World Bank: Wolfowitz with more than holes in his socks destined for the door or 2 yrs as lame duck Print E-mail
 Friday April 13 2007

Turmoil Grows for Wolfowitz at World Bank

By STEVEN R. WEISMAN


Paul D. Wolfowitz, the embattled president of the World Bank, in Washington yesterday. He is seeking support at the bank to keep his job (Jonathan Ernst/Reuters)
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.
   
Shaha Riza, shown in 2003, is still on the World Bank payroll (World Bank).

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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 Sunday April 15 2007

World Bank divided on Wolfowitz's future

 By HARRY DUNPHY
Associated Press Writer

Shirin Shirin, of Washington, D.C., holds a sign calling for the resignation of World Bank President Paul Wolfowitz during a protest in front of the World Bank Saturday, April 14, 2007 in Washington (Caleb Jones).

The controversy involving World Bank President Paul Wolfowitz and his involvement in a huge pay increase awarded to a close female friend moves to center stage Sunday as the bank's policy-steering committee meets.

Wolfowitz, who has been working behind the scenes at weekend meetings of finance ministers and central bankers to drum up support to stay in his post, presents reports to the bank's Development Committee and participates in its closing news conference.

The United States, Britain and France, whose governments have a major role in bank operations, said it was important to await the outcome of the World Bank's board of directors' investigation into Wolfowitz's actions.

But Britain said Saturday the controversy had damaged the World Bank. Development minister Hilary Benn failed to give wholehearted backing to Wolfowitz, who has been under fire since it emerged that he secured a $193,590 job for his companion, Shaha Reza, at the State Department soon after he joined the World Bank in 2005.

"Having (made public) the facts the World Bank board has yet to complete its work," Benn said in a statement. "While this whole business has damaged the bank and should not have happened, we should respect the board's process. I'm sure these views will be shared by other governors who will also be giving their response."

He said the Wolfowitz controversy was distracting attention from the bank's agenda.

"This weekend ought to be about the bank's contribution to fighting poverty and I'm looking forward to discussing how we can increase aid, tackle climate change and get clean water to 1 billion human beings," said Benn.

Treasury Secretary Henry Paulson called Wolfowitz "a very dedicated public servant" and said he also believed the review process by the board should be allowed to proceed.

However, Paulson said waiting for this process to be completed should not be read "as any lessening of support for Paul" by the United States. The White House said President Bush has confidence in Wolfowitz, a former deputy defense secretary and one of the architects of Bush's Iraq war strategy.

A planned demonstration by bank employees calling for Wolfowitz to resign failed to materialize, but several dozen members of advocacy groups marched outside the bank headquarters calling for his ouster.

Some African officials attending the meetings expressed support, saying Wolfowitz has made the continent a greater priority at the bank.

"We have seen visionary leadership, steadfast progress under Mr. Wolfowitz," said Liberia's finance minister, Antoinette Sayeh. "We can only say that we look forward to that continuing."

German Development Minister Heidemarie Wieczorek-Zeul said Wolfowitz needs to do some soul-searching about whether he can continue to lead the bank.

"At this point it is my conclusion that he has to decide for himself whether in regard to this mistake, he can credibly fulfill his duties," she said.

Last week, Wolfowitz apologized for his involvement in securing Reza's job at the State Department. But the apology has failed to quell the concerns of many on the bank's board.

Its European members have long had doubts about Wolfowitz's suitability to be bank president and have clashed with him over his emphasis on rooting out corruption in developing countries and holding up loans for countries with poor governance records.

The World Bank meetings were the closing chapter in the spring finance meetings, which also involved the International Monetary Fund. On Saturday at the IMF policy-steering committee meeting, officials expressed satisfaction with the robust expansion of the global economy but said more must be done to correct trade imbalances.

Finance ministers and central bankers said in a policy statement that growth is expected to remain strong this year and in 2008, underpinned by solid economic foundations.

In their communique the ministers said continued vigilance of the world economy was required in case there was a sharper than expected downturn in the U.S. economy, the world's largest, and a revival of inflationary pressures if oil prices rebound.

