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This is, I take it that is a very customary practice?

Mr. NUSSBAUM. That is correct.

Mr. HUNGATE. It would have to have been done in this case because of the previous audit of the return and the letter?

Mr. DOAR. No, because of the 3-year statute of limitations on the collection of deficiencies.

Mr. DOAR. Regardless of fraud.

Mr. NUSSBAUM. If fraud were found, Congressman, it would not be necessary to have the waiver of the statute but this is just the beginning and you are not sure whether or not fraud is going to come out. Mr. HUNGATE. In the case such as the 1970 case where they had an audit and whatever kind of a letter you mentioned, then they do, I guess it's 1971, they had had for this year a previous audit, and there is a statute of limitations then if you have once been audited, is that true?

Mr. FOLSOM. There is a civil statute of limitations on civil deficiencies, but for fraud deficiencies there is no statute of limitations no matter how many audits there are.

Mr. HUNGATE. None. All right. Thank you.

Mr. FOLSOM. In short, you can cover up for two, three, four audits and on the fifth somebody drops a load on you and you are liable for

the tax.

Mr. HUNGATE. Finally, tab 6, page 2, item H, Mr. DeMarco's secretary testified she remembered typing two deeds and so on and is that a fairly significant factor?

Apparently she actually did type two deeds. Do we agree to that? Mr. NUSSBAUM. That is her testimony. Her testimony is that she remembers typing two deeds.

Mr. MEZVINSKY. Would the gentleman yield?

Mr. HUNGATE. I yield to the gentleman from Iowa.

Mr. MEZVINSKY. You mentioned in the DeMarco hearing, because he agreed to have his notary seal removed, that they could not check the typewriters to see whether or not it was actually typed in 1969. What are we doing now to check whether or not the typewriters in Mr. DeMarco's office, as to the type on this deed, coincide, and did in fact, exist in 1969 since he supposedly stopped the hearing?

Did we pursue that so in fact we can get authentication regarding the typewriters and when it was typed?

Mr. McKEITHEN. Congressman, we have been in touch with the office of the secretary of state of California. They have notified us that an examination of one type sample in 1969 has been made by the office to the attorney general of California. They have not received a written report from that office.

They have assured us that if and when they receive a written report they will forward that and any other documents which they have turned up in their investigation to the committee staff.

Mr. HUNGATE. Counsel, did the Nixons in fact sign the consent form 872 sought for the taxable year 1970? Does anyone know?

Mr. McKEITHEN. Yes, they have.

Mr. HUNGATE. Thank you.

The CHAIRMAN. Mr. Wiggins.

Mr. WIGGINS. Mr. Chairman, three very quick questions.

Counsel, under the code, what is the authority of the Government to impose a negligence penalty?

Mr. NUSSBAUM. Well, all we know is a negligence penalty was imposed pursuant to section 6653 (a), and there was imposed the 5-percent negligence penalty which was imposed and the audit report contains a 3-page statement why that penalty was imposed.

Mr. WIGGINS. I am interested in knowing from you what the code says about the circumstances under which it may be imposed.

Mr. NUSSBAUM. 6653 (a), section 6653, subsection (a) says "If any part of any underpayment as defined in subsection (c)(1) of any tax imposed by subtitle A or by chapter 12 of subtitle B relating to income taxes and gift taxes is due to negligence or intentional disregard of rules and regulations, but without intent to defraud, there shall be added to the tax an amount equal to 5 percent of the underpayment." That is the penalty, this 5-percent penalty which was imposed pursuant to the provisions of this section, and it was justified in the audit report.

Mr. WIGGINS. Thank you.

Now, that is point one. Now just very briefly, Mr. Chairman.
The CHAIRMAN. Mr. Wiggins still has the floor.

Mr. Wiggins.

Mr. WIGGINS. Throughout the entire book, there were photocopies of the Presidential logs for the month of April 1973. In that log, there is a notation of a meeting with DeMarco to sign the tax return for the taxable year 1974. I only call it to your attention and to the other members attention that it was a 3-minute entry and on the theory that practice and custom has some evidentiary value, it does indicate the time that the President spent with DeMarco in signing the return. That appears at least four places in our book and maybe more than that, as you have reproduced that document. I am sure you will acknowledge that.

Mr. DOAR. Yes, that is true.

Mr. WIGGINS. Now, finally, over to tax counsel again, if Richard Nixon should pay that tax which is barred by the statute of limitations, would that be a gift to the Government, and if so, would it expose him to further tax liability?

Mr. FOLSOM. Well, it would be a voluntary act on his part not called for by any legal compulsion at all at this stage.

Mr. WIGGINS. I am just asking you if you know the answer. Is it a gift in the contemplation of the law?

Mr. FOLSOM. I could not tell you.

Mr. BROOKS. Mr. Chairman?

The CHAIRMAN. Mr. Brooks.

Mr. BROOKS. Mr. Chairman, I wonder if distinguished counsel would advise me if in their evaluation of the President's tax problems, they considered all the data in the document prepared by the Joint Committee on Internal Revenue.

Mr. DOAR. If we have or if we did?
Mr. BROOKS. I trust that you are.

Mr. DOAR. We are.

Mr. BROOKS. I particularly want to bring to your attention-I am sure you are aware of it; we have talked to you about it before-the gain on the Presidential New York residence, chapter 3, and the capital gain of some $117,000 which was all established at San Clemente,

and the pattern of signing these deeds was fascinating. It tracks very closely the pattern in the transfer or the alleged transfer of the documents and that Mr. DeMarco had a tendency in that same set of transactions to sign papers and then back date them, sign them and have a different date put on them. It follows that same pattern.

