Obama transition hits bump as Richardson withdraws

CHICAGO Sun Jan 4, 2009 6:49pm EST

US President-elect Barack Obama (L) listens to New Mexico Governor Bill Richardson after announcing Richardson as his nominee for commerce secretary during a news conference in Chicago December 3, 2008. REUTERS/John Gress

US President-elect Barack Obama (L) listens to New Mexico Governor Bill Richardson after announcing Richardson as his nominee for commerce secretary during a news conference in Chicago December 3, 2008.

Credit: Reuters/John Gress

CHICAGO (Reuters) - President-elect Barack Obama stumbled in his quest for a smooth transition on Sunday when New Mexico Gov. Bill Richardson withdrew as his nominee for commerce secretary in the face of a legal inquiry.

Richardson, a former Democratic presidential candidate and one of the country's most prominent Hispanic politicians, became the first casualty among Obama's Cabinet picks 16 days before the new administration takes office.

Obama, who was headed to Washington on Sunday to begin the final work ahead of his January 20 inauguration, said in a statement that he accepted Richardson's withdrawal with "deep regret."

Richardson denied any wrongdoing in connection with the probe of a California-based financial company that had done business with the New Mexico state government.

But he said an investigation lasting possibly weeks or even months "would have forced an untenable delay in the confirmation process."

Richardson had been expected to win easy confirmation by the Democrat-controlled Senate, which will begin vetting Obama's cabinet picks this week.

But an extensive public discussion of the New Mexico case, which news reports have said involves a probe of payments by a California company to political action committees run by Richardson, could embarrass an Obama camp that has already had to distance itself from a "pay-to-play" scandal involving the Democratic governor of Illinois.

Richardson served as U.S. ambassador to the United Nations and energy secretary in the Clinton administration and is a former member of the U.S. House of Representatives.

He became an early Obama supporter after dropping his own presidential ambitions, and said on Sunday he planned to remain as New Mexico's governor.

"Let me say unequivocally that I and my Administration have acted properly in all matters and that this investigation will bear out that fact," Richardson said in his statement.

Obama said he would move quickly to name a new head for the commerce department, who will serve as his government's chief spokesperson for business.

Among those mentioned in the past as potential candidates for the job are Kansas Gov. Kathleen Sebelius, trade law expert Scott Harris and former media executive Leo Hindery.

A transition aide said Obama has picked Virginia Gov. Tim Kaine to head the Democratic National Committee.

CONTRIBUTION QUESTIONS

Richardson's announcement follows news that a federal grand jury in Albuquerque is investigating whether CDR Financial Products improperly won more than $1.4 million in work for the state of New Mexico shortly after making contributions to political action committees linked to Richardson.

The FBI and federal prosecutors are investigating how the company won lucrative fees from the New Mexico Finance Authority in 2004 soon after donating $100,000 to two Richardson organizations, the Washington Post reported in December.

The investigation is described as part of a nationwide investigation into "pay-to-play" practices in local government bond markets.

Richardson's withdrawal was the latest headache for the president-elect's Democratic Party since the November election in which it won the White House and expanded its control of Congress.

Illinois Gov. Rod Blagojevich is under investigation on charges of trying to sell the Senate seat Obama recently vacated. Democrats vow to block Blagojevich's appointee to the Senate, calling the selection tainted.

In Congress, Rep. Charles Rangel, a New York Democrat and chairman of the House of Representatives' tax-writing committee, is the object of an ethics probe into his finances.

The news about Richardson broke just a couple of hours before Obama left Chicago to join his family in Washington.

Obama told reporters traveling with him on an Air Force plane that he "choked up" a bit as he left his house for the last time before taking up residency in Washington.

Wife Michelle and daughters Sasha, 7, and Malia, 10, beat Obama to their new home city. They arrived on Saturday evening in order to avoid the media spotlight surrounding Obama and get settled before school starts on Monday.

The Obamas will be staying at the luxury Hay Adams Hotel until they move on January 15 into Blair House, the guest residence across Pennsylvania Avenue from the White House.

Obama's daughters start school at the Sidwell Friends School on Monday. After seeing them off to school Obama is due to meet with his top economic advisers and hold meetings with top congressional leaders on an economic stimulus package.

(Writing by Will Dunham, additional reporting by Thomas Ferraro, Editing by Howard Goller, Sandra Maler and Jackie Frank)