In a separate statement, four governments, including the United States and China, renewed promises to enact policies aimed at rebalancing global trade.

They said an orderly reduction in the U.S. trade deficit and trade surpluses in Asia would benefit the world by defusing protectionist trade action.

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London -- Wednesday April 11 2007

Neocons and nepotism? Sex, money & the fall of Wolfowitz

The man affectionately known as 'Wolfie' by George Bush has struggled to make friends in his new job as the head of the World Bank. Now his staff are accusing him of lavishing promotions and pay rises on his girlfriend

By Rupert Cornwell

For a mild-mannered and scrupulously polite man, Paul Wolfowitz has a remarkable knack of attracting controversy. There are the minuscule controversies - such as when, in his current incarnation as President of the World Bank, he was seen to have holes in his socks when he took off the mandatory slippers after a visit to a mosque in Turkey earlier this year. Was this handsomely paid international civil servant such a cheapskate that he wouldn't shell out a few dollars for some new socks?

[In January 30, 2007 the pictures of Wolfowitz's socks after his visit to Selimiye Mosque in Turkey released. BBC criticized the influence the World Bank President can make over the poverty as he cannot afford a pair socks without holes. An announcement followed that The Turkish Hosiery Manufacturers' Association sent 12 pairs of socks after the incident]

Then of course there are somewhat more serious controversies, among them the war in Iraq, of which Wolfowitz, then deputy Secretary of Defence, was one of the most enthusiastic advocates and principal architects.

Wolfowitz, it will be remembered, fervently believed that the American invaders would be hailed as liberators, and that the occupation would require no more than 100,000 troops at most. These surely rank as two of the more disastrous military misjudgements of recent times.

And now he is in yet more trouble, this time over the promotion and lavish pay rises accorded to his partner, a former senior employee of the Bank. Shaha Riza is a British national of Libyan ancestry who grew up in Saudi Arabia. She and Wolfowitz have been together since his previous marriage broke down in 2001. Indeed, her strong belief in bringing democracy to the Arab world is said to have only strengthened her partner's determination to confer that boon on Iraq.

Their relationship became public when Wolfowitz succeeded James Wolfensohn at the helm of the Bank in mid-2005. At first he attempted to keep her in her job as communications adviser at the Bank's Middle East department, even though that was flatly against the ethics rules of the organisation. In the end she was sent to the State Department, but stayed on the World Bank's payroll. She was promoted and given two rises well above staff norms, bringing her salary to $193,000 (£98,000) - more than Condoleezza Rice, the Secretary of State.

Among Bank employees, the indignation was widespread and understandable. Given Wolfowitz's reputation as a neoconservative and his identification with George Bush's war in Iraq, he was an unpopular choice as president from the outset.

Since then, he has made the fight against corruption, both in countries receiving World Bank aid, and among Bank employees, a priority issue.

But was not the Riza affair an example, if not of corruption, then at least of favouritism and nepotism, those selfsame Third World vices against which Wolfowitz now campaigns?

Last week the Bank's staff association formally complained about the promotion and pay increases, and on Monday Wolfowitz promised in an email to employees that the association would have full access to the facts of the case, for which he accepted "full responsibility".

In the meantime, Riza has left the State Department. She is now said to be working for the Foundation for the Future, an international group largely funded by the US, whose prime mission is (you've guessed) to advance freedom and democracy in the Middle East and north Africa. But will that be the end of the matter?

Paul Wolfowitz, after all, is a man who carries a good deal of baggage. When he was named by Bush to head the Bank in early 2005, an in-house survey found that nearly 90 per cent of staff opposed the choice.

Wolfowitz, it was feared, would be a mere placeman of the White House, sent in to further the global political agenda of the Bush administration. Fairly or unfairly, he was regarded as a neocon zealot with no feel for, or qualification for, the Bank's mission of helping the developing world. Accusations of cronyism reared their head.

