London ~~ Tuesday May 15 2007
Angry Wolfowitz in four-letter tiradeRichard Adams in Washington
Paul Wolfowitz. Photograph: AP [Scroll down for "conduct unbecoming"]
An angry and bitter Paul Wolfowitz poured abuse and threatened retaliations on senior World Bank staff if his orders for pay rises and promotions for his partner were revealed, according to new details published last night.
Under fire for the lavish package given to Shaha Riza, a World Bank employee and Mr Wolfowitz's girlfriend when he became president, an official investigation into the controversy has found that Mr Wolfowitz broke bank rules and violated his own contract – setting off a struggle between US and European governments over Mr Wolfowitz's future.
Sounding more like a cast member of the Sopranos than an international leader, in testimony by one key witness Mr Wolfowitz declares: "If they fuck with me or Shaha, I have enough on them to fuck them too."
The remarks were published in a report detailing the controversy that erupted last month after the size of Ms Riza's pay rises was revealed. The report slates Mr Wolfowitz for his "questionable judgment and a preoccupation with self-interest", saying: "Mr Wolfowitz saw himself as the outsider to whom the established rules and standards did not apply."
The report brushed off Mr Wolfowitz's defence that he thought he had been asked to arrange Ms Riza's pay package, observing that "the interpretation given by Mr Wolfowitz ... simply turns logic on its head".
The investigators have sent their completed report to the bank's governing board, containing a string of withering criticisms of Mr Wolfowitz's behaviour and casting doubt on his ability to continue running the bank, a multibillion-pound international agency with 12,000 staff based in Washington.
According to the report, Mr Wolfowitz's actions "had a dramatic negative effect on the reputation and credibility" of the bank.
It concluded that "the damage done to the reputation of the World Bank group" should lead the bank's board to "consider whether Mr Wolfowitz will be able to provide the leadership needed to ensure that the bank continues to operate to the fullest extent possible".
It also said: "Mr Wolfowitz's contract requiring that he adhere to the code of conduct for board officials and that he avoid any conflict of interest, real or apparent, [was] violated."
Despite the weeks of turmoil within the bank, Mr Wolfowitz may still keep his job if the US government is prepared to stick by him.
Mr Wolfowitz still enjoys support from the Bush administration, where he served as deputy defence secretary at the Pentagon during the invasion of Iraq.
Yesterday vice president Dick Cheney defended Mr Wolfowitz, saying: "Paul is one of the most able public servants I've ever known .... I think he's a very good president of the World Bank, and I hope he will be able to continue."
The US treasury secretary, Hank Paulson, was yesterday said to also be drumming up support for Mr Wolfowitz, while European governments increasingly despair of US intransigence in allowing Mr Wolfowitz to hang on.
The angry comments attributed to Mr Wolfowitz came from damning testimony by Xavier Coll, head of human resources at the bank, who provided investigators with his notes of a meeting with Mr Wolfowitz last year. The notes directly contradict Mr Wolfowitz's assertions that the details of Ms Riza's treatment were properly shared with senior bank officials.
In March last year, when a mention of Ms Riza's secondment outside the bank to avoid rules about partners was first published in the magazine US News & World Report, an angry Mr Wolfowitz accused Mr Coll of leaking the information.
According to Mr Coll's notes: "At the end of the conversation Mr Wolfowitz became increasingly agitated and said that he was 'tired of people ... attacking him' and 'you should get your friends to stop it'. Mr Wolfowitz said, 'If they fuck me or Shaha, I have enough on them to fuck them too'," naming several senior bank staff he felt were vulnerable.
Mr Wolfowitz appears before the bank's executive board today to make a final defence of his actions, with the board meeting tomorrow to consider the report and make a statement later in the week.
With Mr Wolfowitz so far refusing to step down, the board may need to take radical action to break the stalemate. Members have discussed a range of options, including sacking Mr Wolfowitz, issuing a vote of no confidence or reprimanding him. Some board members argue that a vote of no confidence would make it impossible for him to stay in the job.
London -- Tuesday May 15, 2007
Wolfowitz 'broke World Bank rules over girlfriend's pay'
The World Bank president Paul Wolfowitz said today a report declaring that he broke bank rules to arrange a huge compensation package for his girlfriend was "unfair and unwarranted".
The former Pentagon number two and chief architect of the US-led war on Iraq lashed out after the bank's special panel said the situation had caused a "crisis in the leadership" at the institution, according to its report released in the early hours of today.
The panel said the bank's full 24-member board must consider whether Wolfowitz, who was recommended for the post by US president George Bush, "will be able to provide the leadership" to ensure that the bank achieved its mission of fighting poverty around the world.
The board will ultimately decide Wolfowitz's fate.
The special panel concluded that Wolfowitz's involvement in the details of the package "went beyond the informal advice" given by the bank's ethics committee and that he "engaged in a de facto conflict of interest", the report stated.
But Wolfowitz said: "It is highly unfair and unwarranted to now find that I engaged in a conflict of interest because I relied on the advice of the ethics committee as best I understood it."
Board members have discussed a range of disciplinary options. It could sack Wolfowitz, ask him to resign, signal that it lacks confidence in his leadership or reprimand him. Board members have been leaning towards an expression of no confidence or other tough language that would make it difficult - if not impossible - for Wolfowitz to stay on.
