By JONATHAN
WEISMAN

New
Mexico Gov. Bill Richardson withdrew his nomination as President-elect Barack
Obama's commerce secretary Sunday, citing a federal grand-jury
investigation into a "pay to play" scheme in his home state, Obama transition
officials said.

Just days ago, Republican Senate aides said they didn't believe the
investigation of CDR Financial Products would be a major impediment to Mr.
Richardson's confirmation. But the probe appears to be heating up. Mr.
Richardson hired a personal lawyer last month and in mid-December, the grand
jury began taking testimony from a slew of witnesses.

The grand jury is investigating how the company won more than $1.5 million in
work advising the state of New Mexico after making contributions to Mr.
Richardson's political
action committees. The "pay-to-play" investigation is trying to determine
whether the governor's office had any role in the contracting decisions.

The focus is on fees paid to the Beverly Hills, Calif.-based CDR by the New Mexico Finance Authority in 2004
soon after donating $100,000 to Mr. Richardson's voter
registration effort. CDR has denied any wrongdoing.

Mr. Richardson had served as energy secretary and ambassador to the United
Nations under former President Bill
Clinton. He broke with the Clintons in March when he endorsed Mr. Obama
at the height of the primary fight.

Latino and business groups had praised the selection of Mr. Richardson. Bruce
Josten, chief lobbyist for the U.S.
Chamber of Commerce, said at the time of his nomination that as head of
U.S. trade missions globally, Mr. Richardson would be able to tap his extensive
foreign-policy experience and his acquaintance with foreign leaders to help pry
open new markets for struggling U.S. exporters.

Traditionally, the commerce secretary slot has gone to business executives,
especially those who provided financial backing for the president's election
bid. The current secretary, Carlos M.
Gutierrez, had been chief
executive of cereal giant Kellogg
Co. President George W.
Bush's first commerce secretary, Don Evans, was an oil-services company
executive and one of the leaders of Mr. Bush's campaign team in 2000.

Write to Jonathan Weisman at jonathan.weisman@ wsj.com