Wolfowitz Faces New Inquiry

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By Krissah Williams and Karen DeYoung
Washington Post Staff Writers
Saturday, April 21, 2007

The World Bank's board said yesterday that it has ordered an ad hoc group of its members to "urgently" conduct a far-reaching investigation into bank President Paul D. Wolfowitz's involvement in arranging the compensation and promotion package for his companion, who is also a bank employee.

The board did not set a timeframe for the committee's deliberations, but bank officials said an announcement could come as early as next week. The board has also postponed a nine-day trip to Mongolia and the Philippines set to start next week, bank officials said.

The directors are divided over whether Wolfowitz should continue to lead the anti-poverty institution. U.S. officials, who hold sway because the United States is the bank's largest shareholder, have expressed support for Wolfowitz. But, in its statement, the board reiterated its "great concern" over the matter.

In a separate statement, Wolfowitz said he "welcomes the decision of the board to move forward and resolve this very important issue." He said again that he does not intend to resign.

The board, which met for more than nine hours on Thursday and early yesterday, widened the investigation beyond the possible violations of staff rules committed by Wolfowitz when he outlined a transfer and career plan for Shaha Riza, a woman to whom he is romantically linked.

It said that the ad hoc group will consider bank rules for both the staff and the president, and "conflict of interest, ethical, reputation, and other relevant standards."

Before he assumed the presidency in June 2005, Wolfowitz offered to recuse himself from personnel decisions concerning Riza, but not from "professional contact" with her. The board's ethics committee rejected the offer. It instructed him to arrange a departure package for her with the personnel department, including a one-step promotion and a one-time raise.

Wolfowitz worked out the details of her compensation and directed the personnel manager to implement them. They included a promotion and a salary increase, plus a guaranteed increase for each of the next five years and another promotion upon her return, pending endorsement by a panel that Riza would approve of.

In a related matter, the Pentagon released parts of a 2005 inquiry that found that Wolfowitz had also been involved in Riza's career advancement while he was serving as deputy defense secretary. In a report first disclosed in the New York Times, the Pentagon said Wolfowitz recommended that Riza be awarded a contract for travel to Iraq in 2003 to offer advice on the provisional government.

The inquiry did not lead to a full investigation because Pentagon officials found that Riza "was uniquely qualified to provide the required services and was recommended by others," and because Wolfowitz had acknowledged the relationship, the report said.

The ad hoc group at the World Bank will consider damage to the bank's reputation. The bank's staff association, which represents about half of the institution's 10,000 employees, has called for Wolfowitz's resignation and has accused him of committing the same governance violations that he has decried in the developing world.

In addition, the group will examine "issues around employment contracts made in the Office of the President," an apparent reference to Wolfowitz's highly paid aides, Robin Cleveland and Kevin Kellems. At a meeting with bank managers this week, Wolfowitz offered to fire or rein in Kellems and Cleveland, who are unpopular with many bank staffers.

White House spokeswoman Dana Perino said yesterday that "the president still has confidence" in Wolfowitz, but various European governments have indicated that they want Wolfowitz out.

The bank should be "beyond reproach from an ethical point of view," French Foreign Ministry spokesman Jean-Baptiste Mattei said in Paris, according to wire service reports. The bank's "credibility is at stake," Dutch Finance Minister Wouter Bos and Development Minister Bert Koenders said in a letter to the Dutch parliament.

The United States controls 16.41 percent of the vote on the bank's board, holding an effective veto over other large shareholders. Japan controls 7.87 percent, Germany 4.49 percent, and France and Britain 4.31 percent each.

Bank staffers said that the situation has become a distraction, with internal comment boards filled with messages, most favoring Wolfowitz's resignation. The message board yesterday included a link to a YouTube video splicing scenes from the sitcom "The Office" with workers gossiping about the boss's sex life and Wolfowitz defending his action. The video has been viewed nearly 20,000 times.


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