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Citizen Hughes

Page 32

by Michael Drosnin


  Maheu was ecstatic. “Howard, we have secured a group of highly qualified men to handle our Washington problems,” he crowed. “Thanks to your foresightedness, the availability of O’Brien is perhaps the coup of the century. I am sure that we have no situation pending which O’Brien, Long and Danner cannot handle to your satisfaction.”

  But Hughes was not satisfied. A secret exemption for his charity was not enough. He wanted a major part of the whole tax law entirely rewritten.

  “I am horrified,” he wrote.

  “You assured me the new tax bill was not going to be unacceptable to me, and that you were not needed in Washington during these critical days because everything was under control.

  “I have just heard on the news that the capital gains tax will be increased, and very substantially. I am afraid your refusal to make an all out effort has resulted in a tragedy.”

  Maheu took it all in stride. With his new team of fixers, nothing was impossible.

  “I am so happy that you called to my attention your interest in the capital gains portion of the Tax Reform Bill,” he replied. “We were able to hold meetings with O’Brien, Long, Danner, Morgan and I present. We studied in depth the House version and the Senate version. Fortunately, among the five of us, we have excellent entrees to every member of the Committees involved.

  “We do not intend to leave one stone unturned. We also intend to call to the attention of the President how unpopular this particular portion of the Bill would be to those who undoubtedly account for perhaps 80% of the political contributions needed for a national campaign.”

  Richard Nixon had problems of his own. He too was against the capital gains hike, but the Democratic-controlled Congress was in open rebellion, and that was the least of his problems with the new tax law. The president’s real concern was quite personal. Like Hughes, Nixon was preoccupied with his own private philanthropy.

  While Congress debated a complete overhaul of the country’s revenue code, the president focused on one minor provision—the repeal of charitable deductions for donations of documents. Nixon had been planning to make a gift of his prepresidential papers to the National Archives. In return for a half-million-dollar tax break. Now he had a real dilemma. Throughout the fall the effective date of the repeal fluctuated. Not knowing what the final cutoff date would be, Nixon withheld his gift until he was sure he could claim his deduction, while his chief White House lobbyist, Bryce Harlow, pushed Congress to leave the loophole open, at least long enough for the president to slip through.

  In his strategy sessions with Harlow, Nixon kept raising another concern: the Hughes-O’Brien alliance. The president had learned about it a year earlier from his pal Rebozo, who had heard it from Danner, who had heard it from Maheu, just months after O’Brien first journeyed to Las Vegas. Larry O’Brien and Howard Hughes! The connection would never be far from Nixon’s mind in the years that followed, an obsession that grew throughout his presidency. And now O’Brien, the leader of the Kennedy gang, the former chairman of the Democratic National Committee, was actually out there lobbying Congress for Howard Hughes.

  Nixon wanted all the details, all the dirt. Harlow kept bumping into O’Brien’s operatives, and every time he huddled with the president, Nixon kept asking him about O’Brien and Hughes.

  “We discussed it as a matter of surprise and interest,” Harlow recalled. “I used to meet with the president every morning and in the evening, along with Haldeman and Ehrlichman and sometimes Kissinger. We’d sit there and chew the fat about whatever was going on, and from time to time that would pop up: ‘I wonder how Larry’s getting along with Howard Hughes.’ It seemed to us very odd that that arrangement existed and was acceptable to the Democratic party.”

  Of course, Nixon also kept pressing Harlow to buy time for his papers, to save his big tax break. It was the president’s top legislative priority, but the issue remained unresolved as the tax bill headed for the final House-Senate conference.

  Up in his penthouse, Hughes also sweated out the last crucial round. The capital gains tax had been cut, but not sufficiently, and his big charity loophole was still at risk.

  “We have had our people in Washington practically sleeping on the Hill, watching every move that is being made,” Maheu assured his boss, but warned that he could expect no help from Nixon.

  “The President continues to evidence his inability to control Congress insofar as the tax reform bill is concerned. Fortunately, we are not in an unfavorable position with that particular group because of your foresightedness in getting the O’Brien team aboard.

