Because it was created and became popular at the same time of the Nixon Watergate scandal and the name just stuck. It was called Pistachio-Pineapple salad first and was marketed as a way to use the new Pistachio Jello pudding. I had to ask my mother about this...she said the name stuck because the salad was full of marshmallows, bananas and nuts and covered up with fluff - just like the Nixon administration. Everyone took it to parties and everyone was talking about the scandal. It just happened.
This is actually my favorite and we have it most every holiday:
1 (15 1/2 ounce) can crushed pineapple
1 (3 ounce) package pistachio pudding mix
1 (9 ounce) carton Cool Whip
1/2 cup chopped nuts (preferably pecans)
3 bananas, diced
1 cup miniature marshmallows
1/2 cup maraschino cherries, cut in small pieces
1. Put pineapple with juice in a bowl.
2. Stir in pudding mix.
3. Mix well.
4. Stir in remaining ingredients.
5. Chill until ready to serve, at least 1 hour.
Watergate Cake With Coverup Icing
1 pkg white cake mix
3/4 cup vegetable oil
3 large eggs
1 cup 7-up or club soda
1 1 (3 oz) pistachio instant pudding
1 cup chopped nuts (pecans are the best)
1/2 cup coconut
6 oz whipped topping mix (dry) (2 envelopes)
1 1/4 cups milk
1/4 cup pineapple juice
1 (3 oz) package pistachio instant pudding
1/2 cup coconut
3/4 cup chopped nuts (use pecans if that is what you used in the cake. match the nuts)
crushed pineapple, drained, reserve juice
Combine the ingredients in the order given, blending well after each addition.
Pour into a 13x9-inch pan and bake in a preheated 350 degree F. oven for 35 to 45 minutes, or until the cake tests done.
Combine the topping mix, milk and pudding. Beat until thick. Spread on the cake (the icing will be a light green color). Sprinkle with the coconut and chopped nuts and top with pineapple and cherries.