Ending Battle, Wolfowitz Resigns From World Bank

By Peter S. Goodman
Washington Post Staff Writer
Friday, May 18, 2007

World Bank President Paul D. Wolfowitz resigned yesterday, effective June 30, yielding to demands from governments around the world that he leave to end the ethics controversy that has consumed the institution.

Wolfowitz's resignation, negotiated in recent days with the bank's executive board, closed the leadership crisis that has essentially paralyzed the institution for almost two months. It preempted what had been a growing likelihood that the board would reprimand or fire him after a committee report found that he broke ethics rules in awarding a substantial raise to his girlfriend.

Wolfowitz and his attorney, Robert S. Bennett, extracted a measure of the exoneration they had demanded before he would resign. In a statement released last night, the board conceded that "a number of mistakes were made by a number of individuals in handling the matter under consideration," and the bank would need to improve its ethical procedures. The board declared that Wolfowitz "assured us that he acted ethically and in good faith in what he believed were the best interests of the institution, and we accept that."

The statement added: "We are grateful to Mr. Wolfowitz for his service at the bank. Much has been achieved in the last two years."

That language was agreed upon only after fractious debate among board members, with some, particularly European representatives, dismayed that it appeared to hand Wolfowitz a victory. In the end, however, they swallowed the language as the price of getting Wolfowitz to quit.

Wolfowitz has argued that he sought to resolve an obvious conflict of interest by transferring his longtime companion, Shaha Riza, to another job at the State Department so that he could avoid supervising her, while increasing her pay as compensation for the career disruption.

Staff members described a celebratory mood inside the World Bank's headquarters near the White House, with people embracing, singing songs and hoisting flutes of Champagne.

The ethics scandal that ultimately brought down Wolfowitz was merely the latest in a long list of his infractions in the eyes of many staff members, who accused Wolfowitz of insulating himself behind tyrannical aides, disregarding the counsel of veteran bank officers and running the bank as an adjunct of the Bush administration.

The news that Wolfowitz was leaving, however, did not fully heal the international rifts that have emerged with the leadership crisis. His exit set off a new struggle to determine who will run the bank between now and his official departure date at the end of June.

According to bank and Bush administration sources briefed on the negotiations, the White House on Wednesday demanded that Wolfowitz be allowed to stay for three months, fearing that otherwise an acting president would be put in place from within the bank. That could threaten the traditional American prerogative to select the head of the institution.

"They don't want to lose control," a bank official said.

Most of the board, and particularly the Europeans, wanted Wolfowitz to leave immediately, asserting that he has lost the trust of the staff. The administration ultimately settled for a compromise, the June 30 departure date, fearing that otherwise a caretaker president might be inserted by the board over American wishes.

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