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World Bank Board to Decide Wolfowitz's Fate
NY Times
Published: April 20, 2007

WASHINGTON, April 20 — The World Bank's board of directors expressed "great concern" today about the mounting furor over the charges of favoritism now dogging the leadership of Paul D. Wolfowitz. But the board put off until next week the rendering of a judgment that could force Mr. Wolfowitz to resign as president of the bank.

With Mr. Wolfowitz's future growing deeper in doubt, officials at the bank said the governing board was divided over whether to deliver the equivalent of a vote of no confidence next week, or to take some softer action instead.

In an extraordinary chain of events, the 24 directors who govern the day-to-day workings of the bank and who represent different countries or clusters of countries convened Thursday to discuss Mr. Wolfowitz's fate and did not conclude their session until 1:30 a.m. today.

The officials said that the bank directors from Europe and Asia favored a harsh rebuke that would make it untenable for Mr. Wolfowitz to stay on, while directors from the United States, Canada and Japan have resisted that result. Directors from Latin America are said to be leaning toward a strong rebuke, but directors from Africa are known to have more mixed views.

The board issued a statement saying that they had wrestled with "the current situation in the bank, which is of great concern," and would set up a process "to deal with the situation urgently, effectively and in an orderly manner."

Translated, that meant that the board would decide what to do about Mr. Wolfowitz some time next week, officials said.

Mr. Wolfowitz "welcomes the decision of the board to move forward and resolve this very important issue," according to a statement issued by his office today. "He looks forward to implementing the recommendations of the board."

At the center of the debate at the bank over Mr. Wolfowitz is the disclosure last week that he had played a direct role in arranging a large salary increase, a promotion and a transfer to the State Department for Shaha Ali Riza, his companion, when he arrived at the bank in 2005.

Ms. Riza, who had been at the bank for seven years, was detailed to the State Department to avoid a conflict of interest in her being supervised by Mr. Wolfowitz, a former deputy secretary of defense under President Bush.

But bank officials said the matter of Ms. Riza had been seized upon by Mr. Wolfowitz's critics within the bank, who have grown uneasy and distrustful over many of his policies, from his aggressive campaign against corruption in borrower nations to his insular management style, which relies on a small circle of close aides who followed him to the bank from the Bush administration.

In addition, over the last week, bank officials have said that some of Mr. Wolfowitz's aides have tried to curtail the bank's role in promoting family planning and contraceptives in poor nations, or have tried to prevent it from acting against climate change.

In a meeting with about 30 of his vice presidents earlier in the week, Mr. Wolfowitz denied that he was changing any of the bank's family planning or environmental policies, according to officials who were present.

It was at that meeting that one of his two most senior deputies, Graeme Wheeler, said that Mr. Wolfowitz should resign, a statement that emboldened others throughout the bank. The extraordinary display of discord has riven the bank and produced an internal atmosphere that many describe as chaotic and emotional.

The question hanging over the bank today was whether the executive board, which usually decides matters by consensus, would put forward a judgment of Mr. Wolfowitz's conduct that would be so critical in tone that he or his supporters might find it impossible to remain on the job.

Bank officials who are close to the board's deliberating process said that in the unusual event of a formal vote, the result could be close, and could go either way. Even a in favor of Mr. Wolfowitz might, if the margin is close, make still leave his position untenable, many said.

Bush administration officials have repeatedly said that President Bush supports Mr. Wolfowitz. Officials at the bank say this statement is no more credible than the ones the White House offered last year for Mr. Wolfowitz's former boss at the Pentagon, Donald H. Rumsfeld, who was ousted after the November election.

More than 180 countries belonging to the World Bank have at least some voting share, but most have very tiny fractions of a percentage point. The largest shares are reserved for the United States, with 16.4 percent; Japan, 7.9 percent; Germany, 4.5 percent; France, 4.3 percent and Britain, 4.3 percent.

As a practical matter, all of Europe combined can outweigh the United States, but as the country with by far the largest share of the vote, the United States has traditionally wielded the most power on the board, and the bank adheres to the custom of allowing the United States to select the bank's president.

Some bank officials said that in the background of discussions over what to do about Mr. Wolfowitz are considerations about the Bush administration's attitude. Some suggest that the White House might be more ready to accept an ouster of Mr. Wolfowitz if it is assured that its choice for a successor would be respected and that the bank would continue carrying out Mr. Wolfowitz's reforms, including cracking down on corruption.

The New York Times disclosed in today's editions that Mr. Wolfowitz, while serving as deputy secretary of defense, personally recommended that Ms. Riza be awarded a contract for travel to Iraq in 2003 to advise on setting up a new government, according to a previously undisclosed inquiry by the Pentagon's inspector general.

