By R. Jeffrey Smith, Cecilia Kang and Joe Stephens
Washington Post Staff Writers
Wednesday, February 4, 2009
A classic rule of Washington's political culture -- that public service can lead to personal riches -- seemed to collide yesterday with the presidential promise that the time has come for a break with the past.
Former senator Thomas A. Daschle, whom President Obama once called "the original no-drama guy," suddenly was forced to step aside as the president's nominee for secretary of health and human services because of problematic ties to wealthy private interests.
It was a jarring twist to Daschle's 30-year career in Washington, one built on a reputation of integrity and decency. After losing his Senate seat while serving as that body's most powerful Democrat in 2004, he swiftly signed on as a special policy adviser to a 900-member law firm and pulled in a multimillion-dollar salary. It is a well-worn path, trod by dozens of ex-lawmakers in the past decade.
But some observing the debacle wondered if the capital's ways were changing. The story of how he fell in with the monied elite and out with the popular mood involves a longtime Democratic financier, Leo Hindery Jr., and his keen interest in currying influence with powerful politicians. The outcome caught many in Washington off guard.
"I think it's possible this is some sort of bridge between an old Washington and the new Washington," David Arkush of Congress Watch said of the initial backing of Daschle and the sudden reversal.
Until this week, Daschle was regarded as a shoo-in for confirmation. His undoing came with the release of his financial disclosure forms last Friday and information that he had paid $146,000 in back taxes and interest to resolve problems flagged by Obama's vetters.
Although Daschle, as a former member of the Senate Finance Committee, helped write tax laws, he explained to the committee on Monday that he did not understand that the around-the-clock car and driver in his new life was subject to taxation and not just a gift from a friend.
It was the relationship with that friend, wealthy media entrepreneur Hindery, that ultimately ended Daschle's return to public life.
Hindery, Daschle said last June in a Las Vegas speech, is "as close to a brother as I'll ever have." Daschle called Hindery someone "I have turned to over and over again for guidance, for direction and inspiration," including on the subject of national health insurance. Daschle even pushed him for a job with the Obama administration, though none was offered.
Hindery had no comment on yesterday's events. Though both Daschle and Hindery have long experience in Washington's ways, they found themselves entangled in a political mess neither had anticipated.
Hindery is an immensely sociable, self-confident corporate dealmaker and race-car driver with strong policy opinions. He has a large network of confidants in Washington: Two former senators, besides Daschle, sit on his corporate board; he was John Edwards's chief campaign adviser on economic matters; and he is a board member of the Gephardt Group, run by the former House majority leader, on whose campaign finance board he once sat. In 2004, Hindery was Daschle's candidate to become head of the Democratic National Committee, and a former assistant at a media company Hindery ran is now a senior policy adviser to Senate Majority Leader Harry M. Reid (D-Nev.).
Hindery's access in Washington has been lubricated by his personality, his ideas and the wealth he accumulated at a succession of media firms -- Tele-Communications Inc., AT&T, Global Crossing and InterMedia Partners. He spread that money around to nonprofit groups and politicians, donating first to Republicans and more recently to Democrats. His checks for at least $1 million in the 2002 election, and hundreds of thousands of dollars before that, arrived at moments when some of the 240 separate corporate deals in which he says he played a role were subject to intense regulatory and tax scrutiny.
According to a 2003 legal brief filed by the nonprofit Center for Responsive Politics, soft-money contributions by Hindery and Global Crossing, where he was chief executive officer, were illustrative of the "nexus between large political donations and significant government decisions."
The firm sought regulatory approval in 1999 to build undersea cables to Japan but ran into opposition from three rival firms. "Out of nowhere, Global Crossing emerged as a political powerhouse in Washington, thanks to a multi-million dollar lobbying effort and $2 million" in contributions by the company, Hindery, and two other top executives, the brief said. Hindery was dismissed by Global Crossing before accounting irregularities came to light, and he quickly became a vocal critic of its management.
But it is his payments for Daschle's car -- valued at $255,000 over the past two years -- and his monthly checks to the former senator for $83,333 that put Daschle and his "brother" in the headlights. The two men met at a San Francisco fundraiser in 1997, when Hindery was chief executive of Tele-Communications Inc. They then met repeatedly for dinner in Washington, according to a former senior Daschle aide. Daschle also has visited Hindery's multimillion-dollar ranch in Colorado.
Their friendship was fueled partly by political affinity, according to sources who know both men. Hindery has pushed an unconventional corporate titan's agenda, including universal health coverage, gay and lesbian rights, an end to tax breaks for hedge fund managers, universal access to broadband Internet connections, worker's rights and stronger government regulation of the economy, among other causes. Such an agenda made him a star to some Democrats.
"People like Leo are in it for the ego and like being around politicians," said a former congressional staffer who met Hindery several times.
But few entrepreneurs can afford to pay former politicians such as Daschle a million-dollar annual salary based on friendship alone. Jenny Backus, a spokeswoman for Daschle, said that after joining Hindery's InterMedia equity investment firm in 2005, the former senator helped find investors and explain the firm's decisions to them.
Daschle was in some ways not an obvious choice for such a role: He didn't serve on the Senate committees that oversee telecommunications and media laws or the Federal Communications Commission. But within telecommunications policy circles, Daschle was said to have a key connection at the FCC because of his sponsorship in 2002 of Jonathan Adelstein as one of the commission's five members.
Adelstein, Daschle's former legislative aide from South Dakota, went on to hire Daschle's scheduler, Amber Danter, to become his confidential assistant. Daschle's chief fundraiser, Anya Hoerburger, meanwhile, went to work for Hindery's firm. "Tom Daschle has never contacted Commissioner Adelstein regarding InterMedia," said Katie Yocum, a spokesman for Adelstein. She declined to comment further.
Daschle has frequently weighed in on communications policy and Adelstein has often expressed the same views. In 2004, for example, Daschle sent an aide to an FCC hearing chaired by Adelstein in South Dakota to register his opposition to rules proposed by a Republican member that allowed owners of television stations to purchase newspaper and radio stations in the same town.
Hindery, the former chief executive of AT&T's broadband and telecommunications division and New York regional sports channel the YES Network, also opposed the proposed rules, which would favor large companies such as Newscomm or Viacom over the smaller firms in which InterMedia had invested. The rules drew criticism from other Democratic lawmakers and Adelstein.
Adelstein has also vocally supported tax credits for minority- and female-owned broadcast stations. InterMedia is an investor in CineLatino, a Spanish-language movie channel, and the "Soul Train" franchise, which is geared toward an African American audience.
Fred Wertheimer of the nonprofit advocacy group Democracy 21, who is a veteran of many disputes over ethics in Washington, said: "I don't think people should mistake this and think it means there is no way to change the culture of Washington. Just the opposite. It indicates that there are new lines. In some ways, this is a warning signal to the city that the rules are changing."
Staff writer Ceci Connolly, research editor Alice Crites and staff researcher Madonna Lebling contributed to this report.