Citizen Hughes - Michael Drosnin [242]
Both Napolitan and DeSautels confirmed their work for Hughes, and both also confirmed that they consulted regularly with O’Brien, as did O’Brien himself. “During my period on Wall Street,” said O’Brien, “there were occasions when Claude and/or Joe would check with me on some aspects of their activities with Maheu, and I’m sure I also talked with Maheu directly.” However, O’Brien said that he did not recall any involvement with the Air West CAB hearings or seeking congressional support for the fight against nuclear tests, as reported by Maheu.
O’Brien confirmed that he met again with Maheu in Las Vegas in August 1969, after quitting his Wall Street job, and arranged to go to work for Hughes for two years at $15,000 a month starting October 1, 1969. It was not publicly known at the time that O’Brien was working for Hughes, and the fact that O’Brien was on retainer while he was Democratic Party chairman was not reported until July 1974, when leaked by the Senate Watergate Committee.
O’Brien confirmed Maheu’s report that his firm played a central role in altering the 1969 Tax Reform Act. “I’m sure that’s true,” said O’Brien. “Obviously there was involvement on the tax bill through my contract with Hughes, and I’m sure that DeSautels was very active on that. He knew just about everybody on the Hill.” O’Brien defended his role but added, “I know I’m going to look a bit illiberal on the tax bill.”
The account of Patman’s probe of the Hughes Medical Institute was drawn from reports of the House Banking Committee and the hearing record. The account of HHMI’s finances was drawn from IRS files and internal documents of the Hughes organization, as well as congressional reports. O’Brien said that he never contacted Patman for Hughes, but that DeSautels probably did.
The Senate Finance Committee revised the Tax Reform bill to allow the Hughes Medical Institute to escape its “private foundation” status by affiliating with a hospital, and the House-Senate conferees gave HHMI a full year to make the change and become a “public charity.” The House version of the bill, however, forbid the change unless the foundation repaid with interest all the back taxes it would have paid had it not been tax-exempt as a “private foundation.” The Senate Finance Committee revised the bill to allow the change without any tax penalty, and the House-Senate conference adopted the Senate version. The Senate Finance Committee also softened the rules on “self-dealing” in a clause that seemed tailored for Hughes, and in another clause tailored for Hughes allowed foundations to hold 100 percent of stock in a corporation for fifteen years if the foundation already held more than 95 percent of the stock.
Senator Paul Fannin, who received campaign contributions from the Hughes Aircraft Company’s “Active Citizenship Fund,” confirmed in an interview that he worked with Hughes representatives to revise the Tax Reform Act in the Senate Finance Committee, and also confirmed that committee chairman Russell Long helped push through the Hughes amendments. Both Gillis and Russell Long declined interview requests.
O’Brien confirmed his meeting with Wilbur Mills, but denied that he discussed HHMI with him. Mills, however, supported the Hughes loophole in the House-Senate conference, and two years later opposed an IRS attempt to force HHMI to spend at least 4 percent of its assets each year on medical research.
Nixon’s attempt to get a tax break for donating his papers, the backdating of his deed, and his failure to pay $467,000 owed the IRS while he was president was reported by the House Impeachment Committee. Harlow recounted his talks with Nixon about O’Brien in an interview.
The fact that Hughes paid no personal income taxes for seventeen years, from 1950 through 1966, was established by copies of his federal income tax returns. The Hughes Tool Company became a “subchapter S corporation” in 1967, and as a “small business” with ten or fewer shareholders paid no corporate income taxes starting in 1967.
Larry O’Brien