The inquiry, as described by a senior Pentagon official, concluded that there was no wrongdoing in Mr. Wolfowitz's role in the hiring of Ms. Riza by the Science Applications International Corporation, a Pentagon contractor, because Ms. Riza had the expertise required to advise on the role of women in Islamic countries.

The investigators also found that Mr. Wolfowitz had not exerted improper influence in Ms. Riza's hiring. Earlier this week, Science Applications International said an unnamed Defense Department official had directed that she be hired. She had been a World Bank employee for five years at the time.

Mr. Wolfowitz's office said it could not comment on the latest disclosure. Ms. Riza's lawyer, Victoria Toensing, did not respond to a request for a comment.

The disclosure of Mr. Wolfowitz's role in Ms. Riza's contract in 2003 provides a new indication of his involvement in her employment. The disclosure also came on a day of swirling pressure at the bank, where the 24-member executive board met well into Thursday evening to discuss the situation amid mounting calls for Mr. Wolfowitz's resignation.

Bank officials, speaking on the condition of anonymity because they were divulging proceedings that were not supposed to be made public, reported that the rift between employees and the president had become a major distraction from their work, with some employees wearing blue ribbons in a display of defiance against his leadership.

"People feel paralyzed," one official said. "No one is doing any work at all. This genie can never go back to the bottle."

As the board met, officials said a separate review was being conducted by the vice presidents, who oversee specific countries, regions and subjects, and who were polling their staffs. The overwhelming sentiment, officials said, was that Mr. Wolfowitz should step down.

In another sign of crumbling support, bank officials and others said that a consensus had emerged among European officials involved with the bank that Mr. Wolfowitz had lost his ability to lead the institution, not so much because of the issue of Ms. Riza but because of other policy disputes over the last two years.

The meeting of the board was called by the panel's most senior member, Eckhardt Deutscher of Germany. There was no sign of what the board would do, but Mr. Deutscher gave a speech on Thursday to a German foundation offering a strong though oblique criticism of Mr. Wolfowitz.

"The World Bank needs a strong leadership with compassion, integrity and vision," Mr. Deutscher said in the speech, to the Friedrich Naumann Foundation. "The governance structures need a fundamental reform. And lastly, the World Bank needs credibility, credibility, credibility."

Bank officials said Mr. Deutscher, who has worked closely with Mr. Wolfowitz on developing the bank's anticorruption policies, now favors having him step down, a consensus already reached by Britain, France, the Netherlands and the Nordic countries.

A senior European official involved in the bank said Mr. Deutscher was "leading the charge" for a change in leadership and trying to assert the board's role, effectively wresting control from Mr. Wolfowitz.

"For the moment, the view among the Europeans is, ‘Let's continue the discussions, and it is up to the dean to express what the concern is,' " this official said, speaking about Mr. Deutscher. "It is in everybody's interest to avoid bringing this to a head."

On the matter of the contract for Ms. Riza in 2003, the Pentagon inspector general's office opened a review in March 2005, two years after the invasion of Iraq and one year after it began a sweeping investigation into contracting practices during the early chaotic months of the war.

The Pentagon official who disclosed details of the inquiry agreed to answer questions on the condition of anonymity because it involved the role of senior officials in recommending individuals.

The official said the relatively small contract came under scrutiny only when a Pentagon investigator noticed Ms. Riza's name and recalled that she was romantically linked to Mr. Wolfowitz.

The investigator deemed the matter was worth opening an inquiry, because the type of contract called specifically for it to be assigned to Ms. Riza. But a more formal investigation was not instigated, he said, because "it was determined that Ms. Riza was uniquely qualified to fill the contract requirements."

Investigators also determined that "the recommendation of individuals does not constitute any misuse of office," the official said in describing the findings of the inspector general. "Nobody violated or misused their office."

Nevertheless, the inquiry found that Ms. Riza "was recommended by Wolfowitz as well as others, in verbal form," the official said.

It was not clear how Mr. Wolfowitz's verbal recommendation was relayed through the Pentagon hierarchy and nascent occupation authority and then to the contractor, which is known as SAIC.

Earlier this week, a spokeswoman for SAIC said the company was told to contract with Ms. Riza by an official in the office of the under secretary of defense for policy, then headed by Douglas J. Feith.

But on Thursday, Pentagon officials, clarifying the source of the contract, said it was managed through the Office of Reconstruction and Humanitarian Assistance, then headed by Jay Garner, a retired Army three-star general. General Garner said in an interview that he did not remember Ms. Riza's playing any role in advising the American-led occupation.

The World Bank board is also examining the contract to see if it complied with bank rules requiring employees to get permission for outside consulting work when it might conflict with their duties at the bank. At the time of the contract, it was against bank policy to have dealings with Iraq, on the ground that it was a country under foreign military occupation.

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