From the April 13, 2007, New York Times:
Turmoil Grows for Wolfowitz at World Bank
By STEVEN R. WEISMAN
WASHINGTON, April 12 — Paul D. Wolfowitz’s tenure as president of the World Bank was thrown into turmoil on Thursday by the disclosure that he had helped arrange a pay raise for his companion at the time of her transfer from the bank to the State Department, where she remained on the bank payroll.
In a chaotic day of revelations and meetings at a normally staid institution, Mr. Wolfowitz apologized for his role in the raise and transfer of Shaha Ali Riza, his companion, to a few hundred staff members assembled in the bank building atrium, only to be greeted by booing, catcalls and cries for his resignation.
Earlier, the bank’s staff association had declared that it was “impossible for the institution to move forward with any sense of purpose under the present leadership.” The association had helped spearhead an investigation into Ms. Riza’s transfer and raise, details of which came into the open in the last 24 hours.
The events injected a new ugliness into what had already been a bitter rift between Mr. Wolfowitz and many of the bank’s employees, who have questioned his suitability for the job as a former deputy secretary of defense and architect of the Iraq war, and have challenged many of his policies at the bank, especially those cracking down on corruption in which he suspended aid to several countries without consulting the board.
The World Bank’s 24-member executive board, the body that elected Mr. Wolfowitz to the job after he was nominated by President Bush in 2005, held hurried meetings throughout the day amid mounting speculation that it might reprimand him or ask him to resign.
But shortly after 10 p.m. a bank official released a statement from Mr. Wolfowitz to the board members saying that “in the interests of transparency,” he was requesting the “immediate public release of all documents related to the board’s current review of the case involving myself and Ms. Riza.” The statement appeared to reflect a concern by the bank president that he was being tarred by selective leaks.
The board was also reported to be meeting late into the evening over what further information to make public about the matter. Whatever the outcome, the controversy appeared certain to produce more meetings and engulf delegates at the annual spring session of finance ministry officials in Washington, sponsored by the bank and the International Monetary Fund.
Mr. Wolfowitz apologized at a morning news conference and at the atrium meeting after the staff association disclosed that it had found a dated memorandum from Mr. Wolfowitz to a vice president for human resources at the bank, apparently instructing him to agree to the terms of a raise and reassignment for Ms. Riza.
The transfer and a subsequent raise eventually took her to a pay of $193,590 from $132,660, tax-free because of her status as a diplomat, and exceeding the salaries of cabinet members. “In hindsight, I wish I had trusted my original instincts and kept myself out of the negotiations,” Mr. Wolfowitz said.
“I made a mistake, for which I am sorry,” he added, pleading for “some understanding” of the “painful personal dilemma” he faced when he left the Pentagon to become bank president. Mr. Wolfowitz said he had been seeking to avoid a conflict of interest by having Ms. Riza, with whom he had a personal relationship, transferred from his supervision.
What drove the anger at the bank was not that Mr. Wolfowitz had denied earlier that he had sought Ms. Riza’s transfer, but that he had been less than fully candid in discussing it until documents surfaced showing his direct role. His earlier insistence that he had consulted with ethics officials was disputed by some of them, who say they were not involved in the salary aspect of discussions.
Mr. Wolfowitz, who is divorced, has been close to Ms. Riza for several years, according to people who have worked with them. She was a communications officer in the Middle East and North Africa bureau of the bank when Mr. Wolfowitz arrived in 2005, and was transferred that September to the Middle East and North Africa bureau to help set up a semi-independent foundation to promote democracy in that region.
Her initial supervisor at the State Department was Elizabeth Cheney, whose father, Vice President Dick Cheney, has been a longtime associate of Mr. Wolfowitz. Ms. Riza now serves as a consultant to the foundation, the Foundation for the Future, while drawing her World Bank salary, the State Department said.
Mr. Wolfowitz, in his talk to the bank staff, essentially implied that his fate was up to the board. “I proposed to the board that they establish some mechanism to judge whether the agreement reached was a reasonable outcome,” he said of the arrangement for Ms. Riza. “I will accept any remedies they propose.”