Rather than choose Bank people as his top aides, Wolfowitz brought in Republican political operatives, at least two of whom - Robin Cleveland, a former senior White House official, and Kevin Kellems, who had worked in Vice-President Dick Cheney's office and the Pentagon - had been deeply involved in pre- and post-war Iraq policy. Staff resentment of these outsiders in part reflected the resistance to change inherent in the culture of any large bureaucracy.

But the complaint of one former Bank employee to The New Yorker this month about the pair's modus operandi - "We are brighter than other people, we know more than other people" - was an eerie echo of the arrogance (and ignorance) of the US officials who ran Iraq after the war. Small wonder suspicions of the new boss ran so strong, and that a host of senior staffers, including six vice-presidents, left after Wolfowitz's arrival.

In fact few people are so different from their public image as the man that President Bush used to refer to affectionately as 'Wolfie.' A less lupine figure it is hard to imagine. Wolfowitz is soft-spoken, courteous, a listener rather than a talker.

He is an intellectual, who was Dean of the School of Advanced International Studies (SAIS) at Johns Hopkins University in Washington for eight years, before becoming Donald Rumsfeld's deputy at the Pentagon.

To be sure, Wolfowitz's career has followed the familiar neo-con path, from the young man who espoused liberal causes and marched with Martin Luther King in the early 1960s to the foreign policy hawk of little more than a decade later, convinced that only by projecting its strength and its values abroad could America defend itself at home, first from the Communist, then the terrorist, threat.

Like many neo-cons, he is Jewish, and a passionate supporter of Israel, where his sister now lives. He was also a prime mover in the neo-con manifesto of the 1990s, the Project for a New American Century. He sees himself less as a neo-conservative than as a pragmatist and realist, but in fact much of the youthful idealism remains.

Wolfowitz, the fire-breathing dragon who helped set the Middle East ablaze is in truth "a bit of a softie," Karl Jackson, who worked closely with him at SAIS, told The New Yorker. "He really believes in helping people who are economically deprived."

Often forgotten are his three years as ambassador to Indonesia, that quintessentially Third World country, for three years in the late 1980s, where Wolfowitz earned much praise (as well as criticism, for failing to take on the corruption endemic to the Suharto regime).

And this same archetypal champion of the Jewish state was actually booed at a pro-Israel rally in Washington in April 2002 for daring to remind them of the sufferings of the Palestinians.

The real problems with Wolfowitz in high office, whether at the World Bank or at the Pentagon, are his shortcomings as a manager. That was one reason, as the journalist and Bush court journalist Bob Woodward wrote in his most recent book State of Denial, that Paul Bremer and not Wolfowitz, was chosen to be the US pro-consul in Iraq after the 2003 invasion.

"The deputy Secretary of Defence was a thinker," Woodward records, "but he could barely run his own office."

That trait, by all accounts, has been evident at the Bank. He is not the hands-on, all-action, deftly self-promoting chief executive that was Wolfensohn. Nor is he a proven corporate manager, spewing out plans and bullet charts, like Robert McNamara, the defence secretary under Presidents Kennedy and Johnson and the World Bank President with whom Wolfowitz is often compared.

With one glaring exception, there is no "Wolfowitz doctrine". True, Bank officials are carrying out a review of strategy, which could see it shifting support from social projects like education and health to core schemes directly promoting economic growth.

"The question is - what is our comparative advantage, where can we contribute," Wolfowitz told The Financial Times.

But an administrative earthquake seems unlikely. "I do not think there is an urgent change of direction needed."

Nor are existing urgent goals to help the most impoverished being met. The first G-8 summit Wolfowitz attended was at Gleneagles in July 2005, when world leaders agreed to double aid to Africa by 2010, and write off billions of dollars of debt owed by the poorest countries.

Instead, World Bank lending to Africa in the last nine months is down $1bn from a year before. The explanation, however, may lie in the glaring exception referred to above.

Jim Wolfensohn had been the first Bank president to explicitly target "the cancer of corruption" in many borrower countries, thus breaking the unwritten rule that the Bank keep politics out of development.

In many respects, the new emphasis made perfect sense: up to 20 per cent of foreign aid is said to be swallowed by corruption, and indisputably, aid works best when disbursed to countries with efficient governments and honest officials.

