Citizen Hughes - Michael Drosnin [140]
But Wright Patman could not be stopped. He was on a crusade, and his revelations were finally forcing Congress to impose strict controls on all tax-exempt private foundations.
Except one. Larry O’Brien was seeing to that.
“It was Larry O’Brien’s people who called to my attention the deficiencies in the pending Tax Reform Bill,” Maheu told Hughes. “O’Brien and his people detected deficiencies which could be devastating to HHMI and Hughes Aircraft.”
Devastating indeed. Under the bill passed by the House, the medical institute would actually have to become a charity. It would be forced to spend at least $10 million each year on good works—probably two or three times that amount—far more than what it had paid out in the past fifteen years combined. Worse yet, the new law would prohibit “self-dealing.” Hughes would have to pay a 200 percent tax penalty on all the kickbacks he received from his foundation. And worst of all, he would have to surrender control of Hughes Aircraft, sell off 80 percent of his stock within ten years.
O’Brien had his work cut out for him. But he also had powerful allies. In addition to Nixon’s pal Danner, Hughes deployed a team of lobbyists that included Gillis Long, a former congressman from Louisiana who just happened to be a cousin of Russell Long, chairman of the Senate Finance Committee—next stop for the Tax Reform Act.
By the time the tax bill emerged from that Senate committee, it had a special loophole. One tailored just for Hughes. Now hidden in the 225-page law was a single sentence that exempted “medical research organizations”—namely the Hughes Institute.
Maheu flashed the good news to the penthouse: “In meetings today and yesterday, the Senate Finance Committee adopted all the amendments we were pressing on behalf of HHMI.”
The revised bill still had to survive a House-Senate conference and a final vote of the full Congress, but mainly it had to get past one man—Wilbur Mills, chairman of the House Ways and Means Committee. O’Brien took his old friend Mills out to lunch. For two hours they discussed the impact of the new tax law on foundations, and while O’Brien later insisted he never even mentioned Hughes, Wilbur Mills became a fervent advocate of the Hughes loophole.
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