The $100,000 Misunderstanding

When he decided to fire Archibald Cox, almost nothing made Richard Nixon angrier than the special prosecutor's investigation of the $100,000 Nixon campaign gift from Howard Hughes to Charles ("Bebe") Rebozo, the President's close friend. That matter, Nixon firmly declared, was off limits. But the matter did not die with the departure of Cox. It was pursued by a dogged, four-man team of investigators from the Senate Watergate committee under the direction of Terry Lenzner, 34, a former Assistant U.S. Attorney in New York City and a onetime member of the Berrigan brothers' defense team.

Acting largely on their own, sometimes impressing the other staff and members of the committee and sometimes exasperating them, the investigators crisscrossed the country, conducted some 300 interviews, and pored over countless financial records, personal memorandums and hotel logs. Racing against the May 28 deadline that will bring the committee's investigation to a close, they had produced by last week an outline of a cover-up of the $100,000 transaction that mirrored on a smaller scale the whole Watergate coverup.

Useful Witness. Though the team had painstakingly unraveled part of the mystery, they were given their first dramatic break early in April when Herbert Kalmbach, the President's personal attorney, testified before the committee. Kalmbach was not exactly a willing witness; he refused to divulge details of conversations he had held with Rebozo because of their lawyer-client relationship. But Lenzner, with the approval of Chairman Sam Ervin, pressured him into changing his mind.

The investigator told him that Rebozo had denied that Kalmbach was his attorney. Thus Kalmbach was no longer bound by the lawyer-client privilege. There is some dispute whether Rebozo had said any such thing. "Lenzner twisted the record and twisted statements to leave the completely wrong impression," says Rebozo's Miami attorney, William S. Prates, who also is John Ehrlichman's lawyer. "He was terribly devious in the way he went about it." Whether tricked into his testimony or not, Kalmbach was the most useful witness for the committee since John Dean.

According to Kalmbach's nine-page written statement to the committee, Rebozo met with the President's private attorney on April 30, 1973. Huddled in a quiet corner of the White House, Rebozo asked if they could talk on an attorney-client basis, and Kalmbach agreed. Rebozo then revealed that the President had asked him to speak to Kalmbach about the $100,000 contribution, which, Rebozo said, had come in two installments of $50,000 in 1969 and 1970. That was not news nor was it especially damaging. But the use that Rebozo said that he had made of the money was. He had given part to the President's secretary, Rose Mary Woods; part to the President's two brothers, F. Donald and Edward Nixon; and part to "unnamed others." That, of course, was an illegal use of a campaign contribution, unless the funds had been spent by the recipients on Nixon's campaign. In two or three weeks, Rebozo said, he would be meeting with the Internal Revenue Service to discuss the matter. How should he handle the problem?

In his statement, Kalmbach said that he then told Rebozo to hire the best available tax lawyer, return what was left of the contribution, and submit the names of all the people who had received the money together with all records available of how they had used it. Rebozo did not like that idea. "This touches the President and the President's family," he responded, "and I just can't do anything to add to his problems at this time." Kalmbach offered to check out the matter with a friend, Stanley Ebner, general counsel of the Office of Management and Budget. Rebozo had his doubts, but finally approved when Kalmbach promised not to reveal the names of anyone involved but simply to present it as a hypothetical problem. Rebozo agreed to meet with Kalmbach the next morning at the White House.

When they met, Kalmbach told Rebozo that Ebner's advice was the same as his. But Rebozo seemed unconcerned and did not press Kalmbach for further help. "I had the feeling that he had made up his mind on what to do before that meeting," Kalmbach said in his statement, "and cut me short when he found that I had not come up with a more acceptable alternative."

Last January in San Clemente, the two discussed the matter for the last time. On this occasion, according to Kalmbach, Rebozo changed his earlier story. It turned out that he had not passed on the $100,000 after all, he told the lawyer. On going to his bank, he discovered all the bills still in a safe-deposit box in their original wrappers. "So it was clear," Rebozo said, "that no part of this money had been used during the several years it was in my box."

