One of the state's most powerful politicians has asked Suzanne Clifton, founder of the defunct Castleton Group, to step down as a government adviser.

On Jan. 1, 2007, Clifton began a three-year term on the N.C. Professional Employer Organization Advisory Council. She was appointed to the council by Marc Basnight, a Manteo Democrat and leader of the N.C. Senate.

The General Assembly created the panel to advise the N.C. Department of Insurance on industry regulations. The insurance department in 2005 gained oversight of PEOs, which manage benefits, payroll and related human resource issues for other companies.

According to Schorr Johnson, a Basnight spokesman, the senator did not know Clifton. Basnight got Clifton's name from the National Association of Professional Employer Organizations because her company met the panel's criteria, Johnson wrote in a response via e-mail to questions from The News & Observer.

The Castleton Group, which had more than 100 clients that employed a total 3,500 workers, closed Dec. 18 and filed for bankruptcy four days later. Those actions came after the Department of Insurance denied Castleton a license to operate and after the company disclosed that it owed $8 million in back taxes to the Internal Revenue Service.

"Due to the closure of her company, she [Clifton] has been asked to resign," Johnson, wrote in the e-mail message.

Castleton ran into problems with federal and state tax authorities at least two other times in its 10-year history, court records show. Its demise hurt customers, who scrambled to put in place new health insurance plans and line up new providers to manage payroll.

Clifton's appointment to the board shows just how connected she became through the years. But the advisory council had little influence.The panel still does not have all required members and has never met, said Chrissy Pearson, a spokeswoman for the Insurance Department.

In a statement, Clifton said she "worked diligently to make the PEO Commission of North Carolina a reality. However, my resignation from the PEO Commission is appropriate in light of the current circumstances surrounding The Castleton Group."