  “I talked to O’Brien an hour ago and he has no fear about being able to incorporate language which is beneficial to us when this whole matter goes to conference.”

  On December 22, 1969, the House-Senate conferees emerged from five days and nights of intense negotiations with a compromise version of the Tax Reform Act. It was swiftly approved by the full Congress the same day.

  Larry O’Brien had come through. Howard Hughes had won an incredible victory. The historic new law would affect virtually every American taxpayer, every business, every corporation. Even the long-sacred oil-depletion allowance was cut. And more than thirty thousand tax-exempt organizations came under strict new controls. The Ford Foundation, the Rockefeller Foundation, and the Carnegie Endowment were all brought under the law. But not the Howard Hughes Medical Institute. It was completely exempt, thanks to Larry O’Brien.

  Hughes did not thank him though. The philanthropist did not celebrate his great victory, did not appreciate the secret deal that saved him tens of millions of dollars, saved his control of Hughes Aircraft, saved all his kickbacks, saved his entire tax dodge.

  “I am naturally gratified that the changes in the language of the tax bill (as it relates to foundations) will make it unnecessary to revise the by-laws of HHMI,” wrote Hughes, grudgingly.

  “This is nice, Bob, and it is a convenience I appreciate.

  “However, I hope you realize how totally insignificant this piece of news becomes, if it is accompanied by the report of an increase in the capital gains rate.

  “I have pointed out at great length and with great emphasis that the affairs and funds of HHMI lie on the other side of the great wall, as far as I am concerned.

  “I further explained that HHMI has plenty of resources, is well provided with money for its future activities,” he continued, casually dismissing the threadbare charity he had milked dry, “and therefore that a dollar in the treasury of HHMI did not have a value to me approaching anywhere near the value of a dollar in the treasury of Hughes Tool Company or a dollar of my personal funds.

  “Therefore, you can readily appreciate that the present plans to increase the capital gains tax strike right at the very heart of the only area from which I have any hope of obtaining any profit of any consequence at any time from now on.

  “So, Bob, please put this project at the top of the list, where it should have been all along,” he pleaded, once more demanding that the tax law be rewritten—but not selfishly, not for him alone.

  “It is also the only source of substantial income for any other moderately wealthy man, whether he is a corporation executive, a broker, investor, financier, or what have you.

  “It appears to me that the bill would be devastating to almost everybody in the nation, except those in the very lowest income brackets.

  “Please report at once, Bob, I am more worried about this than about anything else that has happened at any time during the entire period of our relationship.”

  Hughes need not have worried. The new capital gains rate would hardly affect him at all. Hughes Tool had already slipped through its own special loophole, designed to benefit struggling small businesses—corporations with ten or fewer shareholders. That of course included Hughes Tool, which had only one. From now on, his holding company would pay no capital gains, indeed no corporate tax at all.

  Half his empire was now a tax-exempt “charity,” while the other hal
f was a tax-exempt “small business.” Only Hughes himself would have to pay taxes. For the first year under the new law he paid $20,012.64. This was the kind of tax reform the billionaire had in mind. O’Brien Associates had done well on its first official assignment.

  Richard Nixon had not done quite so well. The president lost his battle with Congress. On December 30, 1969, after threatening a veto, he bitterly signed into law a tax reform act that eliminated the deduction for his private papers. The repeal was retroactive to July. Nixon had missed the cutoff date. He had blown the chance for his big tax break. Or so it seemed.

  But on April 10, 1970, there was another signing ceremony in the Oval Office. On that day, the president signed his 1969 income tax returns. He claimed a charitable deduction of $576,000 for his papers and attached a deed showing that they had been donated to the National Archives in March 1969, four months before the new deadline. That whopping write-off allowed Nixon to escape virtually all of his taxes while he was president. In 1970 he paid $792.81. In 1971 he paid $873.03. In 1972 he paid $4,298. There was only one problem. It was all a fraud, one his own lawyers would later call “the Presidential Papers Caper.” Nixon had backdated the deed on his papers, cheated on his taxes, and evaded $467,000 he owed the IRS while he sat in the White House.

