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Daschle Delayed Revealing Tax Glitch
Report Details Payments From Health Sector

By Ceci Connolly, Joe Stephens and R. Jeffrey Smith
Washington Post Staff Writers
Sunday, February 1, 2009

Thomas A. Daschle waited nearly a month after being nominated to be secretary of health and human services before informing Barack Obama that he had not paid years of back taxes for the use of a car and driver provided by a wealthy New York investor.

Daschle, one of Obama's earliest and most ardent campaign supporters, paid $140,000 to the U.S. Treasury on Jan. 2 and about two days later informed the White House and the Senate Finance Committee, according to an account provided by his spokeswoman and confirmed by the Obama administration.

Although Daschle had known since June 2008 that he needed to correct his tax returns, he never expected the amount to be such a "jaw-dropping" sum and "thought it was being taken care of" by his accountant, spokeswoman Jenny Backus said.

White House press secretary Robert Gibbs said last night that Obama stands behind his friend and confidant. "The president believes nobody's perfect but that nobody's hiding anything," Gibbs said.

The disclosure of Daschle's tax problems coincided with the release of the financial statement he submitted to the Office of Government Ethics, which details for the first time exactly how, without becoming a registered lobbyist, he made millions of dollars giving public speeches and private counsel to insurers, hospitals, realtors, farmers, energy firms and telecommunications companies with complex regulatory and legislative interests in Washington.

Daschle's expertise and insights, gleaned over 26 years in Congress, earned him more than $5 million over the past two years, including $220,000 from the health-care industry, and perks such as a chauffeured Cadillac, according to the documents.

In mid-December, Obama's transition team discovered that $15,000 of the $276,000 in charitable contributions claimed by Daschle and his wife over three years lacked proper receipts. But the former Senate majority leader did not mention the larger tax liability until after his accountant had filed amended returns for him.

The Senate Finance Committee has scheduled a private session tomorrow to discuss Daschle's tax problems. Daschle, visiting an ailing relative, was unavailable for comment this weekend, and aides refused to release his tax returns.

Meanwhile, the disclosure of Daschle's lucrative ties to private companies with Washington interests have begun to raise eyebrows among those who expected Obama to be wary of relying on wealthy insiders to stock his administration.

"Daschle is the quintessential Washington story. You leave a powerful position, and you leverage it to make a fortune," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, a nonprofit government watchdog group. "He is not alone . . . [and] it would be hard for Obama to fill his administration without ever turning to someone like that. That said, these are the kind of Washington insiders that Obama campaigned against."

The Obama team is "learning that it's easier to campaign on that than govern under it," Sloan added. The problem is that "it looks disingenuous."

In his principal campaign speech on government ethics in June 2007, candidate Obama decried the "morally offensive conduct" of lobbyists and lawmakers who help large industries and special interests exercise "an effective veto on our progress." He singled out the drug and insurance industries for particular scorn, saying that they had pushed for a new Medicare prescription drug benefit and that lawmakers and Bush appointees who made it happen were rewarded with "cushy lobbying jobs that pay millions."

Americans, Obama said, "are hungry for a new kind of politics."

In recent months, Daschle has advocated for changes to the U.S. health system that are unpopular with sizable portions of the industry, including some physicians, drugmakers and insurance companies. Daschle has nonetheless prospered from a stream of income from the health sector, including $220,000 in speaking fees in the past two years, according to the ethics filing.

He also has been a trustee of the Mayo Clinic in Rochester, Minn. For part of the $2 million he received from the law firm Alston & Bird over the past two years, Daschle also reported that he gave "policy advice" to United Health, a conglomerate that sells insurance, helps the government administer Medicaid, advises drug companies and physicians and dispenses prescriptions.

The 12 organizations or companies that paid Daschle speaking fees, ranging from $12,000 to $30,000, included the National Association of Boards of Pharmacy and America's Health Insurance Plans, an influential trade group.

The Health Industry Distributors Association, a trade association representing medical product distributors, wrote to Daschle last week to express concerns about proposed Medicare changes and reminded him of the $14,000 speech he delivered at its conference last year.