Wolfowitz has not only made the corruption issue his own. He has also appeared to apply it on an arbitrary and unpredictable basis. The broader objections to making the fight against corruption the holy grail of development policy are two-fold. For one thing, corruption and economic success are not necessarily mutually exclusive (just look at China); and second, when the Bank withholds aid it merely hurts the weakest and poorest citizens of the country it is supposedly helping.

But the random fashion in which Wolfowitz applied the corruption sanctions fanned a third suspicion - that his hit list had been drawn up not by the World Bank, but by the Bush administration. Under pressure, Wolfowitz has now agreed to a compromise set of anti-corruption rules, whereby lending would only be halted in "exceptional circumstances".

But this breakthrough is unlikely to rescue the Wolfowitz era at the World Bank. By convention, a president is nominated by the US government, the Bank's largest shareholder, for five years, and assuming a Democrat wins the White House in 2008, Wolfowitz' term is unlikely to be renewed when it ends in 2010 (assuming of course that the Riza affair does not end it sooner).

Whatever happens however, the man with whom Paul Wolfowitz will be compared is Robert McNamara. The two have much in common. Both came to the Bank from the Pentagon, and both were identified with unpopular wars. But there the similarities end. McNamara visibly used the World Bank as atonement for Vietnam, and became the most influential president in its history.

But like his former master in the White House, Wolfowitz (at least in public) has never admitted responsibility for the debacle that is Iraq. Indeed, some believe that he sees the Bank as another means of bringing democracy to the developing world, the very goal the Iraq war was meant to achieve in the Middle East.

That grand notion has failed, and Wolfowitz's stewardship of the World Bank may be little more successful - even with some new socks.
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London -- Saturday April 14, 2007

World Bank reveals details of Wolfowitz role in pay rise row

 

· I was victim in conflict of interest, says his partner
· Bush renews backing as pressure mounts to resign

Larry Elliott in Washington

Paul Wolfowitz last night received his second vote of confidence in three days from George Bush, as the World Bank president came under more pressure to resign from the Washington-based organisation.

"The president has full confidence in Paul Wolfowitz", said White House spokeswoman Dana Perino; he had done "a remarkable job". It came on a day when Mr Wolfowitz faced down a growing rebellion by his staff over the way he took charge of moving his partner, Shaha Riza, from the bank to a highly paid job at the US state department.

The bank president made a statement yesterday to finance ministers of the G7, the industrialised countries that control the bank, and ultimately will determine his fate, after the bank's board of member countries published documents studied while investigating Ms Riza's leaving.

Mr Wolfowitz's rearguard action came as John Edwards, a Democrat bidding to be the presidential candidate in 2008, joined aid agencies and the bank's staff association in calling for him to stand down over what Washington calls "Rizagate". He was jeered by some staff on Thursday, and a protest is planned for today at the bank's spring meeting.

The documents reveal that Ms Riza, head of the Middle Eastern department when Mr Wolfowitz was appointed by Mr Bush, did not want to leave and considered herself the victim of the matter. She was seconded to the state department on a higher grade and her pay raised by $61,000. "I have now been victimised for agreeing to an arrangement I have objected to, and that I did not believe from the outset was in my best interest," she said.

The board's ethics committee required her "to go on external assignment contrary to my wishes" and she had suffered "professionally, physically and psychologically".

The bank's ethics committee was not consulted on the arrangements made when, on Mr Wolfowitz's arrival, Ms Riza was seconded. In a short statement, the bank's board said: "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." The board would "move expeditiously to reach a conclusion on possible actions to taken."

The review by the board focused on whether Mr Wolfowitz broke staff rules by his actions. The bank president said on Thursday that he took full responsibility for Ms Riza's promotion, and apologised on Thursday, saying he had made a mistake. The board's statement said that he had revealed his relationship with Ms Riza while negotiating his contract and, at the directors' request, sought guidance from the ethics committee: "The guidance given on an informal basis was the employee be relocated to a position beyond potential supervising influence."

