The Internal Revenue Serives has seized $550,508 of the $1.3 million surplus remaining from the 1972 Nixon re-election campaign, according to records filed recently with the Federal Election Commission.
IRS acted Feb. 22 to ensure payment of back taxes on money that was used to pay for the June 17, 1972, Watergate break-un and bugging and later cash payments to Watergate defendants, according to the records.
Former Sen. Charles Potter (R-Mich.), chairman of the 1972 Nixon Liquidation Trust, that which controls the surplus campaign fund, said yesterday that IRS acted because it "wanted to protect itself" by making "sure we didn't pay any claimants" before satisfying the tax agency.
Less than a month after the IRS seized the funds, the trust paid $200,000 to settle a claim of the four Cuban-Americans who were convicted in the Watergate who were convicted in the Watergate break-in. They had sue the 1972 Committee for the Re-election of the President because, they said, they were tricked into commiting the burglary.
At about the same time, a claim against the trust for $481,898 was filed by Robert C. Mardian, a former assistant attorney general and Nixon campaign official who was indicted and tried in the Watergate case. Mardian's conspiracy conviction was overturned on appeal in 1976 and the government later decided not to prosecute him agin.
Mardian's claim, filed in February, was to cover four years of legal fees arising from Watergate matter.
The Nixon trust fund, which was down to $485,000 at the end of march, now has outstanding claims totaling more than $1 million.
The trust is also attempting to settle a lawsuit for back pay and damages against the former Nixon campaign committee brought by Alfred Baldwin, an ex-FBI agent who listened to and recorded conversations from the "bug" planted in Democractic Party headquarters.
Potter said yesterday that no more claims would be paid until the IRS payment is settled.
The IRS claims that since the campaign money was used for nonpolitical purposes, it should have been taxed as income to the Nixon committee. Campaign funds used for legitimate political activities are not taxable.
Potter argues that the committee, and therefore the turst, did not raise all the cash that was used for nonpolitical purposes and should not be liable for actions of individuals who received money from it.
According to the records, the IRS assessed taxes of $471,784 and interest of $78,274 against two cash funds that had been maintained in 1972 and 1973 by the Nixon campaign organization's fund-raisers, Herbert W. Kalmbach and Maurice H. Stans.
Although an IRS spokesman would not comment, it is understood from lawyers in the case that the government, after a three-year inquiry, decided to tax those funds raised for Nioxn that were used to pay for the illegal intelligence operations and the cover-up that followed.
The Nixon surplus has in the past paid legal expenses of Nixon campaign officials when they have been found innocent of charges.