. Newman. In that conversation of June 12, 1973, he again stated to me that he originally surveyed the papers in April (meaning April 1969), and that at that time he pointed out sensitive papers, ordered them to be sequestered before the subject matter of the gift was placed in government boxes, and that he came back later to do the actual appraisal. The notes of that conversation are a part of the attached Exhibit '2'. I identify the notes as having been made on or about June 12, 1973 by reference to the word 'Kotz'. In that conversation, in going over his recollection of the circumstances, he stated that he had had a conversation with Ed Morgan on April 1, 1969 where Morgan had told him about the 1969 gift;

"(3) On or about August 1, 1973, Mr. Newman telephoned me to tell me that he was in Washington and was being asked to give a written statement of his recollection of the circumstances of his appraisal of the 1969 papers. In that conversation, he told me that his recollection of the first time that he and I had talked was early April 1969, and asked if that was also my recollection, which I did confirm to him. In that conversation I told him that I based my recollection on his statement about taking a trip to Australia, and he confirmed that he had taken such a trip in late April 1969." Newman's version.-When Mr. Newman first met with the staff he also said he had a telephone conversation with Mr. DeMarco in early April 1969 and said that Mr. DeMarco had told him he was President Nixon's attorney and that Mr. Newman was to keep him advised of his work with the papers.

In his second meeting with the staff, Mr. Newman said that he was concerned that his recollection of events from 4 to 5 years ago may have resulted in certain inconsistencies, which prompted him to make a thorough reconstruction of his activities and conversations relating to the 1969 papers. He said he again reviewed all his files for any additional information which may shed light on the date of certain occurrences. He said he found a letter to Mr. DeMarco which now

leads him to believe that he did not talk to Mr. DeMarco in April but that his first conversation with Mr. DeMarco occurred at the end of October 1969. The letter to which Mr. Newman referred (Exhibit 1-11) reads as follows:

"Dear Mr. DeMarco:

31 October 1969

"It was good to have an opportunity to speak with you this morning and I look forward to seeing you in Washington, if you can make it. Otherwise, I am sure we will be having several telephone conversations after my investigations of the archives.

"Under separate cover I am sending you an article that I wrote several years ago about appraisals that you may find of some interest.

"Sincerely yours,

"Ralph G. Newman"

Mr. Newman told the staff that this letter is the type of letter he would write to someone that he had just met and, therefore, concludes that he had not talked or met Mr. DeMarco prior to this first conversation. Mr. Newman believes that his sequence of events is correct; that is, he made a trip to Washington to review the material and then made a quick analysis of the approximate value of the materials in the Archives, but that this did not occur in April, but rather subsequent to the October 31 telephone call. As discussed below, an analysis of the handwritten notes taken by Mr. DeMarco after his phone conversation with Mr. Newman indicates that they are more consistent with a phone call in October than with a call in April.

DeMarco's alleged conversation with Arthur Blech in May 1969

The staff has been told of only one conversation about a bulk gift in early 1969 that both parties now recall, a phone conversation between Arthur Blech and Frank DeMarco in May 1969. Mr. Blech was subsequently hired to prepare President Nixon's tax returns, but at this time he was on retainer by the Kalmbach, DeMarco law firm as a consultant on tax matters. Mr. Blech has told the staff that he was called by Mr. DeMarco around the middle of May 1969 and asked to determine the tax aspects of a gift of $550,000 by an individual with $250,000 and also with $300,000 of adjusted gross income. Mr. Blech said he wrote this down on a piece of paper and returned the call the next day to Mr. DeMarco with his response. Mr. Blech said that when Mr. DeMarco told him on whose behalf he was raising the question, Mr. Blech dated his paper with the notes and kept it. The staff has asked for a copy of these notes, but Mr. Blech has indicated that he has been unable to find these notes and indicates that they were lost during the time Coopers & Lybrand went through all his files during their audit of the President's tax returns. Mr. Blech did show the staff, however, the sheet of paper of his notes of the call by Mr. DeMarco in August or September 1969 when he was hired to keep the President's books and to prepare his tax returns. This sheet of paper lists the items on which he would have to get information but does not list the gift of papers, which Mr. Blech says he thought had been the $550,000 figure so that he did not need any further information. The staff also raises questions about the fact that Mr. DeMarco

indicated on his Schedule A (Exhibit I-12), which he states he prepared on April 21, 1969, an amount of $500,000 for the gift, while Mr. Blech is positive that Mr. DeMarco told him $550,000 approximately three weeks later. In his staff interview, Mr. DeMarco said he gave Mr. Blech the $500,000 figure, not the $550,000 one.

Both Mr. Blech and Mr. DeMarco stated in their staff interviews that in this May 1969 phone call, Mr. DeMarco told Mr. Blech that President Nixon had already made his bulk gift of papers.

Determination of $500,000 figure by DeMarco

The staff has tried to determine how the amount of the gift ($576,000) was derived. Mr. DeMarco told the staff that information on the amount of the President's income was obtained from Martin Feinstein, the accountant at Vincent Andrews, Inc., who handled the President's taxes at that time, and that this information was relayed by Mr. Feinstein to either Mr. Morgan or Mr. Kalmbach and that Mr. Morgan and Mr. DeMarco calculated the approximate size of the gift. In an interview with the staff, Mr. Feinstein has said that no one contacted him in this regard and that he was never aware of the second gift of papers. Mr. Ehrlichman and Mr. Morgan both have no knowledge of the determination of the amount of the gift and neither of them indicated giving any figure to Mr. DeMarco. In his worksheets estimating the President's possible income in 1969 (for purposes of his declaration of estimated tax) Mr. Feinstein listed his possible income at $490,000 and showed possible charitable contributions on this basis of $150,000 (30 percent of the $490,000 rounded upward). Staff Analysis

In their defense of President Nixon's deduction for his second gift of papers, the President's counsel have relied heavily on the assertion that early in 1969 the President intended to make a large gift of his papers. The staff acknowledges that at this time the President intended to make a gift sometime in 1969. The issue then is whether there was an intent to make a gift in early 1969 and whether the gift intended sometime in 1969 was to be a bulk gift, one large enough to use up the maximum charitable contribution deduction for several years, or like the gifts of President Johnson and like President-elect Nixon's 1968 gift, a gift large enough to use up only one year's available deductions.

The staff has seen no written evidence to indicate that in early 1969 the President intended to make a gift before July 25, 1969, nor has it seen any written evidence to indicate that the gift the President planned to make sometime in 1969 was to be a bulk gift. The evidence for these assertions by President Nixon's counsel consists entirely of reported conversations about the President's gift. Their memorandum asserts that in February 1969, President Nixon told John Ehrlichman to make a bulk gift and that Mr. Ehrlichman told Edward Morgan to make the gift on behalf of the President. However, in his interview with the staff, Mr. Ehrlichman did not mention this alleged conversation with the President, nor did Mr. Morgan in his staff interview recall any conversation with Mr. Ehrlichman about executing President Nixon's intent to make a bulk gift rather than a one-year gift.

The lawyer who prepared President Nixon's tax return in 1969, Frank DeMarco, has told the staff of several discussions of the gift in