UPDATE: Sunday night, I urged President Barack Obama to withdraw former SenatorTom Daschle’s nomination as Secretary of Health and Human Services inorder to “revive the change brand he campaigned and won on.” On Monday, Obama said he was “absolutely” standing behind his nominee. On Tuesday morning, the New York Timesjoined in calling on Daschle to step aside. By Tuesday afternoon, Daschle had withdrawn. The Obama teamunderstood the perils ahead–and moved swiftly to cut its losses.

President Obama would be wise to use this as a “teachable moment”—onein which a new era of responsibility tackles the legalized corruption oflobbying in DC.

After all, while the former Senator’s failure to pay substantial backtaxes raised questions about his suitability for the job, it wasDaschle’s ties to health care firms –payments of some $300,000 inincome from companies that he might have regulated as HHSSecretary–that was most troubling. Daschle’s activities, though notofficially lobbying, made a lucrative living advising clients seekinginfluence with the government, including many in the health industry.That activity, with its appearance of a conflict of interest, underminedObama’s promises to bring change we can believe in, not continuebusiness as usual.

During the campaign, Obama spoke eloquently of curbing the exploitationof public service for private gain. And it is heartening that hefollowed through on his first day in office by imposing the toughestethics rules of any Administration in modern times. But, as I wroteSunday night, “there are a slew of reforms required to dismantle thelegalized corruption of lobbying.” Asking Daschle to step aside is agood beginning.

Now, how about Howard Dean for HHS?

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It turns out that former Senator Tom Daschle waited nearly a month after being nominated to be Secretary of Health and Human Services before letting President Barack Obama know that he had not paid years of back taxes. The tax problem resonates at a time of deepening economic pain, as joblessness soars and Wall Street executives are rightfully chastised for using bailout money for multi-million dollar bonuses.

But the serious issue here is Daschle’s ties to health care firms. In a letter to the HHS ethics office on January 16th (cited in the Washington Post on Sunday) Daschle wrote that he wouldn’t participate in any matter over the next year in which “a former client of mine is a party or represents a party.” How does one define that? And won’t this then mean that Daschle is unable to play a role in passing critical healthcare reform until 2010? After all, the same Washington Post story notes that the Health Industry Distributors Assn., which represents medical product distributors, wrote Daschle “last week” to express concerns about proposed Medicare changes and “reminded him of the $14,000 speech he delivered at its conference last year.” Other special interests from which Daschle collected speaking fees ranging from $12,000 to $40,000 included the National Association of Boards of Pharmacy and America’s Health Insurance Plans, which represents the for-profit health insurance industry. He also gave “policy advice” to United Health, a conglomerate that sells insurance, helps the government administer Medicaid, advises drug companies and physicians and dispenses prescriptions. In fact, when all is tallied up, the former Senator received more than $300,000 in income from health related companies that he might regulate.

Experts who study this gray zone debate whether giving a speech, consulting, and otherwise taking money from special interests in return for services is different from lobbying. Nonetheless, Daschle’s activities clearly pose the appearance of a conflict of interest.

This was a campaign about change. Obama spoke eloquently of ending the way Washington does business and curbing the exploitation of public service for private gain. And he followed through with his early executive order attempting to slow the “revolving door” that has allowed so many former government officials to quickly enter the ranks of registered lobbyists. But slowing that revolving door is only the first step in ending the legalized corruption of the town’s lobbying culture.

Daschle’s tax problems have, so far, attracted the lion’s share of scrutiny. And he may well make it through the Senate—though one leading Democratic Senator told me Sunday that he may not vote for his former colleague’s confirmation. But Daschle’s potential conflicts of interest should persuade Obama to make this a “teachable moment” and find another public servant to tackle the critical task of healthcare reform.

If Obama stated clearly that regulators in his administration should not have any financial ties to the industries they regulate, he’d revive the change brand he campaigned and won on. Sure, there are a slew of reforms that need to be put in place to dismantle the legalized corruption of lobbying in DC, but Obama could begin by asking Daschle to step aside.

My pick for his replacement: Howard Dean.