-6 consultant Sherrod E. East to receive, arrange and catalogue the papers. On March 26 and 27, 1969, all of the pre-Presidential papers stored in Federal Office Building #7 were delivered to the National Archives at Mr. Morgan's direction. The General Services Administration, which operates the Archives, viewed the delivery as having been made for "gift purposes" but was unclear on what portion was to become the property of the 1/ United States immediately. Nonetheless, Mr. East and his staff proceeded immediately to work toward their objective of achieving "intellectual and physical control" over all of the papers. By May 27, 1969, they had completed the initial tasks of boxing, 2/ labeling and filling out inventory worksheets. Since the General Services Administration received no instructions concerning the conditions of access applicable to the papers delivered in March, it assumed that it was to apply the same conditions which had been specified in the 1968 deed. 3/ 1/ 2/ Response of the General Services Administration to Memorandum from National Archives Consultant Sherrod E. -7 4. Morgan-DeMarco-Newman Contacts At about the same time as the delivery of the 1969 gift papers to the Archives, Mr. Ehrlichman advised Mr. Herbert W. Kalmbach of the Los Angeles law firm of Kalmbach, DeMarco, Knapp & Chillingworth that as a result of the President's decision to acquire property at San Clemente, he desired to shift major outside counsel responsibility for his personal affairs from his former New York firm to them. Mr. Kalmbach so advised his partner, Mr. Frank DeMarco, Jr., and indicated that Messrs. DeMarco and Morgan were to work together in implementing the President's expressed intent with respect to the 1969 gift of papers. At the end of March or the beginning of April, a telephone conversation ensued between Messrs. DeMarco and Morgan which in turn led to a call from DeMarco to Mr. Newman in the first week of April. Mr. DeMarco's contemporaneous notes of this initial conversation with Mr. Newman indicate that they understood that Newman would go to the National Archives "segregate enough [papers] to satisfy this requirement," and appraise them. Both Mr. DeMarco and Mr. Newman relate that they understood "this requirement" to be a quantity of papers of an estimated value of $500,000. The $500,000 figure had been developed by Presidential representatives under the formula for the 1969 gift which President Nixon had conveyed to Mr. Erlichman. -8 5. The 1969 Tax Reform Act The actions and events described above all took place at a time when the Internal Revenue Code permitted taxpayers to take charitable contribution deductions equal to the fair market value of donated property. Shortly thereafter, however, the Treasury Department proposed a tax reform package approved by President Nixon which recommended, inter alia, that the deduction permitted for contributions of property which, if sold, would produce ordinary income should be reduced by the amount of the ordinary income that would have been recognized upon a sale of the property. This proposal would not have had any effect on the tax treatment of a gift or sale of papers, which were then clearly within the definition of capital assets. Chairman Wilbur Mills announced on July 25, 1969, that the House Ways and Means Committee had tentatively decided to include in the tax bill to be reported provisions (1) under which a donor of ordinary income property would have to elect either to limit his deduction to his cost basis or, if a deduction equal to fair market value were taken, to recognize income equal to the gain that would have been recognized had the property been sold, and (2) under which papers were redefined as ordinary income property. This proposal was broad enough to cover many of the private papers of public officials. The Ways and Means Committee reported the bill (H.R. 13270) on August 2, 1969, and the House approved it on August 7, 1969 -9 with the provision that it would apply to contributions made after December 31, 1969, and sales made after July 25, 1969. The Senate Finance Committee reported the tax reform bill on November 21, 1969, adopting in pertinent part the House's substantive amendments on sales and charitable contributions but pushing their effective date up to December 31, 1968. The Senate passed the bill in this form on December 11, 1969. A compromise was ultimately reached in conference fixing the effective date of these amendments at July 25, 1969, and the President signed the bill into law on December 30, 1969. Two aspects of our factual understanding of the 1969 gift at the time President Nixon asked this Committee to review the issue have been substantially affected by recent conflicting revelations. These are (1) the circumstances surrounding Mr. Newman's segregation of the 1969 gift papers and (2) the activities of Messrs. Morgan and DeMarco in documenting the 1969 gift for tax purposes. Our pre-December 8 understanding of Mr. Newman's activities with respect to the 1969 gift papers was based upon our conversation with him on August 2, 1973, his written statement of that date, his April 8, 1970 affidavit which was submitted with -10 President Nixon's 1969 tax return, and reports of his conversations in 1969 with Mr. DeMarco. From these sources, it appeared that Mr. Newman had visited the Archives between April 6-8, 1969 and, in the company of Archives representatives, had preliminarily segregated a sufficient volume of materials to satisfy the President's criterion for the 1969 gift. According to Mr. DeMarco, Mr. Newman telephoned him a short time later to confirm these actions. On the basis of Newman's report, Mr. DeMarco apparently felt that a gift consisting of specifically identified papers had been completed, and he so indicated in a formal legal opinion to Coopers & Lybrand on August 22, 1973. He It now appears that Mr. Newman flew to Washington on April 6, 1969 and visited the Archives only on the 8th. spent most of the day completing his appraisal of the 1968 gift, and whether or not he visited the room containing the 1969 gift papers, he did not actually segregate them until November 1969. 2. Documentation Of The 1969 Gift Shortly after the delivery of the 1969 papers to the National Archives, Mr. Morgan transmitted a copy of the 1968 chattel deed to Mr. DeMarco. It appears that Mr. DeMarco did not communicate with Messrs. Ritzel or Tannian concerning the mechanics of the 1968 gift but decided on his own initiative to draft a document incorporating portions of the 1968 deed for |