Wolfowitz Says He Is Target of 'Smear' Tactics

By Karen DeYoung
Washington Post Staff Writer
Tuesday, May 1, 2007

World Bank President Paul D. Wolfowitz said yesterday that he is the victim of a "smear campaign" designed to portray him as unethical and an ineffective leader and that he will "not give in to such tactics" by resigning.

In a statement to a committee of the bank's executive board on allegations that he violated bank rules by arranging a hefty five-year pay and promotion package for his girlfriend, Wolfowitz said he had followed the institution's rules as he understood them. He said the effort to oust him is part of a "conscious campaign" to undermine his reform efforts and "derail important programs . . . to aid the poor."

Wolfowitz's spirited defense, during a two-hour closed-door session with his attorney at his side, marked a clear change in strategy from earlier efforts to mollify his critics with apologies and offers to become a better manager. Instead, Wolfowitz challenged the full 24-member board to examine its own conduct, submitted a sheaf of "exhibits" in evidence, and warned that the "circuslike process" of leaks and public calls for his resignation would give bank donors an excuse not to contribute and make it hard to find someone else willing to take the job.

Although the board had expected to make a quick decision about Wolfowitz, it appeared yesterday that the process could continue for several days and perhaps into next week. "There isn't now any sense of a firm deadline," said a source close to one committee member, who agreed to discuss the deliberations on the condition of anonymity.

As of last weekend, a majority of board members favored ending Wolfowitz's tenure, but a number of governments would prefer that he resign so as to avoid a conflict with the Bush administration, which appointed him.

President Bush repeated yesterday that Wolfowitz "ought to stay" but added that "he ought to be given a fair hearing." Standing at his side in the White House Rose Garden, visiting German Chancellor Angela Merkel, whose government has voiced concern about Wolfowitz's leadership, said the issue should be the subject of "very transparent, very candid conversation" by the board.

The panel also heard yesterday from Shaha Riza, Wolfowitz's companion and the woman at the center of the controversy. Reading a statement, Riza said she had been discriminated against by the bank even before Wolfowitz arrived in June 2005, "not only because I am a woman, but because I am a Muslim Arab woman who dares to question the status quo both in the work of the institution and within the institution itself."

Bank rules were arbitrarily applied, Riza said, citing two senior officials whose wives she said were not required to leave bank jobs. Her forced departure and the leaking of her compensation agreement, she said, "have done significant harm to my career, my personal well-being and my prospects to continue the work I love."

Riza, a British citizen, joined the bank's Middle East and North Africa division in 1998 as a recognized expert in gender and civil society issues. Her relationship with Wolfowitz predated his joining the bank; he had recommended her for a U.S. government contract in Iraq when he was deputy defense secretary during Bush's first term. When Bush named him World Bank president, Wolfowitz disclosed the relationship -- already widely publicized -- and offered to recuse himself from personnel decisions involving Riza.

The board's ethics committee ruled that Riza would have to leave for an "external" job during his tenure, while remaining on the bank payroll. Following its instructions to arrange her exit -- including a pay-grade promotion and a one-time raise -- Wolfowitz directed the bank's vice president for human resources to send her to the State Department, where she joined a Middle East outreach project under the direction of then-assistant secretary Elizabeth Cheney, Vice President Cheney's daughter.

At issue in the current inquiry is whether Wolfowitz's direct involvement in mandating Riza's deal, and the inclusion of an 8 percent raise during the five years of his presidency and another promotion upon her return to the bank, violated ethics rules. When details of the arrangement leaked last month, they sparked criticism from bank staff, managers and member governments that had long complained about Wolfowitz's management in other areas.

Since then, European governments, in particular, have argued that he has damaged the bank's reputation and morale and can no longer effectively function as its leader. They have tried to elevate their complaints beyond Riza's arrangement, but Wolfowitz and his attorney, Robert S. Bennett, made clear that the Riza issue is the battle they intend to fight.

In yesterday's lengthy presentation, Wolfowitz repeated that the board had ordered him to arrange Riza's departure and that it had every opportunity to review the deal. The agreement, he said, "was in line with other World Bank settlement agreements and was consistent with the goals that the ethics committee set out for treating her fairly in difficult and unprecedented circumstances. . . . I find it inconceivable that the Ethics Committee did not know the details of the arrangements, which were available to them."

Wolfowitz said that Ad Melkert, at the time the committee's chairman and a Dutch board member, notified him in writing that he had reviewed the arrangement after anonymous complaints and had ruled that no further review was warranted.

Melkert, now the No. 2 official at the United Nations Development Program, issued a statement yesterday saying allegations that he "was aware of or had somehow approved the specifics of Ms. Riza's external assignment are false." The ethics committee "was not consulted, nor did it approve, the specific terms and conditions of the external placement including: the large pay increase; the stipulation for subsequent annual increases; the stipulations for subsequent promotions."

Bennett indicated that he is prepared to launch a major counteroffensive if the "rush to judgment" against Wolfowitz is not slowed down. "Let's open up all the deals for people at the bank, deals that members of the board have for their staff . . . if that's where they want to go," he said in an interview.

The board barred Bennett and Riza's attorney Victoria Toensing from speaking during yesterday's sessions. "One of the points I would make, if they let me talk, which they won't," Bennett said before the session, "is they've simply got to de-escalate this thing."

But in his statement, Wolfowitz appeared willing to consider the larger question of his leadership if the Riza matter is settled to his satisfaction. "Only when the cloud of these unfair and untrue charges is removed, will it truly be possible to determine objectively whether I can be an effective leader of the World Bank," he said.

Even then, however, he intends to prevail. "Only when everyone involved in this matter steps up and admits his role and responsibility for it, and acknowledges that we all tried to act in good faith, will the Bank be able to return to normal and move forward," he said.

Staff writer Peter S. Goodman in New York contributed to this report.

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