Wolfowitz, who said he acted in good faith in arranging his girlfriend Shaha Riza's pay package, has accused his critics of launching a "smear campaign" against him.
He is due to make an appearance before the board tonight, US time. The proceedings are not public and a decision could come as early as tomorrow.
The controversy that has put Wolfowitz's job in jeopardy involves his handling of the 2005 compensation pay package for Riza, a bank employee.
Wolfowitz said he did not attempt to hide details of the arrangement from bank officials. "I did not have it locked up or placed in a secret drawer; it was a contract of the bank," Wolfowitz wrote in his submission to the panel.
Riza worked for the bank before Wolfowitz took over as president in June 2005. She was moved to the US State Department to avoid a conflict of interest but stayed on the bank's payroll. Her salary shot up from nearly £66,500 a year to £90,000. With subsequent rises, it eventually rose to nearly £97,000.
The panel concluded that the salary increase Riza received "at Mr Wolfowitz's direction was in excess of the range" allowed under bank rules.
Wolfowitz "placed himself in a conflict of interest situation" when he became involved in the terms and details of Riza's assignment and pay package and "he should have withdrawn from any decision- making in the matter", the panel said.
The panel acknowledged, however, that the informal advice provided by the ethics committee "was not a model of clarity".
In addition, the panel said it was of the view that the controversy "has had a dramatic negative effect on the reputation and credibility" of the bank, had raised "serious questions" about the bank's governance and ability to carry out its mission and was contributing to "erosion in the operational effectiveness" of the bank.
The panel also raised fears that the fracas could hinder the bank's ability to raise billions of dollars from countries around the world to provide financial help to poor countries.
European World Bank members - led by Germany, France and the Netherlands - are pushing for Wolfowitz to resign. Other countries, however, would still like to avoid a pitched battle with the US, the bank's largest shareholder.
Many of the bank's staff, former bank chiefs, aid groups and Democratic politicians also have called on Wolfowitz to resign.
But US vice president Dick Cheney said last night that Wolfowitz should remain chief of the bank. The White House has repeatedly expressed confidence in Wolfowitz.
By tradition, the World Bank has been run by an American, while the International Monetary Fund has been run by a European. President Bush tapped Wolfowitz, a move that was approved by the bank's board.
The Bush administration continued to stand by Wolfowitz today.
"A clear reading of the facts in this report demonstrates that this was a unique situation, missteps occurred on all sides and communication may not have been clear enough," said US Treasury spokesman Brookly McLaughlin.
"The facts reveal that President Wolfowitz acted to find a pragmatic solution and to carry out the direction he received from the ethics committee.
"Treasury Secretary Henry Paulson spoke to some of his colleagues today from other countries and expressed that he does not think the facts merit dismissal."
~~ Tuesday May 15, 2007
Bank’s Report Says Wolfowitz Violated Ethics By STEVEN R. WEISMAN
WASHINGTON, May 14 A World Bank committee charged Monday that Paul D. 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 Mr. Wolfowitz from being ousted from office.
On a day of rapid developments that intensified the furor over Mr. 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 Mr. Wolfowitz’s fate.
The report charged that Mr. 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 Mr. 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 M. 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, Mr. Paulson’s conversations with finance and development officials, many of whom have told him they favor Mr. 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 Mr. 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 Bush has seen the controversy over Mr. Wolfowitz as a proxy fight waged by liberals at the bank opposed to Mr. Bush’s policies, and that he would not toss him or Attorney General Alberto R. 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 Mr. Wolfowitz stays. In particular jeopardy is a commitment made in 2005 by Mr. 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 Mr. 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 Mr. 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 Mr. Wolfowitz.
According to his own submission to the committee investigating him, made available by his supporters, Mr. 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 Ms. 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 Mr. Wolfowitz’s charge that one of his accusers, Xavier Coll, the bank personnel director, was wrong in recalling that Mr. Wolfowitz tried to cover up the salary and promotion package for Ms. Riza.
Mr. Coll, according to the report issued Monday, said that he had told Mr. 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 Mr. Wolfowitz noted that in one memo he dictated for himself, Mr. 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, Mr. Wolfowitz noted, the personnel director said he thought the president was embarking on “a reasonable way to move forward.”
Ms. Riza had been at the bank for seven years when Mr. Wolfowitz arrived. She was angry and distraught over being told to leave because she could not be supervised by Mr. Wolfowitz, and was also inclined to sue, according to various documents made public earlier and elaborated on Monday. Mr. 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,” Mr. Wolfowitz said in a rebuttal submitted earlier to the bank panel and obtained Monday from Wolfowitz supporters.
The bank committee ended up siding with Mr. Coll, however, and with Mr. Daniño and Mr. Melkert in saying that Mr. Wolfowitz was never authorized to arrange for the package for Ms. Riza himself.
The bank also sided with Mr. Coll in his contention that Mr. Wolfowitz seemed to be trying to keep the matter of Ms. Riza’s salary from Mr. Daniño and Mr. Melkert, the chief ethics guardians at the bank. But Mr. Wolfowitz maintained that he had asked Mr. 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 Mr. 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.