Richardson's Pullout Leaves Hole in Obama Cabinet

Barack Obama had his first serious setback since winning the presidency when his proposed secretary of commerce, Bill Richardson, was yesterday forced to quit the cabinet because of a federal investigation into a business deal.

Richardson, governor of New Mexico and the most high-profile Latino politician in the US, issued a statement saying he had done nothing wrong and expected to be cleared.

Obama expressed deep regret and held out the prospect of giving Richardson another post in the future.

The president-elect, who moved with his family from Chicago to Washington at the weekend to begin their new life in the capital from today, stood on a campaign platform of bringing change to Washington, in particular links between business and politicians.

Although there is continued excitement in the build up to his inauguration on January 20, some of the euphoria felt in the immediate aftermath of his election is beginning to seep away. That is partly because of the alleged sale of Obama's US Senate seat by the Illinois governor, Rod Blagojevich.

While the president-elect could claim no direct involvement in the Chicago affair, the Richardson episode calls into question Obama's judgment in nominating him at a time when the federal inquiry was already under way. It also raises questions about the efficiency of the vetting process carried out by the Obama team.

Obama announced Richardson's nomination on 3 December, saying: "I look forward to working with him in the years ahead." But Richardson had been under investigation by a federal grand jury since August last year.

The investigation, revealed by the Albuquerque Journal, is into how the California company CDR Financial Products won more than $1.4m (£960,000) in work from the New Mexico state government five years ago. Roughly about the same time, the company and its president, David Rubin, made contributions to Richardson's political campaign committees.

CDR and Rubin contributed at least $110,000 to the committees, according to a review of campaign finance records. The largest donation, $75,000, was made by CDR in June 2004.

CDR's lawyer, Richard Beckler, told the Washington Post last month: "CDR has always tried to abide by these byzantine campaign finance regulations and is cooperating fully with this investigation."

The position of commerce secretary requires US Senate approval. Both Richardson and Obama's team may have reached the conclusion that the inquiry would make the confirmation process more awkward than they had anticipated.The confirmation hearings into Obama's cabinet appointments are due to begin this week.

Richardson, 61, was brought up living in Mexico City with an American father and Mexican mother. He worked in Bill Clinton's administration as US ambassador to the UN and as energy secretary. In his resignation statement, Richardson said: "Let me say unequivocally that I and my administration have acted properly in all matters and that this investigation will bear out that fact. But I have concluded that the ongoing investigation also would have forced an untenable delay in the confirmation process."

Obama, in his statement, said: "It is a measure of his willingness to put the nation first that he has removed himself as a candidate for the cabinet in order to avoid any delay in filling this important economic post at this critical time."

In a separate development, the Democrat and comedian Al Franken emerged victorious at the weekend from a recount of votes in one of the most hard-fought and protracted US Senate races.

Franken's lawyers disclosed he had won by 225 votes, overturning the 215-vote lead that his Republican opponent and incumbent, Norm Coleman, held in the aftermath of the 4 November election. His win theoretically gives the Democrats a majority of 59 in the 100-member Senate.

Coleman is threatening to go to court to demand the count of absentee ballots that have been discarded.