David Howard, an aide to Washington, D.C., Mayor Anthony A. Williams, used the word "niggardly" in a discussion with two of his city employees. While his real crime was trying to shoehorn a ten-dollar word into a two-dollar conversation, D.C. employees objected to the use of "niggardly" due to its "racial overtones."
The problem is, "niggardly" isn't even sort of a racist term, it just sort of totally sounds like one. But it really just means "frugal." The contemptuous "N-word" comes from a Latin word meaning "black" and has absolutely nothing to do with "niggard," aside from the fact that both words will likely get you punched in the face if you're overheard saying them in public.
The misunderstanding got so out of hand that Howard was forced to resign, although he eventually got his job back after everyone realized that this was a controversy that could literally be squashed by consulting Merriam-Webster.