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Wolfowitz Dictated Girlfriend's Pay Deal
World Bank Board Weighs Its Options

By Karen DeYoung and Krissah Williams
Washington Post Staff Writers
Saturday, April 14, 2007

World Bank President Paul D. Wolfowitz personally dictated the terms under which the bank gave what it called his "domestic partner" substantial pay raises and promotions in exchange for temporarily leaving her job there during his tenure, according to documents released by the bank's executive board yesterday.

The board issued a statement saying it will "move expeditiously to reach a conclusion on possible actions to take," amid rising speculation over whether the embattled Wolfowitz will resign or be asked to step down. Board deliberations over his future were suspended yesterday morning as the bank began its spring meeting, an annual rite attended by finance ministers and central bank presidents, and one now being overtaken by the controversy surrounding Wolfowitz.

"He has apologized, and there is a process in place," Treasury Secretary Henry M. Paulson Jr. said after a meeting with his counterparts from the world's richest nations yesterday. "I don't intend to comment on that here. I do not want that to be read as a lessening of U.S. support for Paul Wolfowitz."

Wolfowitz joined the bank in 2005 after working at the Pentagon, where as deputy defense secretary he was a principal architect of the Iraq war. This made him a controversial figure at the bank, where he fostered resentment among its member nations and 7,000 Washington employees. A number of the bank's leading donor nations, including Britain, expressed public concern about aspects of his leadership long before the current uproar over his girlfriend, Shaha Riza, which began when details of her pay package were publicly revealed last month.

As bank staffers and development activist groups continued to call for Wolfowitz's resignation, White House spokeswoman Dana Perino said that he has President Bush's "full confidence" and that "we expect him to remain as World Bank president."

Defenders also surfaced from other quarters. The Wall Street Journal said in an editorial that "the forces of the World Bank's status quo," angered by Wolfowitz's efforts to fight "corruption-as-usual" and institute more accountability in the institution's lending practices, had seized on a trivial issue to bring him down. One former bank staffer said that "some of the countries who failed to block his election are trying to set him up, and he walked into that trap really well."

But while few knowledgeable observers were prepared to predict Wolfowitz's departure, many expressed concern that the turmoil is threatening to undermine the work and credibility of the bank.

"The issue now, as far as many of us are concerned, is a matter of corporate governance," said a senior bank staffer who spoke on the condition of anonymity for fear of reprisal. "The Europeans want him out. The U.S. remains silent, and the board is divided."

Others expressed concern about the effect that the controversy could have on this year's negotiations to finance the International Development Association, the bank's lending vehicle for the world's poorest countries. Europe contributes 60 percent of the IDA's funding, and the United States and Japan together give about 26 percent. U.S. contributions and pledges to the current three-year program total about $3 billion.

Among the more than 100 pages of internal letters, memorandums, and legal and ethics opinions released by the board yesterday was an angry letter from Riza to the board, written Monday, to authorize the release of the documents "in the interest of expediting and facilitating the resolution of this issue."

Riza, a Tunisian-born British citizen who worked at the bank as a communications specialist, made it clear that "I did not wish to leave the Bank." She said she had objected to the arrangements for her departure. "My effort to accommodate the Board's Ethics Committee and avoid creating distractions for Staff, Board and Management from their noble mission while protecting my interest, has only resulted in the most vicious public attacks on me."

Wolfowitz had also asked for the release of the documents, believing that they would show that the board's ethics committee had rejected his offer to recuse himself from consideration of Riza's employment and ordered him to find a solution.

But the documents also revealed that Wolfowitz's description of events has been less than candid. In a May 25, 2005, letter to Wolfowitz's personal lawyer negotiating his contract, Roberto Dañino, then the bank's general counsel, acknowledged that Wolfowitz had disclosed "a pre-existing relationship with a Bank staffer" and had proposed to resolve it "by recusing himself from all personnel matters and professional contact related to the staff member."

Wolfowitz lawyer Robert Barnett responded two days later with an e-mail stating that the proposal "WOULD NOT -- I REPEAT, NOT -- INVOLVE RECUSAL FROM PROFESSIONAL CONTACT" with Riza. "THIS MATTER," Barnett wrote, "MUST BE RESOLVED" before Wolfowitz would sign his contract.

The board eventually ruled that "professional contact" between the two violated bank policy and instructed Wolfowitz to order the personnel department to arrange her departure and compensation.

But the board insisted yesterday that it neither "commented on" nor "reviewed or approved" the agreement that Wolfowitz ordered his human resources department to make with her.

In a memo to the bank's vice president for human resources dated Aug. 11, 2005, Wolfowitz wrote, "I now direct you to agree to a proposal which includes the following terms and conditions." Riza was to be "detailed to an outside institution of her choosing while retaining Bank salary and benefits." She was to receive an immediate raise with approximate annual increases of 8 percent.

By 2010, when Wolfowitz's five-year term expired, she would reach a salary of $244,960, significantly above the maximum of $226,650 allowable for her pay grade. On her return to the bank, she would be automatically promoted to the level of senior country director; if her return were delayed another five years by a second Wolfowitz term, she would be elevated to the level of bank vice president.

In a memo dated Sept. 9, 2005, Wolfowitz aide Robin Cleveland, a former White House official he brought with him to the bank, wrote that Wolfowitz had hired an outside counsel to review the agreement since Dañino, the general counsel, worked for the bank and thus had a conflict of interest. Wolfowitz, the memo said, had selected the Washington firm Gibson, Dunn & Crutcher, "based on their ability to present a strong team within 24 hours which included, among others, the former U.S. solicitor General and Eugene Scalia, a personnel policy expert."

In a letter to Wolfowitz after its review, the firm judged the pact "a reasonable resolution . . . that avoids, among other things, the risks of protracted legal proceedings."

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