WASHINGTON (AP):

New Mexico Governor Bill Richardson abandoned his bid to become commerce secretary under pressure of a grand-jury investigation about political favouritism - an investigation that threatened to embarrass President-elect Barack Obama.

Richardson insisted he would be cleared in the probe, and Obama stood by the governor as an "outstanding public servant". But both men said it has become clear that a grand-jury probe would not be finished in time for Richardson's confirmation hearings and could keep him from filling the post in a timely matter.

Richardson's withdrawal was the first disruption of Obama's Cabinet process and the second pay-to-play investigation that has touched Obama's transition to the presidency. The president-elect has remained above the fray in both the case of arrested Illinois Governor Rod Blagojevich and the New Mexico case.

High-profile democrat

As one of the most prominent Hispanics in the Democratic Party, Richardson served in Congress and as former President Bill Clinton's ambassador to the United Nations and energy secretary. As governor, he has kept up an international profile with a specialty in dealing with rouge nations. Obama also considered him to be secretary of state.

A federal grand jury is investigating how a California company that contributed to Richardson's political activities won a New Mexico transportation contract worth nearly US$1.5 million. Richardson said, in a statement issued by the Obama transition office, that the investigation could take weeks or months, but expressed confidence it will show he and his administration acted properly.