Mr Wolfowitz has faced resentment over his ties to the Bush administration and his role in the Iraq war that overshadowed his first two years at the bank. Two aides, Robin Cleveland and Kevin Kellems, were drafted in from the administration and have been a focus for anger in the bank. Sources said they would have to go if Mr Wolfowitz was to save his job.

The bank's staff association has called on him to go, saying it seemed impossible for an institution, whose mission is to fight global poverty, to move forward "with any sense of purpose under the present leadership". The Bretton Woods Institute said the bank's credibility was in tatters, while Oxfam International said that if Mr Wolfowitz had broken the rules it was "very hard to see how he could continue".
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April 13 2007

Editorial 

Why Bush should let a damaged Wolfowitz go

Should Paul Wolfowitz leave the World Bank? The answer to that question is “yes”. Will Mr Wolfowitz leave the World Bank? The answer to that question is murkier. The US put Mr Wolfowitz in his job and the US will decide whether he is to stay. George W. Bush will hate to abandon a loyal henchman. He should do so, none the less.

It would be absurd to leave the decision to the bank’s executive directors. True, they promised yesterday to “move expeditiously to reach a conclusion on possible actions to take”. If the board did indeed exercise effective oversight, it would be welcome. But it would also be most surprising. These mid-level bureaucrats are not going to reach such a decision on their own.

In practice, national capitals will make the choice, unless Mr Wolfowitz himself takes it out of their hands. The US will be decisive: it is the bank’s largest shareholder; it has always appointed the bank’s president; and the president himself chose Mr Wolfowitz.

Who would want to take the US on if it decided to defend Mr Wolfowitz to the bitter end? However unhappy they may be with him, the other high- income countries are unlikely to want a big fight with the US over what most governments would consider a relatively unimportant matter. Many developing country members may even find the presidency of a now de-fanged anti-corruption campaigner quite appealing.

Mr Bush tends to be loyal to those he regards as loyal to himself. It is not surprising, therefore, to hear Tony Fratto, a White House spokesman, declare that Mr Wolfowitz continues to have “our full confidence”. That then would seem to be the end of the matter: Mr Wolfowitz will survive because the US president has decided he should.

Yet this ought not to be the end of the matter. To place loyalty above all other virtues is the ethics of a mafia boss not of the leader of a great country. The US president also needs to consider what is both right and in the interests of his own country.

That the US has in recent years lost a great deal of moral credit around the world is undeniable. But one area where the present administration has been relatively forward-looking has been aid and development. It has raised the share of gross domestic product spent on official aid to a still low 0.17 per cent, but that is well above the mere 0.1 per cent in 1999. It has supported ambitious debt cancellation for the world’s poorest countries. It has also, rightly, put much weight on the need to tackle corruption and improve governance in aid recipients.

The best justification for placing Mr Wolfowitz at the bank was his determination to give this last objective overriding priority. It is possible to debate the wisdom of this, since the quality of governance, albeit hugely important, is not the sole determinant of development. But one point nobody can debate: if the US has decided that this is what it wants the World Bank to achieve, it cannot sustain a president who is no longer a credible spokesman for that cause. To do so can only destroy yet more of its own battered moral capital. It would be worse than a crime; it would be a blunder.

Loyalty is indeed a virtue. But loyalty is not the overriding virtue. The US needs to perceive its true interests in having an effective and credible bank. It needs also to preserve its own credibility as a campaigner for good governance. Mr Wolfowitz now needs to go if the aim of his presidency is to survive. The choice for Mr Bush has become as simple and as stark as that.

 

 Saturday April 14, 2007

Wolfowitz in a fix

From Steven R Weisman The New York Times Washington:


On Thursday, the World Bank’s 24-member executive board, held hurried meetings amid mounting speculation that it might reprimand Mr Wolfowitz or ask him to resign.

The World Bank’s executive board said on Friday it plans to move quickly to decide what action to take regarding its president Paul D Wolfowitz, who apologised on Thursday for his role in giving his girlfriend, a World Bank employee, a raise and transfer.