  By the time the president backdated his deed, Larry O’Brien had once more become chairman of the Democratic National Committee. For the next year he would serve Howard Hughes and the Democrats simultaneously, and Nixon’s concern about the Hughes-O’Brien relationship would become an absolute obsession.

  O’Brien was not merely a figurehead party chairman but the real leader of the opposition. With Johnson in exile, Humphrey in defeat, and Teddy Kennedy in disgrace, he was perhaps the most prominent Democrat in the country, the point man for his party in the 1970 congressional elections. With the financial freedom afforded him by the huge retainer he received from his hidden boss, Howard Hughes, O’Brien toured the country attacking Nixon.

  Hughes and O’Brien! The leader of the Democratic party a secret Hughes lobbyist, getting $500 a day from the billionaire, $15,000 every month, $180,000 per year while he served two masters—and getting away with it! O’Brien, the leader of the Kennedy gang, getting away with it, just like the Kennedys always got away with everything. Nixon was determined to nail O’Brien, to get proof of his Hughes connection, to find out just what he was doing for all that secret money.

  The president would have been surprised had he known. Certainly he never even guessed at O’Brien’s role in the big “Bold Ones” mission.

  It began one night when Hughes was watching television. What he saw was so shocking that he wanted O’Brien put right on the job, even though it came up at the very height of the great tax-bill battle.

  “Message to be given to Bob when he first wakes up,” Hughes dictated to one of his Mormons while he sat in the bathroom darkly brooding.

  “Sun. night on television was a program entitled ‘The Bold Ones’ which portrayed an almost identical sequence of events as the Apollo 12 flight,” the aide scribbled down as his boss grunted in the background. “This one had one colored man and two white men in it, however HRH is not objecting because of the colored man.

  “HRH thinks this type of show is detrimental to the welfare of the U.S. by showing scenes that would indicate that some things happened which could have been prevented, etc. In the program it showed the colored man getting sick and later one of the other men got sick and passed out and the problem had to be diagnosed by a doctor on the ground at Houston with the colored man’s wife sitting beside the control center.

  “HRH thinks you, through your connections in Washington, should register a violent protest about such a program being permitted to run. HRH thinks it is unpatriotic and puts the US space program in a bad light.

  “HRH thinks perhaps Larry O’Brien might handle such an assignment. However, HRH does not want this protest to be traced back to us.”

  There were other top-secret Hughes-O’Brien missions, some of them directly involving Nixon himself. Oblivious to the president’s obsession, completely unaware of Nixon’s fear and hatred of O’Brien, Hughes regularly suggested sending O’Brien right into the White House.

  “Suppose you have our top contact with Nixon (maybe O’Brien) go to the administration and offer to assist them in satisfying the southern Nevada public with an alternative water system which would be privately financed and require no government funding,” Hughes suggested, ready to pay any price to assure the purity of fluids.

  And when he feared that the president was getting in bed with the bombers, Hughes again proposed that O’Brien make contact: “The very most urgent matter right now is, by all odds, the Nixon-AEC alliance, which I think is absolutely terrible, and must be untied somehow. Can’t you put O’Brien on this and pull out all the stops?”

  Indeed, Maheu and O’Brien hatched a plot to help Nixon get Senate approval of a Supreme Court nomination in return for a bombing halt.

  “I have been in touch with O’Brien and some of his people,” reported Maheu, “and they are going to make an attempt over the weekend to swap votes for Carswell in exchange for a postponement of the blast. You may rest assured that we are handling this one with extreme caution. But O’Brien thinks it’s at least worth a try.”

  Nixon, however, never learned of any of these missions. And the president grew ever more obsessed with discovering exactly what O’Brien was up to. He called in Haldeman—“We’re going to nail O’Brien on this, one way or another,” he told his chief of staff. He called in Ehrlichman, he called in Colson. he called in Dean, he called in the IRS, he called in his pal Rebozo and had Rebozo pump Danner and Maheu. He called in his private gumshoes, and finally he called in his attorney general, and Mitchell called in Liddy, and Liddy called in McCord and Hunt, and Hunt called in the Cubans, and they all got caught in Larry O’Brien’s office at the Watergate.

