"It is with deep regret that I accept Governor Bill Richardson's decision to withdraw his name for nomination as the next Secretary of Commerce," Obama said in a statement.
A federal grand jury is looking into how Beverly Hills financial services company, CDR, earned a $1.5 million state contract after contributing to Governor Richardson's political action committees. And now there are questions about Obama's transition team's vetting process, reports CBS News correspondent Joel Brown.
"Everyone knew about this investigation," says Politico.com's Mike Allen. "The President-elect took a chance. The question is why. Did (Obama's) vetters ask enough questions? Did (Richardson) give the right answers?"
A person familiar with the proceedings has told The Associated Press that the grand jury is looking into possible "pay-to-play" dealings between CDR Financial Products and someone in a position to push the contract through with the state of New Mexico.
Richardson denied any wrongdoing, but said this morning that the pending investigation threatened to stall the confirmation process for several weeks or months.
He said that he had responded to a "call to duty" when accepting Obama's request to serve as Secretary of Commerce, acknowledging that the department will play an urgent role in resolving the nation's economic problems.
"It is also because of that sense of urgency about the work of the Commerce Department that I have asked the President-elect not to move forward with my nomination at this time," Richardson said this morning. "I do so with great sorrow.
"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.
"Given the gravity of the economic situation the nation is facing, I could not in good conscience ask the President-elect and his Administration to delay for one day the important work that needs to be done."
CDR spokesman Allan Ripp, in an exclusive telephone interview with CBS News, said, “The firm adamantly doesn’t practice pay-for-play under any circumstance on any playing field. It is pay for performance, pay for expertise, pay for track record, and pay for merit.”
Ripp said that CDR was selected by the New Mexico Finance Authority after what he called "a very rigorous and open review of credentials, expertise, cost and track record with other municipalities and government agencies around the country. CDR delivered exceptional services to the state under the terms of the contract as the state's swaps advisor.”
"The firm was chosen through a thorough and rigorous selection process. On that basis alone the firm won a partial contract with the state. CDR was vying to do all the work, but the state chose another firm to share the work with CDR."
Ripp, who called Richardson "an extremely accomplished and an extremely capable public official," questioned the motives of whomever released information about the grand jury investigation.
“The timing is extremely unfortunate," he told CBS News. "One would have to ask who is leaking news of this investigation and why this information is being leaked when Governor Richardson is being vetted for a presidential appointment.”