On Thursday, 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 amid mounting speculation that it might reprimand Mr Wolfowitz or ask him to resign.

In a statement released early Friday, the board said it would “move expeditiously to reach a conclusion on possible actions to take.”

On a chaotic day of revelations and meetings at a normally staid institution on Thursday, Mr Wolfowitz apologised for his role in the raise and transfer of Shaha Ali Riza, his companion, to the State Department, where she remained on the bank’s payroll.

Staff upset
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.

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 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 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.

A decision as big as whether to remove Mr Wolfowitz or encourage him to step down is 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 US, with 16 per cent, has the largest share, making it customary for the White House to nominate the bank president.

How it started
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.

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.

Mr Wolfowitz has also been undeniably weakened by his recent tangles with the board. For example, as part of his broad anti-corruption 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.

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London -- Sunday April 15, 2007

Wolfowitz affair hits action on poverty

Heather Stewart in Washington on how scandal has overshadowed aid

A tough politician parachuted in by the White House to save the world from poverty, but brought down by his lover - it sounds like a Hollywood film plot, but in fact, it's the sorry tale which unfolded in Washington this weekend, as Paul Wolfowitz's day-job of running the World Bank was overshadowed by his girlfriend's 30 per cent pay rise.

As finance ministers and central bankers from 185 countries gathered for the spring meetings of the World Bank and the International Monetary Fund, instead of the usual high-minded discussions about the future of Africa, all eyes were on what the US papers have dubbed 'Raisegate'.

Wolfowitz, the neo-con and architect of the Iraq war who claims to have put fighting corruption at the heart of the bank's policies, was forced to open his keynote press briefing on Thursday morning by offering a humiliating apology about his lover's salary.

Shaha Riza, a British-educated Libyan, was a bank employee when Wolfowitz was chosen by President Bush to run the Washington-based World Bank, a decision which many of the bank's shareholders found controversial.

Because her position was deemed a conflict of interest, Riza was seconded to the US State Department, and has subsequently had her pay boosted to almost £100,000 - a decision Wolfowitz personally agreed to, and which came back to haunt him this weekend.

'Not only was this a painful personal dilemma, but I also had to deal with it when I was new to this institution and I was trying to navigate in uncharted waters,' he said in his mea culpa. 'I made a mistake, for which I am sorry.'

The leadership crisis comes as the venerable institution is fretting about its role in the 21st century. With a plethora of other anti-poverty bodies, such as the Gates Foundation and the Global Fund for Aids, now carrying out anti-poverty programmes all over the world, and China spreading its largesse throughout Africa in exchange for control of natural resources such as oil, the cumbersome bank is often outflanked.

When Wolfowitz was appointed two years ago, there were fears his arrival was part of a US plot to emasculate a multilateral institution for which Bush was known to have little sympathy. But since he arrived, with his team of highly paid hot-shot advisers, staff have been more anxious about Wolfowitz's tendency to drift directionlessly from one favourite policy to another, and pick fights with donor countries. In one example, Hilary Benn, Britain's Secretary of State for International Development, even went as far as to threaten to withhold £50m unless the bank rewrote its anti-corruption policies.

Partly because of his lack of support from donor countries, Wolfowitz is struggling to persuade them to meet the promises they made at the Gleneagles summit in 2005, and replenish the bank's coffers, while the frustration of the bank's employees at their boss's combative style has been evident in the steady flow of negative stories to the media.

'There's now real uncertainty about whether the promises of Gleneagles to double aid for Africa by 2010 will be realised,' he warned this weekend.

For the International Monetary Fund, too, there are tough questions about the future. Debt-relief deals for many of the world's poorest countries have reduced its traditional source of income, from repayments, while there is an ongoing battle to find a politically acceptable way of updating its voting procedures to reflect today's world.

A high-powered committee of experts, chaired by former Brazilian finance minister Pedro Malan, recently questioned the IMF's continuing presence in poor countries, where its economists impose tough policy prescriptions on governments already struggling to fulfil the conditions of multiple aid donors. It found that the IMF's experts were wading into policy areas such as civil service reform, privatisation and even justice.

