World Bank's report says Wolfowitz violated ethics

Posted in United States | 15-May-07 | Author: Steven Weisman| Source: International Herald Tribune

World Bank president Paul Wolfowitz

WASHINGTON: A World Bank committee charged Monday that Paul Wolfowitz violated ethical and governance rules as bank president by showing favoritism to his companion in 2005. In response, the Bush administration mounted a last-ditch global campaign to save Wolfowitz from being ousted from office.

On a day of rapid developments that intensified the furor over Wolfowitz at the bank, in the Bush administration and at government ministries around the world, the special committee that has investigated his conduct in the last month issued a scathing set of conclusions that seemed certain to hasten a decision on Wolfowitz's fate.

The report charged that Wolfowitz broke bank rules and the ethical obligations in his contract, and that he tried to hide the salary and promotion package awarded to Shaha Ali Riza, his companion and a bank employee, from top legal and ethics officials in the months after he became bank president in 2005.

Citing what it said was the "central theme" of the matter, the report said Wolfowitz's assertions that what he did was in response to the requests of others showed that "from the outset" of his tenure he "cast himself in opposition to the established rules of the institution."

"He did not accept the bank's policy on conflict of interest, so he sought to negotiate for himself a resolution different from that which would be applied to the staff he was selected to head," the committee said, adding that this was "a manifestation of an attitude in which Mr. Wolfowitz saw himself as the outsider to whom the established rules and standards did not apply."

"It evidences questionable judgment and a preoccupation with self-interest over institutional best interest," it said.

The committee, consisting of seven of the 24 members of the World Bank's board, in the end seemed to challenge the larger governing body to declare him unfit by saying that it must now determine "whether Mr. Wolfowitz will be able to provide the leadership needed to ensure that the bank continues to operate to the fullest extent possible in achieving its mandate."

With that challenge, bank officials familiar with the mood of the board said it would have little choice but to punish him.

In the face of that storm, Treasury Secretary Henry Paulson Jr. was on the telephone during the day with counterparts in at least half a dozen countries to tell them that "these facts do not rise to the level of warranting dismissal," according to a senior Treasury official.

Until Monday, Paulson's conversations with finance and development officials, many of whom have told him they favor Wolfowitz's ouster, have been confined to urging that there be no "rush to judgment."

Vice President Dick Cheney said in an interview with Fox News in Jordan before the committee's findings were released that Wolfowitz was "one of the most able public servants I've ever known" and that "he's a very good president of the World Bank, and I hope he will be able to continue."

White House and Republican officials said that from the beginning, President George W. Bush has seen the controversy over Wolfowitz as a proxy fight waged by liberals at the bank opposed to Bush's policies, and that he would not toss him or Attorney General Alberto Gonzales overboard just because opponents want them out.

Beyond pride and politics, administration officials said that having someone at the bank who is viewed as committed to combating corruption and waste in aid programs, and who commands the confidence of Republicans and conservatives, helps guarantee congressional funding for the bank's projects.

But European governments have increasingly signaled that they will not finance the bank if Wolfowitz stays. In particular jeopardy is a commitment made in 2005 by Bush and other Western leaders to cancel the debts of poor countries, a pledge that will cost $30 billion in new financing over the next three years.

These clashes of perspective have ruptured the bank's governance system so deeply that finance officials in many countries worry that it may be irreparable whatever happens to Wolfowitz. If he refuses to resign, many said he might find it hard to travel or issue directives. If he leaves, a fight over choosing his successor is sure to erupt.

Almost lost in this interplay are the conflicting versions of what actually happened in 2005 that led to the crisis. As each new disclosure has occurred in recent weeks, more light was shed on the events of mid-2005 after Wolfowitz came to the bank. The committee's 52-page report was released Monday evening on the bank's Web site and other documents were obtained from both critics and supporters of Wolfowitz.

According to his own submission to the committee investigating him, made available by his supporters, Wolfowitz vehemently disputed the conclusions of the committee.

His defense rested on arguments he made earlier that he had been directed by ethics officials to arrange for Riza's compensation only after he had tried to avoid involvement, and that officials subsequently approved of what he had done.

The new evidence that surfaced Monday revolved around Wolfowitz's charge that one of his accusers, Xavier Coll, the bank personnel director, was wrong in recalling that Wolfowitz tried to cover up the salary and promotion package for Riza.

Coll, according to the report issued Monday, said that he had told Wolfowitz that the pay package for her was "outside the staff rules" and that the bank president had told him not to inform two top ethics officers, Roberto Daniño, then the bank's general counsel, and Ad Melkert, head of the board's ethics committee.

But Wolfowitz noted that in one memo he dictated for himself, Coll acknowledged that "there is no precedent to his kind of situation and no policy that would clearly apply to resolve it." In another Coll memo, Wolfowitz noted, the personnel director said he thought the president was embarking on "a reasonable way to move forward."

Riza had been at the bank for seven years when Wolfowitz arrived. She was angry and distraught over being told to leave because she could not be supervised by Wolfowitz, and was also inclined to sue, according to various documents made public earlier and elaborated on Monday. Wolfowitz said paying her was the only way to ease her anguish.

He charged further that ethics officials in effect washed their hands of the matter, deliberately looking the other way until after he had made his decision over how to handle her compensation.

"It would only be human nature for them to want to steer clear of her," Wolfowitz said in a rebuttal submitted earlier to the bank panel and obtained Monday from Wolfowitz supporters.

The bank committee ended up siding with Coll, however, and with Daniño and Melkert in saying that Wolfowitz was never authorized to arrange for the package for Riza himself.

The bank also sided with Coll in his contention that Wolfowitz seemed to be trying to keep the matter of Riza's salary from Daniño and Melkert, the chief ethics guardians at the bank. But Wolfowitz maintained that he had asked Coll to keep the terms secret only for the brief time they were being negotiated.

He said he fully expected that once the salary and promotion package was in place, the proper authorities at the bank would find out about its composition. Indeed, he assumed they had done so when they decided not to act against him in late 2005 and again in early 2006.

Though it tended to side with Wolfowitz's critics, the committee's report acknowledged that the instructions conveyed to him were "not a model of clarity" and subject to "the possibility of misinterpretation."

Nevertheless, the report concluded, "Mr. Wolfowitz has taken the position that there were no rules that applied to the situation and therefore no rules could have been broken in resolving the matters as he did."

In a gesture to critics of the bank who say that the entire episode showed a flawed governance system, the committee recommended a full review of governance procedures in the future.