The war of words has heaped embarrassment on Suu Kyi whose star as a rights defender continues to plummet over her failure to speak out for the Rohingya in the face of overwhelming evidence of the Muslim minority group's suffering.
Suu Kyi's office said that during discussions in Myanmar's capital on January 22, "it became evident" that Richardson was not interested in providing advice as one of five international members of a new panel on a crisis that has seen nearly 690,000 Rohingya flee a military crackdown to Bangladesh.
The Burmese-language version said they decided to "terminate" his participation.
Myanmar's explanation stands in stark contrast to Richardson's, who after his three-day visit to the country said he could not in "good conscience" sit on a panel he feared would only "whitewash" the causes of the Rohingya crisis.
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He tore into Nobel Laureate Suu Kyi for an "absence of moral leadership" over the problem, and described her "furious response" to his calls to free two Reuters journalists arrested while covering the crisis.
"He should review himself over his personal attack against our State Counsellor," government spokesman Zaw Htay told AFP, using Suu Kyi's official title.
Urging understanding instead of blame, Zaw Htay said the issue of the arrests was beyond Richardson's mandate and he should not have brought it up at his meeting with Suu Kyi.
The heated discussion left Myanmar's leader "quivering" with rage, Richardson told the New York Times.
The Reuters journalists, Myanmar nationals Wa Lone and Kyaw Soe Oo, face a possible 14 years in prison under the Official Secrets Act for allegedly possessing classified documents that they say were given to them by two policemen.
The military operations started after Rohingya insurgents attacked police posts in August.
Though Myanmar says it is ready to start repatriating refugees, many fear returning, and some 300 more families crossed the border in recent days after several houses were burned down in Buthidaung township, said Chris Lewa from the Arakan Project, a monitoring group that closely tracks Rakhine.
Myanmar analyst Khin Zaw Win said Richardson's words could deliver a "much-needed jolt for Aung San Suu Kyi and for the people around her who are not reporting the truth to her."
Aaron L Connelly from the Lowy Institute for International Policy told AFP that the description of the conversation between Richardson and Suu Kyi should "finally dispel the myth that she privately holds views which she cannot express publicly".
Richardson joined the Myanmar board as a private citizen, but the US State Department said the Washington administration shares many of his concerns.
Richardson could not immediately be reached for comment today.
Fellow members of the advisory board, which included five Myanmar nationals, defended their work on Thursday and denied participating in a whitewashing of the crisis.
"Bill Richardson was making his comments too early and it's very unfortunate from that angle," South African national and panel member Roelof Petrus Meyer told reporters in Yangon.
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