Tattered Bills. The Watergate committee investigators are inclined to believe that Rebozo was right the first time, though in his appearance before the committee, he denied that he ever told Kalmbach he gave the money away; Kalmbach must have "misunderstood," he testified. But other evidence unearthed by the investigators indicates that the cash had been disbursed, and Rebozo was looking for a fast, safe way to replace it in April 1973.

Though Kalmbach proved to be no help, Rebozo also went to William E. Griffin, counsel for the Hudson Valley (N.Y.) National Bank and a close associate of Robert Abplanalp, another millionaire friend of the President's. The investigators learned that Abplanalp met in Washington last May with Richard Danner, the Hughes executive who originally gave the $100,000 to Rebozo. Later in the month, Rebozo and Danner met with the President at Camp David. The investigators believe that Abplanalp provided the cash to replace the missing money in the safe-deposit box. Then last June, more than three years after the money had been paid to Rebozo, Griffin returned it to a Hughes representative in New York. When the cash was examined by the investigators, they came to a preliminary conclusion that the bills were not the same ones Hughes originally handed out. His gift was supposedly taken from a cash register in one of his Las Vegas casinos. But most of the bills in question were issued in the early '50s and were too tattered and scruffy to be used by a gambling house. The committee feels that it is more likely that they came from the storage vault of a bank.

Investigators expect other pieces of the cover-up to fall into place soon. Last week the IRS agreed to let the Watergate committee examine "relevant" portions of its files on Rebozo, Rose Mary Woods and the President's brothers. The agency finally gave in when a memo from Lenzner was leaked; it attacked the IRS for truckling to the White House. Lenzner charged that it was not until a year after the disclosure of the $100,000 contribution that the agency got around to interviewing Rebozo about the matter. Even then, in May 1973, its investigation was perfunctory. IRS Agent John Bartlett told Rebozo that he had been cleared before all the relevant documents had been examined. Rather than talking to Rose Mary Woods directly, Bartlett got in touch with Rebozo's attorney, who talked with White House Counsel J. Fred Buzhardt, who obtained a letter from Miss Woods explaining her role in the matter. Buzhardt composed the letter, in which the President's secretary said that she was aware of the contribution but had no further details to offer about it.

Buzhardt, always in the background of recent White House maneuvers, may turn out to be a key figure in the $100,000 misunderstanding. "There is some evidence," says a committee staff member, "that he was put in charge of the Hughes-Rebozo cover-up." Buzhardt appeared before the Watergate committee but provided so little information that he has been summoned again. "It was an incredible performance," says an investigator. "He couldn't remember anything--not even what he was doing two days before he testified."

The Real Problem. Some people in the White House claim to have better memories and such misgivings in the present atmosphere that they are even willing to suggest that the real problem with the use of the $100,000 is that some of it went to the President himself. This story has it that in his first talk with Kalmbach, Rebozo said that the money had gone to the "Nixon brothers," Rose Mary Woods and others, letting Kalmbach mistakenly assume--as Rebozo had intended--that by Nixon brothers he was excluding the President. If that tale, which is being leaked to investigators by some White House aides, should prove accurate, it would be damaging almost beyond calculation to the President's position.

In the course of the investigation, Lenzner's tactics have managed to infuriate the White House, the minority staff members of the Watergate committee and occasionally even the majority staff members, particularly since Special Prosecutor Leon Jaworski has pursued his own investigation into the $100,000. Lenzner's detractors accuse him of resorting to underhanded methods at the last moment to make up for a lackluster record of investigation and an abrasive performance as a committee interrogator. Complains Chief Minority Counsel Fred Thompson: "Certain members of the majority staff are panicking now that we're getting close to the deadline. We are seeing another onslaught of 'sources close to the committee' stories, evidently for the aggrandizement of a few staffers."

Lenzner's team admits that it is working frantically to tie up the loose ends before the deadline, since an extension is out of the question. "We have no illusions," says one of the investigators. "We almost certainly won't get finished. I'm concerned about what will happen then. But I know Jaworski will continue to run with the ball, and I hope the Rodino committee will too."

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