He also appealed to the staff members to look beyond his role in planning the Iraq war and join him in fighting poverty in Africa and other missions of the bank.
“For those people who disagree with the things that they associate with me in my previous job, I’m not in my previous job,” he said.
Many bank officials said board members were likely to wait to decide what to do after checking with their finance ministers, many of whom were on their way to Washington for the annual meetings.
A decision as big as whether to remove Mr. Wolfowitz or encourage him to step down would be likely to involve leaders of the bank’s main donor countries in discussions with President Bush, bank officials said.
The bank’s five largest donors — the United States, Japan, Germany, France and Britain — each nominate one board member, but their voting power is based on shares in the bank. The United States, with 16 percent, has the largest share, making it customary for the White House to nominate the bank president.
But the bank has been gripped by resentment for years over the perception that the United States has too much influence. That trend reflects declining American influence at the bank at a time when European and Asian countries have gained in economic clout.
There is speculation among bank officials that if Mr. Wolfowitz leaves, European members and others will agitate for more of a say in choosing his successor, a possible factor in whether Mr. Bush decides to go along with his removal.
At the White House, Tony Fratto, a spokesman, said: “Of course, President Wolfowitz has our full confidence” and in dealing with the controversy over his involvement with Ms. Riza, “he has taken full responsibility and is working with the executive board to resolve it.”
The storm over Mr. Wolfowitz has been brewing for a week, following disclosures by the bank’s staff association and the Government Accountability Project, an independent watchdog group, that Ms. Riza had received an unusually large raise. They questioned whether the proper procedures had been involved.
The controversy gained steam after the issue was mentioned by Al Kamen in his Washington Post column. The Financial Times has also disclosed details of the matter.
Subsequently, Mr. Wolfowitz asserted that he had consulted the board and the bank’s general counsel, the board’s ethics committee director, and the human resources director to arrange the transfer.
These officials then contradicted Mr. Wolfowitz, saying that while they supported the transfer and a raise, they were not involved in the amount. Alison Cave, chairwoman of the bank’s staff association, said the amount of the raise and the procedures followed seemed to violate bank rules. Ms. Cave also said the records showed that Ms. Riza was to return to the bank at the higher salary level and be given a rating of “outstanding” in her performance reviews while with the foundation.
Mr. Wolfowitz did not deny his involvement, but Thursday was the first day that evidence surfaced of his direct role.
Bank officials said they were somewhat mystified that the details of the transfer, worked out in 2005, did not get out until now. Some attributed it to the changed landscape in Washington.
Mr. Wolfowitz has also been undeniably weakened by his recent tangles with the board..
For example, as part of his broad anticorruption drive, Mr. Wolfowitz for a time suspended aid to India, Chad, Kenya and other countries without consulting the board. Uzbekistan’s aid was suspended after it ousted American troops in 2005, leading to charges of political motivation.
Last month, the bank adopted a new anticorruption policy that insisted that Mr. Wolfowitz consult board members, and it placed other restrictions on his ability to act. Resentment of Mr. Wolfowitz has extended to his two top aides, Robin Cleveland and Kevin Kellems, both of whom worked with him on defense matters in the Bush administration. Although some bank officials said the board might have decided to reprimand or dismiss one or both of them for the salary increase, that was no longer deemed a way out of the crisis for Mr. Wolfowitz.
He also appeared a victim of his own declaration that he would bring a new era of accountability to the bank. He boasted that he had doubled the staff of the public integrity division so it could prosecute cases of graft against corporations and bank employees, stirring resentment throughout the bank that he saw them all as corrupt.
Some bank officials, speaking anonymously so they could be candid, said that instead of ousting Mr. Wolfowitz, the board might prefer that he remain but in a weakened position.
“It’s a coin toss right now whether Wolfowitz stays,” one official said. “But the board might prefer to have a weak president dangling by the thread so they can run the policies themselves for the next two years.”
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