WASHINGTON — A political insider tapped by Barack Obama to vet potential running mates resigned Wednesday, saying he wanted to prevent a controversy over his personal finances from hurting the Democratic presidential candidate's campaign.
The unpaid advisor, Jim Johnson, was chosen by Obama last month to serve on a three-member team screening prospective nominees for vice president.
Johnson, however, drew criticism over a report last week that he had received what may have been reduced rates on loans from Countrywide Financial Corp., a mortgage lender with business ties to Fannie Mae.
He also has been criticized for compensation and other perks he received as an official of mortgage giant Fannie Mae and for compensation decisions made while he was a board member of United HealthCare, one of the nation's biggest medical insurers.
For The Record
Los Angeles Times Friday, June 13, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 30 words Type of Material: Correction
Obama advisor: An article in Thursday's Section A about the resignation of Barack Obama advisor Jim Johnson misspelled the last name of former Hewlett-Packard Chief Executive Carly Fiorina as Fiorini.
The controversy over Johnson is one of a series of dust-ups involving Washington insiders that have struck Obama and Republican John McCain as the presumptive presidential nominees compete to win voters with promises to distance themselves from Washington's traditional system of insider politics.
Those promises notwithstanding, both Obama and McCain have followed the time-honored practice of relying on well-connected advisors steeped in Washington's political culture.
That included Johnson, once a top aide to former Vice President Walter F. Mondale. For years he has been a fixture of establishment Washington, with ties to Wall Street and powerful members of both political parties.
Lately, the McCain campaign has accused Obama of hypocrisy for keeping Johnson as an advisor at the same time the Democratic candidate was chastising mortgage lenders such as Countrywide.
The Obama campaign returned fire by calling attention to McCain's reliance on Carly Fiorini, the former CEO of Hewlett-Packard, for economic advice. Fiorini received a $21-million severance package when she left the Silicon Valley company in 2005 after a stormy tenure. On the campaign trail, McCain has decried excessive corporate compensation, raising the issue again this week.
As recently as Tuesday, Obama dismissed Republican criticism of Johnson, saying, "I am not vetting my V.P. search committee for their mortgages." He said Johnson had a "discrete task" that he was performing well.
But on Wednesday, Obama issued a statement on Johnson's resignation: "Jim did not want to distract in any way from the very important task of gathering information about my vice presidential nominee. . . . I remain grateful to Jim for his service and his efforts in this process."
Separately, Johnson said in a statement that he had done nothing wrong but was leaving the campaign because "I would not dream of being a party to distracting attention from that historic effort."
With Johnson's departure, Obama's vice presidential vetting team now includes only former Deputy Atty. Gen. Eric Holder and Caroline Kennedy, the daughter of former President John F. Kennedy, neither of whom has participated in any previous vice presidential selection processes.
Johnson helped vet running mates for Mondale in 1984 and for John F. Kerry in 2004.
Along with serving in those campaigns and in various public-sector jobs, Johnson also has had an extensive business career. After leaving his post as executive assistant to Mondale, Johnson founded Public Strategies, a consulting firm, before joining the Lehman Brothers investment firm in 1985. From 1991 to 1998, he served as chief executive of Fannie Mae.
Currently, Johnson is vice chairman of a private banking firm, Perseus.
When he left Fannie Mae, Johnson was receiving $6 million to $7 million a year in compensation and perks, part of a pattern at the institution that later was questioned by congressional critics.
In addition, the Wall Street Journal reported last week that he received close to $2 million in mortgage loans with the help of the chief executive of Countrywide, which is under federal investigation in the sub-prime mortgage crisis. The first loan was made before Johnson left Fannie Mae in 1998.
Johnson also was associated with an executive compensation controversy at United HealthCare, where he served on the board. The insurer's chief executive, William McGuire, resigned after it was reported that he had been granted more than $1.4 billion in stock options. Some of that money was returned as a result of legal settlements, but McGuire still left with more than $800 million.
Karl Cambronne, a Minnesota lawyer for shareholders suing for the return of some of those funds, slammed Johnson this week in an interview, saying Johnson received at least $9 million in profit from options he cashed while serving on the board.
"Jim Johnson served on both the compensation and audit committees at various times. . . . It is difficult to fathom how someone who was paid as much as he was as a board member didn't take more proactive steps" to prevent improper compensation practices, Cambronne said.
Nell Minow, co-founder of the Corporate Library and a shareholder advocate, acknowledged that Johnson sat on boards where excessive compensation was authorized. But in the case of United HealthCare, she said, Johnson -- once he grasped the problem -- acted aggressively to resolve it.
"Even though I don't agree with everything he has done, I do respect the way he responded to those cases where there were problems. He did show real responsiveness," Minow said.
A spokesman for Johnson, Washington lawyer Brian Brooks, could not be reached for comment.