A report by the IMF's own Independent Evaluation Office, published this weekend, offers a devastating critique of its work in sub-Saharan Africa. It shows that by insisting that governments set strict limits on public spending, to ensure inflation stays below an arbitrary 5 per cent ceiling, the IMF actually prevents some of the world's poorest countries from being able to use the aid money they are given. On average, the IMF recommends that just £3 of every £10 increase is spent.

IMF lending to poor countries was rebranded in 1999 as a 'poverty reduction and growth facility'; but critics say its approach is still to push the 'Washington consensus' of tight fiscal discipline, low inflation, and privatisation.

Liz Stuart, of Oxfam, said it was time for the IMF to accept that it should leave anti-poverty programmes to the World Bank. 'It's decision time for the fund. It's been wavering on what it's doing in low-income countries for years. Its own staff don't even know - and this is totally unacceptable'.

For richer countries, the IMF still believes it has a role as a forum for collective action on some of the pressing problems facing the global economy. After it was given fresh powers to carry out 'multilateral surveillance' at last year's spring meetings it managed to corral the US, Saudi Arabia, China, Japan and the Eurozone into promising this weekend to take co-ordinated steps to address the imbalances between a heavily indebted US and countries such as China, which are pouring surplus cash into overseas assets.

Gordon Brown, in Washington for his final outing as chair of the IMF's decision-making committee, said he would like to see a more fleet-of-foot fund, focusing its resources on preventing problems before they emerge.

But there was little time for clear-headed consideration of the future for the IMF or the bank this weekend. With the focus on Wolfowitz, his girlfriend and her pay rise, yet another gathering of the most powerful decision-makers in the global economy passed without agreement on what the World Bank and the IMF are really for.

Mixing business and pleasure
Paul Wolfowitz is not the first high-profile figure to see their professional standing suffer as a result of a tangled love life. Details of advertising boss Sir Martin Sorrell's affair with a senior executive were heard in court this year. National Grid's Roger Urwin was confronted by his mistress's ex-husband at an AGM. He was backed by the company, as was Burton boss Sir Ralph Halpern, whose affair with a model earned him the moniker 'five-times-a-night' Halpern.

Even Jack Welch, the corporate genius who ran General Electric, faced criticism for an affair with Harvard Business Review journalist Suzy Wetlaufer, after she interviewed him. They are now married.
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 Saturday April 14, 2007

News Analysis

Wolfowitz Fight Has Subplot


Paul D. Wolfowitz, the embattled president of the World Bank, in Washington yesterday. He is seeking support at the bank to keep his job (Jonathan Ernst/Reuters)

By DAVID E. SANGER

WASHINGTON, April 13 ­ When President Bush appointed Paul D. Wolfowitz as the president of the World Bank two years ago, the White House had to put down an insurrection among European nations that viewed the administration’s best-known neoconservative as a symbol of American unilateralism and arrogance.

For a while, Mr. Wolfowitz seemed to defuse those fears, even taking on the Bush administration over how best to aid the poorest nations of Africa. But now it is clear that the chorus of calls in recent days for Mr. Wolfowitz’s ouster is only partly about his involvement in setting up a comfortable job, with a big pay raise, for a bank officer who is Mr. Wolfowitz’s companion.

At its core, the fight about whether Mr. Wolfowitz should stay on at the bank is a debate about Mr. Bush and his tumultuous relationship with the rest of the world, particularly the bank, the United Nations and the International Atomic Energy Agency, which have viewed themselves ­ at various moments since the invasion of Iraq in 2003 ­ as being at war with the Bush White House and its agenda.

As finance ministers gathered in Washington on Friday for the bank’s weekend meeting, Mr. Wolfowitz worked behind the scenes, seeking support for keeping his job. But there were few endorsements of his leadership beyond those offered by the Bush administration.

In foreign capitals, and among the bank’s staff members, it has been noted that Mr. Wolfowitz’s passion for fighting corruption, which he has said saps economic life from the world’s poorest nations, seemed to evaporate when it came to reviewing lending to Iraq, Pakistan and Afghanistan, three countries that the United States considers strategically vital. Some longtime bank staff members complained that Mr. Wolfowitz relied too little on experts in international development and too much on a pair of aides who served with him in the administration.

