Inside Kerik's Fall

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Former New York City police commissioner Bernard Kerik speaks after being announced as the new homeland security secretary by Bush

In calculating his odds of getting confirmed as Secretary of Homeland Security, former New York City police commissioner Bernard Kerik and his advisers had reckoned they could handle the issue of Kerik's reputation for occasional lapses of judgment in personal matters. Or that the smell of some conflict-of-interest issues still clung to him. "Everything seemed pretty normal, at least by Washington or New York standards," his mentor and boss, former New York City mayor Rudolph Giuliani, told TIME. "It is never pleasant. You deal with it." But they hadn't counted on the nanny. Kerik's disclosure, a week after President George W. Bush had announced his selection, that a nanny he had once employed may have been an illegal immigrant, and that he had not paid some taxes on her salary, became the fatal flaw for the man whose prospective job would include enforcing immigration laws. "The good news is he found it, he came forward and he cut off a bitter conflict that would have cost the President capital," Giuliani says. "The bad news is that it could have been caught earlier."

Giuliani insists that his protege's withdrawal is solely about the nanny problem—and not about the cacophony of other issues that surfaced, like Kerik's recent $6.2 million windfall from exercising stock options in Taser International, a stun-gun company on whose board he serves and which does business with the Department of Homeland Security. Kerik never warned the Bush Administration about a potential nanny issue, a senior official says. "He's a workaholic.

These are things he doesn't concentrate on," says Giuliani. When Kerik called the White House to tell them of the problem and his decision, the senior official says, Bush's advisers quickly agreed that it had become a no-win proposition. "Bernie made the right decision," Giuliani says. "It would have been a really tough fight. And this is a very sensitive department, where you need leadership, quickly."