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Wolfowitz Clashed Repeatedly With World Bank Staff
Tenure as President Has Been Rocky

By Karen DeYoung
Washington Post Staff Writer
Sunday, April 15, 2007

As he prepared to sign a five-year contract as World Bank president in the spring of 2005, Paul Wolfowitz sent his personal lawyer, Robert Barnett, to negotiate the terms. Barnett, whose high-profile clients have included some of Washington's biggest political and media figures, did not mince words in his meetings with the bank's legal team.

Wolfowitz wanted more than a dozen amendments to the standard contract that had served the institution for decades, Barnett told them, including special dispensation for the books he would write and the paid speeches he planned to deliver, and a salary on par with that of the managing director of the International Monetary Fund, who was traditionally more highly paid.

A final sticking point, conveyed in all capital letters in an e-mail to then-general counsel Roberto DaƱino, was Wolfowitz's insistence that, while he had earlier offered to recuse himself from all office matters involving bank employee and his girlfriend Shaha Riza, he insisted on retaining retain "professional contact" with her -- something that the executive board later determined was a clear conflict of interest under personnel rules.

The Riza issue has come back to haunt Wolfowitz, as the bank's executive board is now considering what to do about revelations -- contained in documents it released Friday -- that Wolfowitz resolved the issue by personally arranging a bank salary and promotions for her in a temporary State Department post.

Testy exchanges and peremptory demands, similar to those made on his behalf by Barnett early in his tenure, quickly came to characterize Wolfowitz's dealings with the institution's staff and governors on a range of issues during his presidency, according to current and former senior bank officials and representatives of the bank's member governments interviewed for this article, several of whom have worked closely with Wolfowitz. None would speak on the record, out of either fear of retribution or reluctance to become involved in the increasingly public controversy.

Wolfowitz has clashed with the staff over pay packages and authority he gave to aides Robin Cleveland and Kevin Kellems, whom he brought to the bank from the White House, installed in senior positions and rewarded with open-ended contracts and quarter-million-dollar, tax-free salaries, despite their lack of development experience.

Both staff and management also have raised concerns over what several described as Wolfowitz's insistence that the bank accelerate its lending to Iraq and open an office there.

A principal architect of the Iraq war as deputy defense secretary during President Bush's first term, Wolfowitz has pressed the issue in the bank against strong concerns about security and poor governance in Iraq. "He was pretty aggressive about it, given that he's generally a mild-mannered person. He was really quite hard," said one source with first-hand knowledge of internal bank discussions on Iraq. "I don't know how much of it was flogging for the [Bush] administration rather than his own ghosts and convictions."

Although the bank eventually opened a $500 million loan program for Baghdad, the board took the unusual step of asking to be "regularly updated" on developments, according to internal documents obtained by the Government Accountability Project, a Washington-based whistle-blower group that tracks World Bank activities. Bank interests in Iraq have been managed from its regional headquarters in Jordan.

In December, after a bank official offered the Baghdad job turned it down, a committee interviewing other candidates reported that the pool of those willing and qualified was "extremely limited and particularly weak," according to an internal memo provided to The Washington Post yesterday by the accountability group.

Another signature Wolfowitz initiative was a new anti-corruption strategy for countries receiving bank loans. But at a meeting last fall in Singapore, bank governors rejected the proposal on the grounds that it would politicize the multilateral institution. More recently, they attacked Wolfowitz's budget proposal, saying it lacked a coherent strategy. Governors have now accepted a revised anti-corruption plan, and a chastened Wolfowitz has announced the appointment of a respected bank economist to launch a strategic review of bank operations.

"He arrived at the bank expecting the board to behave like the Republican Congress, and ran into a Democratic majority," Nancy Birdsall, president of the Washington-based Center for Global Development, told the Financial Times last week. Birdsall, a former director of policy research at the bank, on Friday called for Wolfowitz to resign.

As the Riza controversy has escalated over the past week, Wolfowitz has suddenly been left fighting for his job amid uneven support, at best, from many of the bank's most powerful donor nations. The board has said it had no knowledge of the deal with Riza; Wolfowitz has publicly acknowledged making a "mistake" and has apologized.

The White House on Friday expressed President Bush's "full confidence" in Wolfowitz. Japanese Finance Minister Koji Omi, here for the bank's annual spring meeting of finance and development ministers this weekend, said, "I rate his work as World Bank president highly."

But French Finance Minister Thierry Breton, whose government has questioned Wolfowitz's leadership in the past, noted ominously that the bank is "special" because of its mission of helping the world's poor and that its "governance and ethics must obviously be impeccable."

"I fully trust the governing board to draw the consequences it must draw," Breton said.

Most ministers, including Omi, U.S. Treasury Secretary Henry M. Paulson Jr. and Canada's Jim Flaherty, declined to comment directly on the Riza matter. All spoke of letting the executive board's "process" regarding Wolfowitz run its course.

Among African leaders, the emphasis Wolfowitz has placed on their continent's development has won him support. "He has been a visionary, absolutely supportive and responsive," said Antoinette M. Sayeh, finance minister of Liberia. "We have visionary leadership and steadfast progress under Mr. Wolfowitz, and we look forward to it continuing."

Zambian Finance Minister N'gandu Peter Magande cautioned against a rush to judgment. "We don't want to go back to old days in our jungles," he said. "We want to be sure that issues are dealt with correctly. It is not that we are being soft; we didn't come here to make a judgment on this issue."

Officials from several governments said any desire for Wolfowitz's departure would be carefully balanced against the need to preserve smooth bilateral ties with the United States and to avoid exacerbating a bad situation at the bank.

The board is unlikely to take the unprecedented step of firing Wolfowitz, a knowledgeable source said. "They could try to get the same result by making some statement to the effect that they're deeply disappointed that he misled them as to his role" in directing Riza's compensation.

In an e-mail to bank staff last night, Wolfowitz wrote: "Out of respect for the Board review process that has been underway, I have said little. I feel, however, that this has left a vacuum which has been largely filled by misleading information." The 109 pages of documents released by the board, he said, are "a lot to wade through looking for significant facts so I'd like to call your attention to a number of them."

He attached a selection of excerpts, most of them referring to his initial offer before assuming the presidency to recuse himself from dealings with Riza, and all of them favorable to himself. They did not include Barnett's subsequent clarification that the recusal officer did not include a ban on "professional contact."

He included a link to the complete package of documents, as did a posting on the bank's Web site yesterday.

Wolfowitz's initial appointment, made by tradition by the U.S. president, was controversial, largely because of his role in the administration's Iraq policy, which was opposed by most of the bank's contributing governments.

Some have said Wolfowitz is now being vilified as a proxy for Bush, and because his proposed reforms challenged the bank's entrenched status quo. But there is consensus, even among many of his supporters, that his actions over the past two years have given ammunition to those eager to find more reasons to dislike him.

"They were waiting for him to screw up, and he did," said a recently departed senior bank official.

Staff writer Krissah Williams contributed to this report.

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