Daschle's Tax Problems Stem From Media Company's 'Gift'

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By now most people have heard that Barack Obama's nominee for Secretary of Health and Human Services, Tom Daschle, has backed out due to some major tax problems. Many have probably even heard that the bulk of his problems involve his affinity for free limo service, not to mention the inevitable limousine liberal jokes that followed. However, most have no idea exactly who was paying for Daschle's free rides.

That company is a media investment firm named InterMedia Partners. They own or have controlling stakes in a variety of media platforms from outdoor magazines to Spanish language television to Christian publishing companies. On top of providing him with the now troublesome transportation they also paid Daschle a million dollar annual salary for his advice. Here is how Fox News described Daschle and InterMedia's car troubles:

Senator Daschle is a limited partner in InterMedia Partners of Englewood, CO and Chairman of its Executive Advisory Board. Senator Daschle also is an independent consultant to InterMedia Advisors, LLP of New York City. He entered into a business relationship with InterMedia in February, 2005. Beginning in April, 2005, the senator was provided the use of a car and driver by Mr. Leo Hindery, the Managing Partner of InterMedia. In addition to being business partners, Mr. Hindery and Senator Daschle have been personal friends for many years. Charges for the car and the services of the driver were billed to InterMedia. InterMedia did not issue Senator Daschle a Form 1099 for the value of the car service and Senator Daschle did not report the value of the car service as income on his original tax returns for 2005, 2006 and 2007.

Senator Daschle told staff that in June, 2008, something made him think that the car service might be taxable and he disclosed the arrangement to his accountant. Under Section 132 of the Internal Revenue Code, the value of transportation services provided for personal use must be included in income. Senator Daschle estimated that he used the car and driver 80% for personal use and 20% for business use. On January 2, 2009, Senator Daschle filed amended returns for 2005, 2006 and 2007 reporting the value of the car service as income. He did not pay self-employment tax on the personal value of the service. It was determined during the Committee review of Senator Daschles returns that the personal value of the car service is subject to self-employment tax. The senator has acknowledged that the 2005, 2006 and 2007 tax returns will need to be adjusted to pay the applicable Medicare taxes of 2.9% of the personal value of the service.

As egregious as it is that neither InterMedia nor Daschle figured that money spent on transportation for the former senator could be taxable there is another side of the story that is perhaps more shocking. That is the fact that, according to Politico.com, Tom Daschle has been pushing for the founder and managing partner of InterMedia, Leo Hindery, to be placed high up in the Obama administration:

Tom Daschle backed the patron who paid him a million-dollar salary and supplied him with a free car and driver for a job inside the Obama administration, two Democrats said Monday.

Leo Hindery, whose InterMedia Partners employed the former Senate majority leader, had been mentioned as a possible secretary of commerce or U.S. trade representative.

"Tom was pushing for him," said one Democratic source.

Yes, that's right, Tom Daschle is backing the media mogul who gave him a million dollar a year consulting position and what Daschle understood to be a "gift" of free limo transportation. But this isn't the first time that the media executive who has worked everywhere from the San Francisco Chronicle to AT&T's cable service, Leo Hindery, has used his financial support to influence powerful Democrats:

Hindery, who had been Daschle's top Senate fundraiser, was also the top fundraiser for a losing candidate for New York mayor, Freddy Ferrer, and a top supporter of former Sen. John Edwards' White House bid. He chaired an economic initiative, the Horizon Project, which aimed, with little success, to move Democratic leaders toward a more skeptical stance on trade.

[...]

"He didn't get in it for the money or any of those other things - the guy really got in it because the guy wanted to be part of shaping the policy," said Paul Blank, Edwards campaign manager, who recalled getting 2 a.m. emails from Hindery on economic policy.

"He acted more like an economic policy staffer than a renowned Democratic donor." Hindery, though, was also in the top rung of donors: He personally contributed more than $1 million to the Democratic Senatorial Campaign Committee under Daschle's leadership.

Just as Hindery is no stranger to Democrat fundraising, he is also no stranger to controversial avenues of getting this funding into candidates hands. During the failed John Edwards campaign for president in '08 Hindery underwrote their private jet travel expenses. Underwriting campaign travel expenses is a practice which the Politico described as a "campaign finance loophole" and one that has since been closed.

However, as with his previous forays into Democrat fundraising, his latest attempt to gain political influence seems to have failed:

Obama's aides rejected Daschle's suggestion that a top job go to Hindery, for whose private equity fund Daschle had served as a rainmaker and adviser.

We will see if Daschle continues to push the Obama administration to appoint Hindery to an influential government position. And we will see if media mogul Hindery continues to use his connections and influence to try and shape policy and gain a government position. My guess is this isn't the last we will hear from these two.