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Obama performance chief Killefer out, citing taxes


By MICHAEL J. SNIFFEN and LIZ SIDOTI, Associated Press Writer Michael J. Sniffen And Liz Sidoti, Associated Press Writer – 42 mins ago


In this Jan. 7, 2009 file photo, Then-President-elect Barack Obama looks on as AP – In this Jan. 7, 2009 file photo, Then-President-elect Barack Obama looks on as Nancy Killefer at his …



WASHINGTON – Nancy Killefer, who failed for a year and a half to pay employment taxes on household help, withdrew her candidacy to be the first chief performance officer for the federal government on Tuesday.

Killefer was the second major Obama administration nominee to withdraw and the third to have tax problems complicate nominations after President Barack Obama announced he had chosen them.

In a brief letter to Obama, the 55-year-old executive with consulting giant McKinsey & Co. wrote that she had "come to realize in the current environment that my personal tax issue of D.C. unemployment tax could be used to create exactly the kind of distraction and delay" that must be avoided in responding to urgent economic problems.

She offered no further details of her tax difficulties.

Obama took no questions Tuesday after announcing his choice of Sen. Judd Gregg to be commerce secretary. He left the White House lectern ignoring a shouted question about why so many of his nominees have tax problems.

When Killefer's selection was announced by Obama on Jan. 7, The Associated Press disclosed that in 2005 the District of Columbia government had filed a $946.69 tax lien on her home for failure to pay unemployment compensation tax on household help. Since then, administration officials have refused to answer questions about the tax error, which she resolved five months after the lien was filed.

Obama's first choice for commerce secretary, New Mexico Gov. Bill Richardson, took his name out of consideration when his confirmation appeared headed toward complications because of a grand jury investigation over how state contracts were issued to political donors.

More recently, Timothy Geithner was confirmed as treasury secretary despite belatedly paying $34,000 in income taxes, and Tom Daschle is still waiting to see if his late payment of more than $128,000 in income taxes will harm his nomination to be health and human services secretary.

On paper, Killefer brought impressive credentials to the two jobs Obama selected her for: deputy director for management at the Office of Management and Budget, which requires Senate confirmation, and a new White House post, chief performance officer for the entire federal government, which does not require confirmation.

Killefer oversees McKinsey's management consulting for government clients. During 1997-2000 in the Clinton administration, she was assistant treasury secretary for management. As such she was the chief financial officer and chief operating officer for the Treasury Department and its 160,000 employees, and she led a modernization of its largest component, the Internal Revenue Service.

The AP reported that on March 7, 2005, the D.C. Department of Employment Services slapped a tax lien on her home in the upscale Wesley Heights neighborhood. The local government alleged that beginning three years after she left the high-powered Treasury post she failed to pay unemployment compensation tax for a household employee. She failed to make the required quarterly payments for a year and half, the D.C. government said, whereupon a lien for $946.69 was placed on her home.

That sum included $298 in unpaid taxes, $48.69 in interest and $600 in penalties. Killefer didn't get the lien extinguished for almost five months, until July 29, 2005.

During that period, Killefer and her husband, an economics professor, had two nannies to help care for their teenage son and daughter, and she had a personal assistant to run things when she was on the road, she told Harvard business students back then.

Ignoring payroll taxes on household help has sunk nominees before. Failure to pay Social Security taxes for a nanny and chauffeur kept corporate lawyer Zoe Baird from becoming President Bill Clinton's attorney general in 1993. Similar problems either blocked or bedeviled other nominees. Still others overcame them, including Shirley S. Chater, the university president who was confirmed to head the Social Security Administration under Clinton despite failing to pay Social Security taxes for a part-time baby sitter.

Bobby Tucker, chief of D.C.'s unemployment insurance tax division, said filing tax liens is "not a common practice" for his office. D.C. law authorizes such liens when an employer "neglects and refuses" to pay the levy that helps pay for unemployment benefits for those laid off or fired. Tucker said his auditors have discretion to use tax liens based on "the number of attempts to collect contributions owed, whether or not the employer responds to written attempts, phone calls and-or in-person visits" to collect the tax.

Tucker said, however, that his department's lawyers would not let him discuss the specifics of Killefer's case.

White House spokesman Tommy Vietor said simply on Tuesday, "Nancy Killefer has decided to withdraw her nomination, and we accepted her withdrawal. Since acknowledging Killefer's unemployment tax error on Jan. 7, Vietor had declined to amplify or answer followup questions, saying he couldn't respond because she was still completing the Obama transition team's questionnaire for nominees.

Her nomination was never formally sent to Congress. And Killefer herself did not respond to messages left for her.