Also, in part 7, the expenditures of funds of the President at San Clemente and Key Biscayne reflected that the IRS did agree with the Joint Committee that some $92,000 of Federal expenses were personal income to the President and assessed him taxes on those funds.

Now, I hope that the committee staff, and you have a lot of people there, would take a look at the Constitution and see where it reads "No further emoluments shall be provided to the President by the United States or the states thereof." I wonder if this $92,000 which has been assessed as a personal income to the President upon which he is required to pay taxes is not emoluments to the President by the United States, a further emolument above his income as stated by the Constitution and by the laws providing for his salary. I would think that it might well be established that that is a direct violation of the constitutional prohibition against any further emolument.

I would hope that the committee staff, Mr. Chairman, would take a very close look at that and give us a report on that before we reach a conclusion on this specific tax problem.

Mr. COHEN. Mr. Chairman?

The CHAIRMAN. Mr. Cohen.

Mr. COHEN. Mr. Nussbaum, I asked earlier today whether or not there was any evidence of authority on the part of Mr. Morgan to sign on behalf of the President that deed and you said no. I refer your attention to page A-293-I am sorry, A-301-where there is an affidavit by Mr. Morgan indicating that he had such authority.

The question I ask of you, No. 1, when you are engaged in a transfer of personal property as opposed to real estate, is it necessary to have a power of attorney executed in order to make it a valid transfer? Would that be true under California law or would an affidavit such as filed here be sufficient? If you would furnish that information to me at some later time, I would like to have it.

Second, would you clarify for me the reason for the retyping of the original deed? As I recall it, you said something about the original deed did not conform in terms of the type of paper that it was on and that was the reason for the retyping?

Mr. NUSSBAUM. Yes. Mr. DeMarco said that the original deed was different than the new schedule because of the texture of the paper and the type style, type style of the deed as compared to the paper, and he felt that it should be consistent. Consequently, he had another deed typed.

Mr. COHEN. The only other question I have of the chairman is are we going to have the benefit of these various interviews that have been conducted and I assume placed on paper. Are we eventually going to see these?

Mr. DOAR. Yes, they are available for you, yes.

Mr. COHEN. At the headquarters!

The CHAIRMAN. All members have always been invited to review those documents. Those documents are available at all times.

Mr. WALDIE. Mr. Chairman?

The CHAIRMAN. Mr. Waldie.

Mr. WALDIE. Would you refer just a quick moment to exhibit 8, the letter from Donald Alexander to Jaworski? Has the staff interviewed all the individuals that Alexander refers to in that letter as to whom he has been unable to have any cooperation or information?

Mr. NUSSBAUM. The staff has not interviewed Mr. Ehrlichman.
Mr. WALDIE. Has there been a reason why you have not?
Mr. NUSSBAUM. Well, Mr. Ehrlichman is under indictment.
Mr. WALDIE. Well, I know that.

Mr. DOAR. We have not attempted to interview Mr. Ehrlichman as yet in connection with this matter.

Mr. WALDIE. Now, in terms of the other gentlemen, would your assessment of their response to you concur with that of Mr. Alexander? His assessment is: "We have been unable to complete the processing of this matter in view of the lack of cooperation of some of the witnesses and because of many inconsistencies in the testimony of individuals presented to the Service."

Is that a fair description of your experience with these gentlemen?

Mr. NUSSBAUM. We interviewed Mr. DeMarco, Mr. Newman, and Mr. Morgan, and they did consent to be interviewed to answer our questions.

Mr. WALDIE. I know. And then were you content with the responses to your questions? Were they telling you the truth, did you think?

Mr. NUSSBAUM. I do not think that is--let me put it this way: As Commissioner Alexander said and as the joint committee reports indicate, there are a number of inconsistencies in the testimony as between these people, and judgments will have to be made someday of people with respect to this matter, to resolving those inconsistencies, whether it be this group or the grand jury or anybody else.

Mr. WALDIE. OK. Two final questions. Have you had access to the special agent's report and related exhibits compiled during the investigation?

Mr. NUSSBAUM. Yes; we have.

Mr. WALDIE. And is the fruit of that exhibit or a report contained in our folders?

Mr. NUSSBAUM. No; we have the fruit in our offices, but it is not totally contained in the reports submitted to you.

Mr. WALDIE. Is it not contained because it is confidential and sensitive?

Mr. NUSSBAUM. What we have attempted to do is in drafting this report is in effect to give an interim or preliminary report with respect to the matters that we have looked at as of this date. The total material is available for members of the committee to look at.

Mr. WALDIE. Will we be able to find out what portions of it are under process for grand jury investigation?

Mr. NUSSBAUM. No portions of a report are in process

Mr. WALDIE. I gather Mr. Doar said that Jaworski told him that some portions were being investigated for grand jury.

Mr. NUSSBAUM. Yes, as we understand from the Special Prosecutor, they are looking into the circumstances surrounding the gift of papers, Congressman Waldie.

The CHAIRMAN. The Chair recesses this committee until 10 o'clock tomorrow morning. This is a record vote, and I would just caution the members that the material that has been presented this afternoon, as you know-there are 10 documents-are internal documents which came from the IRS and they should be returned or left in the book. The report, however, is available to the members.

I should also caution the members that there were some items that were presented this afternoon in executive session that I think are sensitive items, and I would hope that they do not discuss this with members of the press.

[Whereupon, at 3:53 p.m., the committee recessed, to reconvene at 10 a.m., Friday, June 21, 1974.]

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