Wolfowitz quitting at World Bank

Wolfowitz to leave World Bank

May 18, 2007|By Maura Reynolds and Joel Havemann | Maura Reynolds and Joel Havemann,LOS ANGELES TIMES

WASHINGTON -- Paul Wolfowitz, the embattled president of the World Bank, announced yesterday that he would resign from that position effective June 30, bringing an end to weeks of controversy over accusations that he violated ethics policies in arranging a job transfer and substantial salary increases for a bank official with whom he was romantically involved.

Wolfowitz, who decided to step down without acknowledging wrongdoing, is considered by many to be the intellectual architect of President Bush's foreign policy, especially the war in Iraq.

His departure sets up a struggle over the future of the World Bank and other international financial institutions established at the end of World War II. Critics have said that the bank is overdue for change, particularly in the way its president is chosen.

"I regret that it's come to this," Bush said yesterday morning, signaling the end of his unqualified support for his former deputy secretary of defense. "I admire Paul Wolfowitz. I admire his heart. And I particularly admired his focus on helping the poor."

Wolfowitz's conflict-filled two years as bank president and the circumstances of his departure are expected to intensify discussion about whether it is time to change the tradition by which the United States, as the bank's largest shareholder, gets to choose its president.

The White House moved quickly to quell such speculation. "The president will have a candidate to announce soon," spokesman Tony Fratto said.

Bush is expected to pick someone with more experience as a manager and as a financier. Potential candidates include Robert B. Zoellick, a former deputy secretary of state and U.S. trade representative in the Bush adminstration; Deputy Treasury Secretary Robert M. Kimmitt; Stanley Fischer, a former International Monetary Fund official who is a governor of the Bank of Israel; and Paul A. Volcker, chairman of the Federal Reserve from 1979 to 1987.

The controversy that led to yesterday's announcement involved allegations that Wolfowitz had improperly arranged a promotion and raises for Shaha Ali Riza, a bank employee with whom he had been involved for several years before Bush named him to the institution's top job.

As he was negotiating his contract, Wolfowitz told bank officials about the relationship and sought advice from the bank's ethics committee about how to deal with it.

To avoid a conflict of interest, Riza was forced to leave the bank and take a temporary assignment at the State Department, but she remained on the bank's payroll.

As part of the deal, Wolfowitz arranged promotions and raises that brought her annual salary to nearly $194,000, more than most senior administration officials, including the secretary of state.

Critics say Wolfowitz, whose tenure as World Bank president was marked by a high-profile campaign against corruption, lost considerable credibility because of the appearance of favoritism.

Once the details became public, Wolfowitz refused to resign unless the bank's board of directors accepted his argument that he had acted in good faith, based on muddled ethics advice from the board.

In the end, the board issued a statement late yesterday that made only passing reference to the controversy. Instead, it praised Wolfowitz's tenure and said, "He 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."

In his statement, Wolfowitz said, "I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership."

Sebastian Mallaby, a senior fellow at the Council on Foreign Relations and author of a 2004 book about the World Bank and its travails, called Wolfowitz's resignation "a good outcome."

"I'm very pleased he left the bank, because his presence had become utterly toxic. But I'm also pleased that he doesn't have to be labeled for the rest of his life as a bad guy," Mallaby said.

Wolfowitz's actions in the Riza case, Mallaby said, appeared to result more from bureaucratic incompetence than pernicious corruption.

Bank staff members, who had pressed hard behind the scenes to oust the unpopular Wolfowitz, expressed dismay, especially with the length of time, six weeks, before the president leaves.

"While Mr. Wolfowitz has finally done the necessary thing by resigning, he has damaged the institution and continues to damage it every day that he remains as its president," the World Bank Group Staff Association said in a statement. "He has demeaned the bank, insulted the staff, diminished its clients and dragged this institution through the mud."

Bea Edwards, international director of the Governmental Accountability Project, a whistleblower protection group that released much of the early information about Wolfowitz's relationship with Riza, said the bank's staff fears retaliation by Wolfowitz in his remaining weeks.

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