World Bank president Paul Wolfowitz faced a fight for his political life yesterday after the development lender's directors demolished his defense in a favoritism scandal surrounding his girlfriend.
As calls mounted for the former US deputy defense secretary to resign, the 24 executive directors issued a statement that left Wolfowitz squarely isolated heading into a weekend of high-level talks among global financial leaders.
After a day-long emergency meeting that stretched late into the night, the board detailed the findings of its investigation into the row over Wolfowitz's Libyan-born partner, Shaha Riza.
More than 100 pages of documents released with the statement revealed that on Wolfowitz's personal direction, Riza was given raises that took her annual pay package to nearly US$200,000 when she was reassigned from the World Bank to the US State Department.
Riza remained on the World Bank payroll despite her move, which was to forestall any conflicts of interest after Wolfowitz took charge of the bank in June 2005.
"The executive directors will move expeditiously to reach a conclusion on possible actions to take," the board's statement said. "In their consideration of the matter, the executive directors will focus on all relevant governance implications for the bank."
The controversy engulfing one of the architects of the war in Iraq threatened to overshadow talks yesterday among finance ministers from the G7 nations.
Ahead of the bank's annual spring meeting this weekend, whose formal agenda threatens to be engulfed by the dispute, Wolfowitz said on Thursday "I will accept any remedies" proposed by the executive board.
"I made a mistake, for which I am sorry," Wolfowitz told a news conference.
He said that "in hindsight, I wish I had trusted my original instincts and kept myself out of the negotiations" over Riza's generous pay deal.
But his mea culpa was not enough for the World Bank's staff association, which said Wolfowitz had "destroyed" the trust of employees and should quit.
"He must act honorably and resign," the de facto union said in a letter to the World Bank's 10,000 rank-and-file staff.
In an editorial yesterday, the Financial Times also called for Wolfowitz to go, either voluntarily or at the behest of the board.
"If the president stays, [the World Bank] risks becoming an object not of respect, but of scorn, and its campaign in favor of good governance not a believable struggle, but blatant hypocrisy," it said.
But the conservative Wall Street Journal called the controversy "trivial" in an editorial.
"The forces of the World Bank status quo are now making their power play," the Journal wrote, suggesting the fracas involved resistance to Wolfowitz's efforts to make the bank and its borrowers more accountable.
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