Health secretary nominee was aware of Tax Issues since last June
02 02 09 - 19:13
Daschle Knew of Tax Issues Over Car Use Last June
By SHERYL GAY STOLBERG and ROBERT PEAR
WASHINGTON — President Obama’s choice for health secretary, Tom Daschle, was aware as early as last June that he might have to pay back taxes for the use of a car and driver provided by a private equity firm, but did not inform the Obama transition team until weeks after Mr. Obama named him to the health secretary’s post, senior administration officials said Saturday.
As Senate Democrats rushed to save the nomination of Mr. Daschle, their former leader, the White House spent the day trying to explain how he survived its vetting process despite his failure to pay $128,000 in taxes.
The White House would not say when the president himself learned of the tax issue, but said Mr. Obama is standing by his nominee.
“The president believes that nobody is perfect, but that nobody is trying to hide anything,” Robert Gibbs, the president’s press secretary, said in an interview, adding, “I think Senator Daschle rightly is going to have to answer questions, but I think members will be satisfied with the answers that he gives and will understand that he’s the right man for the job.”
At least six leading Democratic senators have come out in support of Mr. Daschle, but the fate of his nomination is unclear. The Senate Finance Committee, which is charged with holding a confirmation hearing on Mr. Daschle’s nomination, will meet behind closed doors Monday to discuss his taxes. After Timothy F. Geithner, Mr. Obama’s Treasury secretary, faced similar issues, some senators may have little appetite for confirming another nominee with tax problems.
“It’s totally shocking,” an aide to a Democratic senator said Saturday. “Why do we have to continue to have the same story over and over again with these nominees?”
Mr. Daschle, who has paid the back taxes with interest, is the latest of Mr. Obama’s cabinet choices who have run into trouble, and the revelations about his finances — which include more than $300,000 in income from health-related companies that he might regulate as secretary — raise questions about the presidential vetting process, as well as Mr. Obama’s ability to keep his pledge to run an administration free of outside influence.
“One of the problems here is what they set up as expectations,” said Martha Joynt Kumar, an expert in presidential transitions at Towson University. “If you have talked about the importance of ethics and set up the kind of rules they did on lobbying, then I think it sets expectations that yours is going to be an administration that is not going to have problems that others might have had.”
Privately, some Democrats on Saturday were scratching their heads at how Mr. Daschle, a Washington insider with a reputation as a sophisticated thinker, could have made such a mistake.
A spokeswoman for Mr. Daschle, Jenny Backus, said Mr. Daschle became concerned last June that he might owe taxes on the car and driver, and instructed his accountant to investigate. Mr. Obama named Mr. Daschle to the health secretary’s post on Dec. 11. But it was not until late December or early January, after the accountant came back to Mr. Daschle with a report on the back taxes owed, that the former senator informed the White House transition team. Ms. Backus said Mr. Daschle did not think to mention it earlier, in part because “he thought his accountant was taking care of it,” and in part because he had no idea the amount owed would be so high.
“He took responsibility for his mistake as soon as he figured it out,” Ms. Backus said. “That’s about all you can do. People who know him and respect him are putting that mistake in context.”
On Capitol Hill, Senate Democrats rallied around Mr. Daschle, a former senator from South Dakota who lost his seat in 2004 while serving as the minority leader. Mr. Daschle is a close ally of the president’s — he marshaled his staff on behalf of the Obama campaign, and at least five former Daschle aides now have top White House jobs — and Democrats vowed to go to bat for him.
“We wish this didn’t happen,” said Senator Charles E. Schumer, a New York Democrat who is on the Finance Committee, “but he’s chosen such quality people that nobody minds taking a bit of an extra step to help get them in.”
But already, Mr. Daschle is becoming the butt of Republican jokes, as was the case at the House Republican retreat this weekend. According to one person who was there, Representative Eric Cantor of Virginia, the party whip, had this to say after hearing the news about Mr. Daschle: “It is easy for the other side to advocate for higher taxes because — you know what? — they don’t pay them.”
When Mr. Obama was elected, official Washington marveled at the speed of his transition and the rigorous vetting process. But Paul C. Light, a professor at New York University who studies the federal bureaucracy, said that “speed may have been the enemy of thoroughness” in the Obama process. The White House, though, insisted that was not the case.
“In terms of the vetting,” Mr. Gibbs said Saturday, “we’re comfortable with the process.”
The information about Mr. Daschle has come to light in different ways. He disclosed some to the transition team, including the taxes owed on the car and driver. The transition team spotted a problem with his charitable tax deductions, and the Senate Finance Committee discovered the failure to pay Medicare tax on the use of the car.
If Mr. Daschle’s confirmation is derailed, it would undoubtedly hurt one of Mr. Obama’s major domestic priorities: revamping the health care system. Mr. Daschle has been asked by the president to serve in a dual role spearheading that effort as the White House “health czar.”
As a politician, Mr. Daschle often struck a populist note, but his financial disclosure report shows that in the last two years, he received $2.1 million from a law firm, Alston & Bird; $2 million in consulting fees from a private equity firm run by a major Democratic fundraiser, Leo Hindery Jr. (which provided him with the car and driver); and at least $220,000 for speeches to health care, pharmaceutical and insurance companies. He also received nearly $100,000 from health-related companies affected by federal regulation.
Mr. Obama has instituted rules requiring former lobbyists in his administration to pledge not to deal with former clients, though he has made exceptions for two nominees, one at the Pentagon and one at the health agency. As a strategic adviser to companies, Mr. Daschle did not have to register as a lobbyist, and is not technically covered by those rules.
“He’s never lobbied, therefore he’s not in violation of the pledge,” Mr. Gibbs said. “The president is comfortable with Senator Daschle’s variety of experiences and backgrounds. It’s why he believes he’s best suited to the efforts to reform our health care system.”