  All in a desperate effort to get to the bottom of the Hughes-O’Brien connection.

  “I thought it would be a pleasant—and newsworthy—irony,” Nixon later explained in his memoirs, “that after all the years in which Howard Hughes had been portrayed as my financial angel, the Chairman of the Democratic National Committee was in fact the one profiting from a lucrative position on Hughes’s payroll.”

  But there was another factor in Nixon’s obsession, one he did not mention in his memoirs.

  The president was also on the pad.

  *So much more that when Fortune magazine sized up the wealthy in 1968, the whole of the Kennedys’ net worth—at most $300 million—was less than the margin of error in appraising Hughes.

  *Hughes was mistaken about the days—it was actually Tuesday and Wednesday nights.

  *Humphrey received $100,000 from Hughes. It is unclear if the billionaire had forgotten the full amount or was counting only the $50,000 in secret cash handed directly to the vice-president when he now equated “20 times Humphries” with his proposed million-dollar bribe.

  10 Nixon: The Payoff

  The blood dripped slowly from a suspended pint bag, trickling red down a clear plastic tube, flowing through a hypodermic needle into the emaciated arm of the cadaverous old man.

  Howard Hughes, near death, was coming back to life.

  He had been losing blood for months, apparently from his ruptured hemorrhoids, a now critical anemia compounded by chronic malnutrition. His hemoglobin count had dropped below four grams, a 75-percent blood loss that left him as leeched as a week-old corpse.

  Unwilling to be hospitalized—he would not leave his lair, he dared not face the daylight—Hughes instead sent his henchmen in search of uncontaminated blood. It was no simple mission. Hughes insisted on knowing the precise origin of each pint, requiring a thorough investigation of every potential donor, rejecting some for their dietary habits, others for their sexual activity, and all who had ever given blood in the past, before he finally selected several clean-living Salt Lake City Morm
ons to be bled for him alone.

  And now, after getting his first taste of pure Mormon blood—blood the billionaire came to like so much that he would later demand transfusions he did not need—Hughes watched television and waited for news that would satisfy an older craving.

  It was Tuesday, November 5, 1968. Election night.

  “… and it’s a very tight election indeed,” boomed the absurdly amplified voice of Walter Cronkite. “A seesaw race right across the country. Nothing like the presidential countdown that had been anticipated.…”

  The same report echoed, at a considerably lower volume, in another grim hotel room three thousand miles away. There, men as yet unknown but soon to be notorious monitored the returns for Richard Nixon.

  Nixon himself, secluded in a separate room on the thirty-fifth floor of the Waldorf Towers in New York, would not allow even a TV to share his solitude. Hour after hour he sat alone, hunched over his yellow legal pads, analyzing the vote pattern, shut off from his family down the hall, withdrawn from his closest aides in the adjacent suite.

  Nixon had been losing ground to Humphrey for weeks, had seen his once overwhelming lead shrivel day by day, and now, alone in the gloom of his secret room, knew that his political survival was in serious doubt. “You could almost feel the mood changing as the darkness came over the land,” his aide Leonard Garment later recalled. “We knew there was this hemorrhage of votes, this dreadful phenomenon, like a strange disease.” All night and into the early morning, Nixon watched his vote count waver.

  Precisely at the stroke of three A.M., he suddenly emerged in an old rumpled suit, haggard from the ordeal, and announced he was ready to claim victory. The outcome was still uncertain, but Nixon savored the moment. It was at the same hour eight years earlier that he had conceded defeat to John F. Kennedy.

  Beaten in 1960, buried in 1962, he had delivered his own obituary—“You won’t have Nixon to kick around any more”—in the famous “last press conference.” But now he was back, risen from the grave and ready to enter the White House.

 

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