World Bank pledges action on Wolfowitz

World Bank pledges action on Wolfowitz
By Krishna Guha in Washington
Copyright The Financial Times Limited 2007
Published: April 13 2007 13:53 | Last updated: April 13 2007 13:53


Paul Wolfowitz’s future as president of the World Bank was in jeopardy on Friday after the bank’s board issued a damaging finding of facts on his role in the Shaha Riza affair and pledged to ”move expeditiously to reach a conclusion on possible actions to take.”

The board said that its ”consideration of the matter” would ”focus on all the relevant governance implications for the Bank”.

The promise of further action will intensify pressure on Mr Wolfowitz to step down of his own accord, ahead of possible censure by the board.

As of Friday morning, though, there was no indication that Mr Wolfowitz – who issued a public apology Thursday morning – was ready to give up the fight.

Much will now depend on the position of the US, which is more nuanced than yesterday’s reaffirmation by the White House of confidence in Mr Wolfowitz suggests.

The decision came after a marathon emergency session of the 24-member board, made up of representatives of the Bank’s shareholder governments, which began around midday on Thursday and ran late into the night.

Overnight reports suggest European nations took the lead in driving for a tough board statement, overcoming reluctance from some other states. However, there was no consensus to call for Mr Wolfowitz’s resignation.

The controversy relates to Mr Wolfowitz’s personal involvement in securing a promotion and a pay rise far in excess of the normal maximum associated with such a promotion for Ms Riza, a bank official with whom he was romantically involved, as part of a secondment package.

The board statement – hammered out after tough negotiation between board members – states that Mr Wolfowitz ”sent the vice-president, human resources, a written memorandum directing him to reach agreement with the staff member and specifying in detail the terms and conditions.”

The existence of this memorandum, dated August 11 2005, was first revealed by the Financial Times.

The statement further notes that the then ethics committee ”had not been involved in the discussions with the concerned staff member. Neither did it find that the terms and conditions of the agreement had been commented on, reviewed or approved by the ethics committee, its chairman or the board.”

However, the statement does acknowledge that the ethics committee originally advised Mr Wolfowitz to consider a secondment for Ms Riza as one of a number of possible ways to comply with Bank rules that prohibit employees from working under the authority of a colleague with whom they are romantically involved.

It also states that the board suggested that Ms Riza could be offered a promotion as compensation for the disruption to her career.

The board released the full report of the subcommittee that investigated the Riza secondment and promised to release all relevant documents.