"As you may recall from speaking to some of our members during HIDA's 2008 Executive Conference in Miami, where you were the keynote speaker, a competitive bidding program will undermine access to quality care for millions of beneficiaries," said the letter, which was posted on the group's Web site.

In a letter sent to the HHS ethics office on Jan. 16, Daschle did not list any specific entities that would pose a conflict of interest; he pledged instead not to participate for the next year in particular matters in which "a former client of mine is a party or represents a party."

When he left the Senate in early 2005, Daschle held a more modest portfolio, according to the financial disclosure report he filed with the Secretary of the Senate.

Four pages in length, the document listed financial holdings ranging from $255,000 to $775,000. All of his money was held in investment funds and a retirement account, the two largest being a Fidelity/First Union capital management fund and a Vanguard fund, each of which held between $50,000 and $100,000. He was paid $175,700 as Senate leader and did not have any specific stock holdings.

Daschle did not list his Washington home in the Foxhall neighborhood, which, according to records, he and his wife, Linda, purchased in 2003 for $1.9 million. It is now valued at $2.9 million.

It is impossible to determine Daschle's current net worth with precision because his assets and income are reported in ranges. He also wrote that the value of some assets was "not readily ascertainable," including profit-sharing arrangements with InterMedia Partners, owned by Leo J. Hindery Jr., a longtime donor to Democratic campaigns and causes, and stock options granted to him by the commercial real estate firm CB Richard Ellis and by ethanol research company Mascoma Corp.

Spokeswoman Backus said that Daschle did "extensive work for four years, raising funds" for InterMedia from investors. Daschle, a Senate Finance Committee veteran, "naively" thought the car service Hindery provided was "nothing more than a generous offer from a friend," she said.

Daschle collected director's fees from five companies and organizations, including the nonprofit Freedom Forum, which advocates free press and speech rights; the bioenergy company Prime BioSolutions; and the Mascoma ethanol research company. The international energy company BP Corp. alone paid him $250,000 in director's fees.

He also received a $21,ooo advance for a book on resolving the health-care crisis.

Daschle listed two residences, each valued at $100,000 to $250,000 -- one in Aberdeen, S.D., the other in Altus, Okla.

Several Democrats on Capitol Hill defended Daschle.

"He's the gold standard for integrity in government," said former Daschle aide Andrea LaRue, now a partner in the government relations firm NVG. "The fact that he's done so much to fix the honest mistakes shouldn't be held against a man who has had such a long and distinguished career."

Daschle's tax troubles stemmed partly from his three-year-old ties to InterMedia, the equity investing firm, run by cable industry veteran Hindery.

Hindery made millions of dollars in telecommunications deals involving AT&T, Global Crossing and other firms that were subject to intense scrutiny by the Federal Communications Commission and the Internal Revenue Service. His firm now owns "Soul Train," the R&B television show founded by the legendary DJ Don Cornelius, and Thomas Nelson, which bills itself as the world's largest publisher of Bibles. Hindery's firm also owns the Gospel Music Channel, the first 24-hour station devoted solely to Christian music, and Cine Latino, a leading cable channel for Spanish-language movies.

Hindery and colleagues at his firm have donated at least $227,000 to Democrats since 2005, according to Federal Election Commission records. Daschle chairs the firm's advisory board, which includes two other former senators -- Bob Kerrey and Slade Gorton -- as well as Cappy R. McGarr, a Dallas investor who served as Daschle's political treasurer, and Bernard L. Schwartz, the former head of Loral and a major Democratic donor.

In a 2005 book, Hindery called the absence of an efficient health-care system for poor families "disgraceful." He did not respond yesterday to an e-mailed request that he explain what Daschle did for the company in exchange for years of limousine service and a million-dollar annual fee. Alan J. Sokol, a senior partner in the firm, said that Daschle did "a lot of helpful work" for the firm but declined to say what it was.

Staff writer Paul Kane and staff researcher Magda Jean-Louis contributed to this report.

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