Wolfowitz Hangs On As Ouster Hits Wall
Day-Long Standoff Ends Unresolved; Talks to Resume

By Peter S. Goodman
Washington Post Staff Writer
Thursday, May 17, 2007

The Bush administration spent much of yesterday trying to broker a graceful end to the ethics controversy consuming the World Bank, offering the resignation of embattled president Paul D. Wolfowitz, senior administration and bank officials said. But Wolfowitz said he would not leave, insisting on a measure of vindication.

On a day full of rumors, counter-rumors and closed-door meetings, the Wolfowitz saga turned into an only-in-Washington standoff.

The bank's executive board, under pressure from governments worldwide to remove Wolfowitz in response to findings that he engineered and covered up a hefty raise for his girlfriend, appeared intent on forcing him out without voting to fire him. The board adjourned without resolution late yesterday, promising to keep talking today.

The Bush administration, navigating the currents of international diplomacy, remained sympathetic to Wolfowitz's plight but has appeared less willing by the day to spend political capital on him. Officials were eager to wrap up the unpleasantries and move on.

But Wolfowitz, who has clung tenaciously to his post through weeks of controversy, even as World Bank staff members took to the streets to demand his ouster, stuck to his position that he tried to do the right thing in handling his girlfriend's career situation. "Mr. Wolfowitz will not leave under a cloud," his attorney, Robert S. Bennett, said yesterday for perhaps the 10th time.

Seeking to break the logjam, the Bush administration pressed a compromise: The board could issue a statement that Wolfowitz had erred in handling the raise for his longtime companion, Shaha Riza, but apportion some of the blame to a bank committee that Wolfowitz believes gave him murky ethics advice. Wolfowitz would then resign, said senior bank and administration officials, speaking on condition of anonymity because of the sensitive nature of the talks.

"Not that Paul would resign eight minutes later," a senior White House aide said, but perhaps after a few months.

Wolfowitz was nominated to the World Bank post by President Bush in 2005.

The board rejected that formulation, however, insisting that Wolfowitz face consequences for a committee's findings that he broke ethics rules and undermined the reputation of the bank, the officials said.

Some board members feared that Wolfowitz might accept a statement exonerating him, then stay in the job, the White House aide said. Several board members were opposed to any deal, officials said, asserting it would compromise their integrity: It would seem to vindicate criticisms from the Bush administration and Wolfowitz that their investigation has been less than fair.

While the board might have once been friendly to a negotiated outcome along the lines the Bush administration proposed, that window closed with the completion of the investigation by the board committee last week, senior officials said. The final report accused Wolfowitz of breaching ethics rules and undermining the reputation of the bank by directing bank staff to give Riza a substantial raise. The report directs the board to consider whether he can continue to lead the bank.

An official who had been briefed by a European board member said yesterday that the Bush administration's proposal was deemed offensive by several members. "The staff were absolutely horrified by what seemed to be the Bush administration's disdain for a clear-cut case of corruption at the bank," an official said.

The board had hoped to resolve the matter and take action, perhaps declaring a lack of confidence in Wolfowitz or even firing him, by last night. But the board adjourned just before noon at the request of the American executive director, Eli Whitney Debevoise II, said an official briefed by a European board member who spoke on condition of anonymity.

A senior Bush administration official later said the United States had requested the delay to allow Wolfowitz to step down, preempting board action against him. For several hours, the bank buzzed with news that Wolfowitz was on his way out via a deal. At 2:30 p.m., the board went back into session, and when the members came out about three hours later, no agreement had been reached.

The Bush administration's decision to negotiate an end to Wolfowitz's tenure came in recent days, as it became clear the White House is virtually alone in supporting him. Nearly all board members have endorsed the findings of the committee's report, officials said, with even Canada, traditionally a reliable U.S. ally, breaking with the administration.

Signs mounted that Wolfowitz has lost his ability to lead the institution. Germany's development minister effectively disinvited Wolfowitz to a meeting scheduled next week in Berlin to discuss Africa. Asked specifically whether Wolfowitz would attend, the German minister, Heidemarie Wieczorek-Zeul, said: "I would not advise him to do so," adding that he "would do a good service to the bank if he were to resign."

Wolfowitz has apparently scrapped a trip today to Slovenia, where he was scheduled to attend a development event. He was to deliver an award to graduate students who wrote essays exploring the troubles of corruption in the developing world, bank officials said.

A day after telling reporters that all options were open for discussion in terms of the bank's future leadership, White House spokesman Tony Snow yesterday called the ongoing crisis a "bruising episode" for the World Bank, which seeks to end global poverty.

"What you have to do is figure out a way forward to maintain the integrity of the institution," Snow said. "And, therefore, when you do it, you're going to discuss everything. That's what you would normally do."

Staff writers Karen DeYoung, Glenn Kessler and Al Kamen contributed to this report.

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