[Barbara Jordan Scrapbook, July - September, 1974] Page: 34 of 236
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IRS Planned Audit'
By Bob Kuttner
Washington Post Staff writer
Last Dec. 8, President
Nixon with much fanfare
made public his 1969-1972 in-
come tax returns and in-
vited the congressional
Joint Committe on Internal
Revenue Taxation to review
the controversial deductions
taken for his gift of vice
presidential papers to the
National Archives.
The President did not dis-
Mimi. Firm
F-aces Count
In Milk Case
By Austin C. Wehrwein
Special to The Washintoi Pot
MINNEAPOLIS. July 26-
.orman Sherman and Jack
Valentine, partners in a
voter canvassing firm, will
be charged by the Water-
gate special prosecutor with
aiding "nonwillfully" in the
illegal use of corporate
funds from a milk coopera-
tive for political purposes, a
misdemeanor.
Sherman is a former press
secretary for Sen. Hubert H.
Humphrey (D-Minn.). Sher-
man and Valentine are ex-
pected to plead guilty. They
have eboperated fully with
Special Prosecutor Leon Ja-
worski.
The formal ch a r g e,
sources close to the case
said, will be filed in federal
court in St. Paul early next
week. It is expected that the
special prosecutor will al-
lege that the firm, called
Valentine Sherman & Asso-
ciates, aided Associated
Milk Producers Inc. in using
$82,000 in corporate funds in
1971 to buy computerized
voter lists for use by Demo-
cratic candidates in Towa,
South Dakota, and Minne-
sota. Some of the money
was used for lists provided
to Humphrey.
Because Sherman and Va-
lentine cooperated voluntar-
ily, the special prosecutor's
office is expected to recom-
mend leniency in U.S. Dis-
trict Court, which could
mean the partners would re-
ceve only a nominal fine.
Although the partners de-
clined comment, sources
close to the case said that
they had expected to be
paid from the dairy coopera-
tive's political arm, but the
first check, for $25,000,
which arrived in July, 1971,
was drawn on a coorporate
account. They reportedly
were assured by their attor-
ney, Jack Chestnut, who was
Humphrey's campaign man-
ager, that they could legally
accept the money after they
told Chestnut the coopera-
tive planned to use the lists
for commercial purposes.
But Chestnut has reportedly
denied giving such advice.
The arrangement between
the partnership and the co-
operative was apparently ne-
gotiated in the spring of
1971 with the milk group's
general manager, Harold
Nelson, and its lawyer,
David L. Parr. Parr pleaded
guilty Tuesday to a charge
of conspiring to make illegal
corporation donations to the
campaigns of Humphrey and
Rep. Wilbur Mills, (D-Ark.),
and others. Parr pleaded
guilty to arranging an illegal
corporate gift amounting to
$222,450, including $150,450
to Humphrey.In fact, the IRS advised
the President in a letter de-
livered Dec. 7 that he was
being re-audited. That eve-
ning, according to IRS Com-
missioner Donald Alexan-
der, the White House sent
for copies of Mr. Nixon's tax
return.
Apparently, the White
House plan to enlist the
joint committee was already
in progress when word came
of the new IRS audit.
These and other details of
the President's personal fi-
nances emerge from a 552-
page House Judiciary Com-
mittee book of impeach-
ment, evidence released yes-
terday.
According to the commit-
tee's summary of evidence,
IRS Commissioner Alexan-
der personally decided on
the re-audit in order to pro-
tect the integrity of the IRS.
He felt that questions raised
in the press and elsewhere
"would have caused the ex-
amination of the returns of
any other taxpayer."
Alexander then advised
Treasury Secretary George
P. Shultz of his decision. Al-
exander's notes of the meet
ing Nov. 28, say, "Secy said
. . . go ahead, said he would
talk to Gen. Haig. Said law-
yers would cause downfall
of Govt."
Rep. Wilbur D. Mills (D-
Ark), chairman of the con-
gressional joint committee,
agreed to investigate the
President's taxes, but ac-
cording to committee aides
Mills at the time was proba-
bly unawa-e that the IRS
had already begun its own
investigation. Eventually,
both the IRS and the joint
committee determined that
the $576,000 tax deduction
for the papers was im-
proper, and the President
was billed for a total tax de-
ficiency of $432,787.13.
The IRS assessed a negli-
gence penalty, but did not
accuse the President of tax
fraud. The Judiciary Com-
mittee staff summary, how-
ever, concluded from addi-
tional evidence that Mr.
Nixon was aware when he
signed his 1969 tax return
that the dating of the gift as
of March 27, 1969, was un-
true.
