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In Daschle’s tax woes, a peek into Washington

The disclosures about Tom Daschle show how he was able to live a lavish lifestyle by dint of his name, connections and knowledge of Washington’s inner workings.
/ Source: The New York Times

Tom Daschle, the former Democratic Senate leader, had been voted out of office. His close friend Leo Hindery, a Democratic donor and media mogul, was out of a job too, having just sold his latest company, Yes Networks.

So in early 2005 the two men decided to team up. Mr. Daschle agreed to become the founding chairman of “a world-class executive advisory board” of “industry and regulatory experts” for a new investment firm run by Mr. Hindery, according to a news release announcing its inception and seeking investors. The Daschle-led board, the release said, would help provide a “collective depth of industry knowledge and expertise that will allow us to pursue unique and high-value opportunities.”

In addition to lending the prestige of his name, Mr. Daschle traveled to help raise money from investors for Mr. Hindery’s new venture, said Jenny Backus, a spokeswoman for Mr. Daschle. And in exchange, over the next four years the firm compensated Mr. Daschle with over $2 million, and Mr. Hindery lent Mr. Daschle the use of a chauffeured limousine in Washington.

Ms. Backus said that when Mr. Hindery was not in Washington he lent his car to Mr. Daschle as a favor to a friend.

The partnership has now come back to haunt Mr. Daschle, with the disclosure that he had failed to pay $128,000 in taxes on the car and driver Mr. Hindery’s firm provided him, threatening to derail his confirmation as secretary of health and human services.

Beyond the ramifications for Mr. Daschle’s ascent to the cabinet, the disclosures about Mr. Hindery and the many clients Mr. Daschle advised on public policy offers a new window into how Washington works. It shows how in just four years an influential former senator was able to make $5 million and live a lavish lifestyle by dint of his name, connections and knowledge of the town’s inner workings.

There is no evidence that Mr. Daschle pulled strings for Mr. Hindery. Indeed, Mr. Hindery’s firm appears to have had few interests before the government. But interviews and a review of public documents show that in his work for a Washington law firm, Mr. Daschle did take on an array of clients seeking influence with the government, including concerns involved in Indian gambling, ethanol, health care, telecommunications and federal contracting.

At least one, the nonprofit student loan company EduCap, may pose new problems for Mr. Daschle. The Senate Finance Committee said it was trying to determine whether trips to the Bahamas and the Middle East provided to Mr. Daschle by the company should also have been reported as income.

Ms. Backus said that the trips predated his work for EduCap, that he traveled at the request of a different charity, and that his accountants say he handled the trips appropriately.

Affiliated with the firm Alston & Bird, Mr. Daschle has operated in the gap between the popular understanding and legal definition of a lobbyist. There is no evidence that he directly sought to influence his former colleagues or other government officials in ways that would have required him to register as a lobbyist or could have run afoul of the restrictions on former lobbyists entering the Obama administration. But the rules still left plenty of room for him to advise businesses seeking to influence the government or to profit otherwise from the fame and insights he acquired in public life.

“Did he attempt to influence? Maybe,” said Thomas Susman, an official at the American Bar Association and author of its lobbying manual. “Did he advise others in the business of influencing? Probably. But he wasn’t a lobbyist.”

Ms. Backus said Mr. Daschle provided clients with advice based on years of public service. But she said he also gave the same insights free to the One campaign and the liberal Center for American Progress, as well as to his students at Georgetown University.

Aides to President Obama said on Sunday that they still expected Mr. Daschle to win confirmation. The Senate Finance Committee will meet on Monday to discuss the nomination.

What expertise Mr. Daschle contributed to Mr. Hindery’s firm is hard to determine. The firm, Intermedia, has hired no federal lobbyists and it mainly invests in media businesses — the television program “Soul Train,” for example; cable networks devoted to gospel music or hunting and fishing; and the Christian publisher Thomas Nelson — with few interests before the government.

Mr. Hindery, who sought the chairmanship of the Democratic National Committee in 2000, could not be reached for comment. Other firm executives did not return calls. Former Senator Bob Kerrey, another board member, did not respond to an e-mail message.

Former Senator Slade Gorton, a Washington Republican who also joined the board, said in an interview on Sunday that the other members received $100,000 a year in compensation, mainly for attending quarterly meetings about the state of the firm.

The Senate Finance Committee expects to disclose this week the results of a two-year investigation into the possibility that Mr. Daschle’s client EduCap abused its tax-exempt status by providing lavish entertainment and travel to its officers and their guests, including Mr. Dashcle. Mr. Daschle is an old friend of Catherine B. Reynolds, EduCap’s chief executive.

Another client paying for his policy advice was UnitedHealth, a giant insurance company with many issues pending before the Department of Health and Human Services. About a third of its $81 billion in revenue last year came from federally regulated sales of Medicare Advantage and Medicare supplement and prescription drug plans.

The company boasted in its annual report that “one in five Medicare recipients participates in a UnitedHealth Group Medicare program.” (Mr. Daschle has said he will recuse himself from matters involving former clients.)

Two of the clients Mr. Daschle disclosed involved Indian tribes: the Great Plains Indian Gaming Association, and the law firm Fredericks Peebles & Morgan, which represents Indian tribes in legal and government-relations matters involving gambling, health care and other issues.

Another was Perry Capital, a firm that specialized in handicapping the completion of mergers, many of which required federal approvals.

Several other clients or employers have stakes in federal support for the production of ethanol, an alternative to petroleum popular in farm states but controversial among environmentalists. Mr. Daschle received fees as a director of Prime BioSolutions and the Mascoma Corporation, which are involved in ethanol production, and he sold policy advice to the Governors’ Ethanol Coalition and the Renewable Fuels Association. Other clients were investment companies with stakes in federal environmental policies, and one, Crown Consulting, specialized in work for the Federal Aviation Administration.

Mr. Daschle was also a director of the Mayo Clinic. Although he did not officially lobby for the hospital, he did lend his voice to its cause in at least one notable battle. (As a director, Mr. Daschle received free medical care from the clinic, and for that he paid taxes, his spokeswoman said.)

Over the last few years, the clinic paid several Washington lobbyists to help beat back a $2.5 billion government loan for a company from Mr. Daschle’s home state, South Dakota, that wanted to operate a freight rail line near the clinic’s headquarters in Rochester, Minn.

To much criticism in his home state, Mr. Daschle sided with the clinic, calling it “an American treasure.”

“I don’t think the Mayo Clinic is asking too much,” he told The St. Paul Pioneer Press. The Federal Railroad Administration killed the project last February.

Robert Pear and Sheryl Gay Stolberg contributed reporting.

This article, "," first appeared in The New York Times.