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AP
Obama blames himself for mishandling Daschle


Former Sen. Tom Daschle, President Barack Obama's choice to head the Health and AP – Former Sen. Tom Daschle, President Barack Obama's choice to head the Health and Human Services, speaks …

WASHINGTON – President Barack Obama is taking responsibility for mistakes in the handling of the tax controversy that led to Tom Daschle's withdrawal as President Barack Obama's nominee to be health and human services secretary, saying: "I screwed up."

The president did a series of back-to-back television interviews in which the subject of failed nominees was a top subject.

Obama told NBC "I'm frustrated with myself" for unintentionally sending a message that there are "two sets of rules" for paying taxes, "one for prominent people and one for ordinary folks."

"I take responsibility for this mistake," he told Fox News.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) — Tom Daschle withdrew Tuesday as President Barack Obama's nominee to be health and human services secretary, dealing potential blows to both speedy health care reform and Obama's hopes for a smooth start in the White House.

"Now we must move forward," Obama said in a written statement accepting "with sadness and regret" Daschle's request to be removed from consideration. A day earlier, Obama had said he "absolutely" stood by Daschle in the face of problems over back taxes and potential conflicts of interest.

The stunning Daschle development came less than three hours after another Obama nominee also withdrew from consideration, and also over tax problems. Nancy Killefer, nominated by Obama to be the government's first chief performance officer, said she didn't want her bungling of payroll taxes on her household help to be a distraction.

"They both recognized that you can't set an example of responsibility but accept a different standard of who serves," said White House press secretary Robert Gibbs.

Daschle, the former Senate Democratic leader, a strong and early backer of Obama's presidential bid and a close Obama friend, said he would have been unable to operate "with the full faith of Congress and the American people."

"I am not that leader, and will not be a distraction" to Obama's agenda, he said.

Obama had given Daschle two jobs — to be White House health czar on top of the post leading the Health and Human Services Department — and Daschle is relinquishing both. The developments called into question whether Obama will be able to move as quickly as he has promised on sweeping health care reform — one of the pillars of his first 100 days agenda and expected to be among the hardest to accomplish.

"It really sets us back a step," said Sen. Dick Durbin, D-Ill. "Because he was such a talent. I mean he understood Congress, serving in the House and Senate; he certainly had the confidence of the president."

Said White House spokesman Gibbs: "We're looking for a new nominee, but the problem has existed for quite some time and the work toward a solution to make health care more affordable won't stop or won't pause while we look for that nominee."

Among those considered for the post before it went to Daschle was Howard Dean, the physician-turned-politician who ran for president in 2004 and recently left as head of the Democratic National Committee.

Asked repeatedly whether the White House sought Daschle's withdrawal, Gibbs said it was Daschle's decision alone. He "did not get a signal" from the White House to step aside, the spokesman said.

Daschle is the third high-profile Obama nominee to bow out. Obama tapped Bill Richardson to be Commerce secretary, but the New Mexico governor withdrew amid a grand jury investigation into a state contract awarded to his political donors. Obama named Republican Sen. Judd Gregg of New Hampshire to the position Tuesday.

Last week, the Senate confirmed Timothy Geithner as treasury secretary, but only after days of controversy over the fact that he had only belatedly paid $34,000 in income taxes.

Asked whether tax questions are going to arise with any other nominees, Gibbs said only that "the president has confidence in the people he has chosen to serve in government." He also defended the administration's vetting process.

He added: "the president takes responsibility" for the spate of nomination troubles.

The White House dispatched senior adviser David Axelrod to Capitol Hill to soothe Democrats whose nerves were frayed by the loss of Daschle.

Obama, Vice President Joe Biden and Daschle's former Democratic colleagues had rallied to Daschle's defense in the wake of questions about his failure to fully pay his taxes from 2005 through 2007. Last month, he paid $128,203 in back taxes and $11,964 in interest.

"Tom made a mistake, which he has openly acknowledged," Obama said Tuesday. "He has not excused it, nor do I. But that mistake and this decision cannot diminish the many contributions Tom has made to this country."

"I was a little stunned. I thought he was going to get confirmed," said Max Baucus, D-Mont., chairman of the Senate Finance Committee, the panel that would have voted on Daschle's nomination. "It's regrettable. He's a very good man."

Daschle also was facing questions about potential conflicts of interests related to speaking fees he accepted from health care interests. He also provided advice to health insurers and hospitals through his post-Senate work at a law firm.

The controversy has undercut Obama's promise to run a more ethical, responsible and special interest-free administration. Republicans and major newspapers had been questioning Obama's decision to stick with Daschle.

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Associated Press writers Ron Fournier, Charles Babington and Liz Sidoti contributed to this story.