The 1969 Tax Reform Act,
enacted in December, 1969,
retroactively eliminated de-
ductions for gifts of papers
made after July 25, 1969.
As evidence that the ear-
close that, only a day ear-
lier, he had been notified
the Internal Revenue Serv-
ice was reopening a full au-
dit of his 1971 and 1972 re-
turns. Instead, the Presi-
dent's statement referred to
the original cursory IRS au-
dit, implying that the IRS
had no further questions.
The Internal Revenue
Service reviewed the deduc-
tions, Mr. Nixon said, "and
advised me that they were
correctly reported."
her date - ^ ~'* a+
claimed
staff cite
Ralph Ir
praised
pers. Ne
mittee st
make th<
vember,
months
date.
Newm
chanced
dent in
ceiving
man sal
mented I
estimate
Newm
lieved thmade a gift on the date later
claimed. "I thought he'd
blown it," Newman testified.
The Judiciary Committee
documents also reveal that
the IRS has asked Special
Prosecutor Leon Jaworski to
launch a grand jury investi-
gation of possible fraud
charges against Newman,
two former Nixon aides and
two tax lawyers.
In a letter dated April 2
to Jaworski, IRS Commis-
sioner Alexander called for
further investigation of for-
mer deputy counsel Edward
Morgan, who signed the
back-dated deed for the
President, lawyers Frank De-
Mrco and Herbert Kam-
bach, who prepared the 1969
tax return, and John D.
Ehrlichman, the principal
Nixon aide responsible for
the papers donation.
Kalmbach, a law partner
of DeMarco, is serving a
prison sentence for cam-
paign fund-raising viola-
tions. Ehrlichman, formerly
the President's chief do-
mestic adviser, has been
convicted of conspiracy in
the Ellsberg break-in.
Another Judiciary Com-
mittee document reveals
that the IRS considered levy-
ing a civil fraud penalty
against President Nixon, but
fund insufficient evidence
'linking the taxpayer with
the actual preparation of
the return."
The memorandum, by
Robert Browne, chief of the
intelligence section in the
IRS Baltimore district of-
fice, that direct testimony
added by the principal aides
would be necessary to dem-
onstrate fraud. However,
Newman and Morgan re-
fused to testify and Ehrlich-
man was never contacted.
Tax fraud is not directly
included in the two articles
of impeachment before the
House Judiciary Committee.
although misuse of the IRS
has been cited by many
members as an example of
abuse of office.
One committee member,
Edward Mezvinsky (D-Iowa).
has urged colleagues to con-
sider the President's own
taxes as an impeachment
count Rleamnc commriiee
concern about IRS and te
"enemies list," Mezvinsky
declared: "You've got to
wonder when you look at
the friends list whether
President Nixon wasn't his
own best friend . .
The committee documents
indicate that Mr. Nixon has
so far paid the IRS less than
the total the White House
promised he would repay.
The President sent a check
on April 17 to cover his tax
debt for 1970, 1971, and 1972.
But according to IRS offi-
cials he is still considering
whether to pay the 1969 de-
ficiency of $148,080.97. on
which the statute of limita-. r
Special counsel John Doa
Republican
FORD, From Al
President's innocence in
particularly emphatic terms.
"I can say from the bot-
tom of my heart that the
President of the United
States, he is right," Ford
said to a standing ovation of
the Republican faithful.
Today, in a press confer-
ence here, Ford attributed
no special motive to his em-
phatic statement of support
beyond the fact he wanted
to demonstrate his agree-
ment with Dennis in his
home district.
Ford also said in MuncieExcerpts
TRANSCRIPT, From A12
Rangel. I wonder as we try to talk
about specifics so that the President
would be in a better position to defend
himself whether we really take into
consideration that the mandate of this
committtee is to report to the House of
Representatives and it seems to me
that if we got bogged down with spe-
cifics before the House of Representa-
tives has worked its will, that perhaps
we would not give the general recom-
mendation to the House that it right-
fully deserves. It is not our constitu-
tional responsibility to impeach the
President but merely to report to the
House. So that it seems to me that we
should not be talking about specifics
but give them maximum amount of in-
formation to the House of Representa-
tives so that they can deal with the
problem constitutionally
Railsback. Mr. Doar, I wonder if I
could direct a question to you. I won-
der if in past impeachment cases it has
not been the procedure that the Judici-
ary Committee has recommended and
then on some occasions the House of
Representatives itself has formally
drafted and prepared articles of im-
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[Barbara Jordan Scrapbook, July - September, 1974], book, 1974; (https://texashistory.unt.edu/ark:/67531/metapth616583/m1/34/: accessed May 1, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting Texas Southern University.