Bumps in the Road: Obama's HHS Secretary Nominee Faces Tax Questions Over Car and Driver

ABC News has learned that the nomination of former Senator Majority Leader Tom Daschle, D-SD, to be President Obama's Secretary of Health and Human Services has hit a traffic snarl on its way through the Senate Finance Committee.

The controversy deals with a car and driver lent to Mr. Daschle by a wealthy Democratic friend, a chauffer service the former Senator used for years without declaring their use on his taxes.

It remains an open question as to whether this is a "speed bump," as a Democratic Senate ally of Mr. Daschle's put it, or something more damaging.

After being defeated in his 2004 re-election campaign to the Senate, Daschle in 2005 became a consultant and chairman of the Executive Advisory Board at InterMedia Advisors.

Based in New York City, InterMedia Advisors is a private equity firm founded in part by longtime Daschle friend and Democratic fundraiser, Leo Hindery, the former president of the YES network (the Yankees' and Devils' broadcast network).

That same year he began his professional relationship with InterMedia 2005, Mr. Daschle began using the services of Hindery's car and driver.

The Cadillac and driver were never part of Daschle's official compensation package at InterMedia but Mr. Daschle -- who as Senate Majority Leader enjoyed the use of a car and driver at taxpayer expense -- didn't declare their services on his income taxes, as tax laws require.

During the vetting process to become HHS Secretary, Mr. Daschle corrected the tax violation, voluntarily paying $101,943 in back taxes plus interest, working with his accountant to amend his tax returns for 2005 through 2007.

(Mr. Daschle reimbursed the IRS $31,462 in taxes and interest for tax year 2005; $35,546 for 2006; and $34,935, a Daschle spokesperson said, adding that Mr. Daschle had asked his accountant to look into the tax implications of the car and driver five months before Mr. Obama won the presidency.)

The chairman of the Senate Finance Committee, Sen. Max Baucus, D-Mont., has called his colleagues for a private meeting at 5 p.m. ET on Monday to discuss these complications surrounding Daschle's nomination.

The Daschle spokesperson told ABC News that the senator, facing questions from the committee, has said "he deeply regretted his mistake. When he realized it was a mistake he corrected it rapidly."

This is the second Cabinet nominee of President Obama's to face questions of tax malfeasance. Treasury Secretary Tim Geithner paid more than $34,000 in taxes during his vetting process for income earned at the International Monetary Fund. Earlier, Commerce Secretary nominee Bill Richardson withdrew his name from consideration after reports of a federal investigation involving whether his office engaged in pay to play, a charge Mr. Richardson denied.

The spokesperson said, by way of explaining how it was this happened: "In 2005, Sen. Daschle's close friend Leo Hindery who lives in New York offered him the use of a car and driver in Washington when he was not using it. That same year, they began a formal business relationship where he was an independent consultant and chairman of the external advisory board to InterMedia Advisors. The car was not provided as part of his compensation. So it never occurred to him that it should be considered income. The senator simply and probably naively considered its use a generous offer by a longtime friend."

Neither the White House nor businessman Leo Hindery had any comment. Mr. Daschle personally refrained from commenting.

Daschle came before the Senate Health Education Labor and Pensions Committee for a hearing on January 8, 2009, and it was a veritable love-in, with the respected former colleague praised to the high heavens.

But staffers at the Senate Finance Committee are generally a little more exacting -- witness the stormy weather faced by Treasury Secretary Tim Geithner, for his back-tax snafus -- and they have been delving into the issue and exploring all the ramifications before holding a Committee vote on his nomination.

The Daschle spokesperson insisted that the senator is the one who should get credit for discovering, fixing, and disclosing the tax issue.

"In June 2008, Sen. Daschle mentioned the use of the car to his personal accountant and asked him if there were any potential tax consequences," the spokesperson said. "His accountant said that there could be tax consequences and said he was going to fix them as part of Daschle's 2008 filing. So when he got down to vetting, Sen. Daschle decided to amend his returns for 2005, 2006, and 2007 and he paid all the taxes. At the urging of Daschle the accountant was very conservative in his estimates."

Daschle has long been one of President Obama's closest advisers, so it was no surprise when the mild-mannered pol was named Obama's nominee to be HHS Secretary shortly after Obama won election; his official nomination came on December 11, 2008.

Should Mr. Daschle have trouble being confirmed -- a prospect that seems unlikely given the benefit of the doubt Senators frequently extend to one another, not to mention the Senate's Democratic majority -- he doesn't have to worry about finding another job in the administration, since President Obama has also appointed him to serve as Director of the new White House Office on Health Reform.

-- Jake Tapper

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