Pressure grows on Wolfowitz to resign
By Krishna Guha and Eoin Callan in Washington

Published: April 12 2007 19:03 | Last updated: April 13 2007 04:37

Paul Wolfowitz was under pressure to resign as president of the World Bank on Thursday after admitting he was personally involved in securing a large pay rise and promotion for a Bank official with whom he was romantically involved.

The Bank president issued a public apology, saying: “I made a mistake for which I am sorry”.

The apology came after the Financial Times revealed that Mr Wolfowitz ordered the World Bank’s head of human resources to offer Shaha Riza the pay rise and promotion as part of a secondment package.

The instructions were set out in a memorandum dated August 11 2005, according to two sources who have seen the document.

The Bank’s board of directors, who represent its shareholder governments, met late into the night in an emergency session to review the findings of their own investigation into the Riza assignment and decide on the next step.


Pressed at the opening press conference of the Bank’s spring meeting as to whether he would resign over his handling of the Riza case, Mr Wolfowitz said he would “accept any remedies” the board proposes.

He did not comment on the specifics of the memo.

Moments later, amid chaotic scenes in the lobby of the Bank’s headquarters in Washington, the Bank president made an impromptu address to staff who had gathered to call for his resignation.

An emotional Mr Wolfowitz told staff the controversy had been “very painful” and apologised to them in person for his handling of the affair.

Alison Cave, the chair of the staff association, welcomed the apology but said Mr Wolfowitz must “act honourably and resign”.

Mr Wolfowitz said he acted as he did in order to shield the Bank from the threat of a lawsuit if Ms Riza was forced to leave because of staff rules that prohibit its employees from working for anyone with whom they are romantically involved.

He denied charges of an attempted cover-up, declaring: “I did not attempt to hide my actions nor make anyone else responsible.”

The Bank president made a plea for “understanding” saying he faced a “painful personal dilemma” at a time when he was new to the Bank and “trying to navigate in uncharted waters”.

Ms Cave said Mr Wolfowitz had “broken the staff’s trust on this and many other issues” and if the board failed to ask him to step down, the staff association would call a vote of no confidence in him.

In the August 11 2005 memorandum, two sources told the Financial Times, Mr Wolfowitz directed Xavier Coll, the Bank’s vice-president for human resources, to offer Ms Riza specific terms as part of a secondment package to the US State department.

These included a promotion, a pay rise above that normally associated with the promotion, and arrangements to ensure Ms Riza received exceptional annual pay increases. Only the promotion had been recommended by the board’s ethics committee, two sources told the FT.

The terms and conditions were not approved by the Bank’s ethics committee or its senior legal officer, then general counsel Roberto Danino.

A copy of the memorandum has been seen by the subcommittee of the bank’s board of executive directors who were charged with investigating the Riza assignment, two sources said.

Mr Wolfowitz went to the board on Thursday morning and proposed that it should “establish some mechanism to judge whether the agreement reached was a reasonable outcome.”

http://www.ft.com/cms/s/ee84cc80-e91e-1 ... 10621.html

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An editorial to this article:


Wolfowitz must be told to resign now
Published: April 12 2007 17:54 | Last updated: April 12 2007 17:54

The president of the World Bank has one asset: his credibility. The Bank’s capacity to make a difference lies not in its money and ideas but in its ability to be the world’s voice for development. This includes, as Paul Wolfowitz, the current president, has insisted, being the voice for good governance. Recent revelations have, however, demonstrated such serious failures that the Bank’s moral authority is endangered. If the president stays, it risks becoming an object not of respect, but of scorn, and its campaign in favour of good governance not a believable struggle, but blatant hypocrisy.

It is important to understand what is not at issue here. It is not Mr Wolfowitz’s unpopularity, even though his role as an architect of the Iraq war made him disliked from the start. It is not failures of management, even though his reliance on a group of outside appointees made him mistrusted by many inside and outside the Bank. It is not disagreements over development doctrine, where some convergence of views has occurred. It is not a romantic relationship with a subordinate, itself hardly a rarity in today’s world.

The issue is whether the failures of corporate governance are serious enough to damage the Bank’s moral authority. In a world where curtailing corruption and improving governance have become central to the practice of development, the world’s premier development institution must, like Caesar’s wife, stand above suspicion.

What then is the story? When Mr Wolfowitz became president of the World Bank he also became the boss of his girlfriend, Shaha Riza. To resolve this situation – inconsistent, rightly, with Bank rules – Ms Riza was seconded to the US State Department.

So far, then, so unproblematic. Yet, it is alleged, the terms of the appointment, which appear astonishingly generous, violate a number of Bank protocols. Worse, it now appears Mr Wolf*owitz personally directed the Bank’s head of human resources to offer his girlfriend these exceptional terms. Worse still, this has come out after misleading claims by a senior official that the ethics committee of the board, in consultation with the general counsel, approved the agreement.

What then do we see here? The answer is: an apparent violation of Bank rules; favouritism that borders on nepotism; and a possible cover-up. It is true Mr Wolfowitz and Ms Riza were put in a difficult position. Even so, what has come out would be bad in any institution. In an institution that spear-heads the cause of good governance in the developing world, it is lethal.

The World Bank has moved from being a self-proclaimed exemplar of best practice in corporate governance to an example of shoddiness. As long as Mr Wolfowitz stays, this can be neither repaired nor forgotten, be it outside the Bank or inside it. In the interests of the Bank itself, he should resign. If he does not, the board must ask him to go.

http://www.ft.com/cms/s/18b3bad0-e914-1 ... 10621.html