Members of the bank’s board from around the world began comparing what they called the murky way in which the bank made some policy decisions to the secretive habits of the Bush administration.

Nancy Birdsall, the president of the Center for Global Development, a group that monitors aid to the world’s poorest nations, described what she termed “real doubts about Wolfowitz’s judgment” inside the bank.

Mr. Wolfowitz came to the bank with heavy political baggage. Since the bank was set up at the end of World War II, its president has always been an American, a fact that has engendered more and more resentment over time. That reaction was compounded when Mr. Bush selected Mr. Wolfowitz, who had served as deputy secretary of defense and an architect of the Iraq war.

“It took a huge amount of effort to quiet this down,” a member of the bank’s board of governors and an early supporter of Mr. Wolfowitz recalled Friday of the early insurrection. “And you would think, knowing that he was going into an institution that was deeply suspicious of him and the Bush administration, that he would have done everything he could to allay those concerns.”

At first, Mr. Wolfowitz did so. He made Africa his first priority. He displayed a passion and energy for the work ­ much as he did many years ago as ambassador to Indonesia, where he immersed himself in the culture and took on a dictator, Suharto. His campaign against corruption was intellectually unassailable and quintessentially American, and he was certainly right as far as the facts were concerned, members of the bank’s staff and leadership say.

But eventually his focus on that issue put him at odds with career officials at an institution that is famously resistant to outside influence, and which believes that fighting poverty has to come first, even if that means dealing with countries whose leaders are not above skimming a few million dollars along the way.

“He came in to a mood of skepticism and strong reservations by many,” said Geoffrey Lamb, a former vice president of the bank, who worked closely with Mr. Wolfowitz on questions of finance for the world’s poorest nations before he retired last summer. “My feeling was that he provided a bit of reassurance, by moving actively on aid to Africa and debt forgiveness. Clearly, those early perceptions have changed a lot.”

Over time, Mr. Wolfowitz created an impression that at critical moments he was putting American foreign policy interests first, most notably when he suspended a program in Uzbekistan after the country denied landing rights to American military aircraft, and directed huge amounts of aid to the countries he once recruited to sign on to Washington’s counterterrorism agenda.

It did not help that he relied heavily on a pair of aides drawn from the Bush administration, Robin Cleveland and Kevin Kellems, who created an inner circle that the bank’s professional staff members said they had great trouble piercing.

Mr. Wolfowitz’s defenders say that he was right to come in with a mission of shaking up the ingrown bureaucracy at the bank, and that the place desperately needed shaking up. But even they acknowledge that management has never been his strong suit, and that his judgment in dealing with the transfer of his companion, Shaha Ali Riza, was questionable.

In the backlash against Mr. Wolfowitz, though, there is also an undercurrent of settling scores ­ including those that go beyond the World Bank. Europeans still fume over Mr. Bush’s decision to send John R. Bolton, one of the biggest critics of the United Nations, to New York to serve as ambassador there ­ an experiment that ended when it became clear that the newly Democratic Senate would not confirm him to finish Mr. Bush’s term.

Others recall that the administration tried to fire Dr. Mohamed ElBaradei, the Egyptian-born head of the International Atomic Energy Agency, who famously declared in early 2003 that there was no evidence Saddam Hussein had reconstituted his nuclear weapons program. Dr. ElBaradei proved to be right, and was soon awarded the Nobel Peace Prize.

So far, the White House has expressed confidence in Mr. Wolfowitz, but not with much vigor. There were no signs that President Bush was about to rush to his aid, though that could still happen. European and Asian officials bet it will not.

“There is a sense that we’re finally at a moment when Bush needs the world more than the world needs Bush,” said a senior foreign official who flew into Washington recently for the annual meeting of the bank and the International Monetary Fund. “And there’s more than a little of that mixed in this whole argument over Wolfowitz’s fate.”