Wolfowitz Seeking Face-Saving Exit From World Bank

By Peter S. Goodman
Washington Post Staff Writer
Thursday, May 17, 2007; 3:24 PM

World Bank President Paul D. Wolfowitz, seeking a face-saving exit from the ethics controversy consuming the institution, this morning held out for exoneration as a condition of his resignation, said senior officials at the bank.

Board members continued to negotiate with Wolfowitz informally, with the Bush administration playing a central role, said the officials. But the board remained adamant it will not clear Wolfowitz, following the release of a bank report earlier this week that found he broke ethics rules in engineering and covering up a substantial pay raise for his girlfriend, the officials said.

In short, for another day, the leadership crisis at the World Bank went on with no clear end in sight and much speculation about how and under what circumstances Wolfowitz might eventually depart.

The bank officials, who spoke on condition they not be named citing the sensitivity of the talks, said the German and British representatives on the board were now taking the lead in trying to craft a deal. But the space for a negotiated outcome was narrow, they said, because Wolfowitz and the board have dug themselves into seemingly irreconcilable positions.

Wolfowitz has insisted he will not leave unless the board effectively acknowledges that he acted in good faith to resolve an obvious conflict of interest by transferring his girlfriend, Shaha Riza, to a job outside the bank while upping her pay to compensate her for the disruption.

The Bush administration has in recent days sought to broker a deal that would see Wolfowitz step aside--provided the bank shares some of the blame for the ethics controversy, acknowledging that the ethics committee's counsel to him was unclear.

But the board maintains that such a deal would be unseemly and damaging to the bank's credibility: The report released this week uses scathing language to conclude that Wolfowitz broke ethics rules, breached his contract and undermined the credibility of the institution in personally directing bank staff to confer the raise and cutting the top legal adviser out of the loop. If the board backs down from disciplining Wolfowitz in response, it will undermine its own integrity, the officials said.

The German executive director on the board, Eckhard Deutscher, and the British representative, Thomas Scholar, were both under strong pressure from their governments to resolve the leadership crisis swiftly, and both were authorized to pursue a vote to fire Wolfowitz, the officials said. That backing made them even less likely to give Wolfowitz the exoneration he seeks.

"Their position is hardening," said one official, who was briefed by European members of the board this morning. "They both do feel that they have the total buy-in of their governments."

A decisive vote to fire Wolfowitz would break with the consensus-driven traditions of the board, while risking open conflict between European governments and the Bush administration. For that reason, the German and British representatives, joined by the Canadian executive director, Samy Watson, were eager to find a compromise that would remove Wolfowitz while stopping short of a vote, said bank and Bush administration officials.

Wolfowitz has previously enjoyed the resolute backing of the White House, where many officials -- particularly Vice President Cheney -- see the struggle to oust him as a European power play motivated by animus over the Iraq war. Wolfowitz was a key architect of the war in his previous post at the Pentagon.

But in recent days, the Bush administration has come to recognize that Wolfowitz's tenure at the bank is no longer salvageable, with his staff in open revolt and foreign governments demanding his ouster.

This morning, President Bush offered the latest sign that the White House has absorbed the sense that Wolfowitz must go eventually.

"I regret that it's come to this," the President said at a morning news conference with outgoing British Prime Minister Tony Blair. "I admire Paul Wolfowitz."

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