Gov. David A. Paterson's top adviser, Charles O'Byrne, who rose from the ranks of legislative speechwriter to the most powerful staff job in state government, resigned Friday under mounting pressure for failing to pay income taxes for five years.
The move came after it was revealed this week that O'Byrne, who served as secretary to the governor, only recently finished paying more than $300,000 in back taxes, penalties and interest for a period from 2001 to 2005 when he failed to file his state and federal income tax returns.
Lawyers for O'Byrne this week blamed his tax problem on clinical depression and a unique defense they called "nonfiler syndrome" -- a response that created its own public relations damage.
"Gov. Paterson is grateful for the hard work and dedication Mr. O'Byrne has shown to the administration and to the people of New York," the administration said Friday night. O'Byrne resigned his title Friday night but will remain during a transition period until Nov. 7.
Paterson is losing his closest adviser at a time when his administration is under siege trying to resolve a state budget crisis that is worsening by the day. The Legislature is due back in town next month for a special session to slash upwards of $2 billion from the current budget.
Sources say aides were planning a big strategy session for this weekend to figure a course to try to end the controversy -- but with O'Byrne remaining in his job. Within hours, though, those plans changed and O'Byrne's departure was announced.
O'Byrne, a former priest who has close ties to the Kennedy family, has been the point person on every major decision made by the Paterson administration since the governor replaced Eliot Spitzer last March.
O'Byrne's situation had become political fodder for Republicans, who have been using his tax problems in campaigns to try to hang onto their slim majority in the State Senate. The GOP-led Senate investigations committee this week said it was opening up a review of the O'Byrne matter, a probe with which Paterson pledged to cooperate.
"Everyone has an obligation to pay their taxes. No one likes to do it, but it is the law and when someone does not comply with the law, there are consequences," said Senate Majority Leader Dean Skelos, a Nassau County Republican. He said Paterson took "appropriate action" Friday, but said a host of questions remain, including why the governor "chose to do nothing about the matter until it became public this week."
Paterson first was told by O'Byrne of the tax problem in 2004, and then again in late 2006 or early 2007.
O'Byrne, known for a confrontational style, was literally the eyes of the legally blind governor on many state matters. He also was the governor's sole gatekeeper, serving as the go-to staff member while being Paterson's chief cheerleader and blocker at the Capitol.
"Everything going into the office and everything going out of the office went through him," said one Democrat with knowledge of the governor's office. "It makes replacing him that much more difficult."
Even Democratic allies of the governor said O'Byrne's tax problems were not going to go away. Paterson this week said that he stood by his key adviser, saying his personal financial problems were in the past and had been resolved and did not stop O'Byrne from continuing to serve in his administration.
But with O'Byrne's job having him touch virtually every area of state government, the image of a past tax delinquent in such a powerful post could have undermined Paterson's stance in future negotiations on a whole range of issues, insiders said.
William J. Cunningham III, a senior adviser to Paterson, will replace O'Byrne at least for now. Cunningham is a longtime friend and former law partner of the governor's father, Basil Paterson.
The Paterson administration, after the New York Post broke the story a week ago, at first said O'Byrne owed $200,000 in past tax liabilities. On Wednesday, the number rose to $293,000. They also said last week that O'Byrne had paid off his debts. It turned out the final check to the state tax department was not made until Tuesday.
O'Byrne turned to friends and family members to help him pay the back taxes. Jean Kennedy Smith, sister of Sen. Edward Kennedy, gave him a loan of up to $100,000, his lawyers said. O'Byrne has been tight with the Kennedy family for years; he officiated at the wedding of John F. Kennedy Jr. and Carolyn Bessette, and later served as the family's spiritual counsel when the couple was killed in a plane crash. He also has served on several Kennedy family trusts and foundations.