World Bank panel says Wolfowitz broke rules

Washington, May 8: A World Bank panel has found that bank President Paul Wolfowitz's handling of a promotion and pay increase for his companion represented a conflict of interest and broke staff rules, but made no recommendation on how he should be reprimanded, board sources said.

The former US deputy defense minister, who has faced calls by staff to resign over the lucrative deal for his companion, Shaha Riza, a World Bank Middle East expert, has been given time to respond to the report, but senior bank officials repeated that he would not step down.

One source close to the World Bank board said yesterday the panel found Wolfowitz's actions amounted to conflict of interest, while another source said the panel found he broke governance rules.

A meeting of the 24-nation World Bank board of shareholder governments, which will determine whether Wolfowitz should be fired for his actions, is now scheduled for later in the week, possibly on Friday.

Wolfowitz has said he is the victim of a smear campaign designed to discredit his leadership and undermine his anti-corruption campaign.

One of Wolfowitz's top aides, Kevin Kellems, resigned on Monday, saying turmoil at the bank over its current leadership has made it difficult for him to do his job.

Kellems, who served as an advisor to Wolfowitz from 2002 when he was US deputy defense secretary and before he became World Bank president in 2005, told Reuters he was leaving to pursue other opportunities.

Kellems worked briefly for US Vice President Dick Cheney as spokesman before he rejoined Wolfowitz at the World Bank in 2005 because of previous experience in development issues.

''Given the current environment surrounding the leadership of the World Bank Group, it is very difficult to be effective in helping to advance the mission of the institution,'' Kellems said.

''I have tremendous respect and admiration for the bank staff and management and treasure the many friendships,'' he said.

Depending On Aides

Wolfowitz's two years at the bank have been marred by criticism that he depended on a coterie of aides, including Kellems and Robin Cleveland, whom he brought from the Pentagon and White House. That added to tension between Wolfowitz and bank employees by isolating him from career staffers.

According to board sources, there is ''widespread feeling'' among member countries that it is virtually impossible for Wolfowitz to finish his term because of the damage to the bank's credibility and its ability to be effective.

In Brussels, Dutch Finance Minister Wouter Bos stressed it was important that the bank's reputation not be undermined.

''The bank can only do a good job if there is a good and sound reputation,'' Bos told reporters. ''I am concerned about this reputation at the moment.'' Still, the key to whether Wolfowitz stays or goes is if the United States, the bank's biggest shareholder who nominated Wolfowitz for the job, pressures the board, especially European countries, to allow Wolfowitz to continue.

It is still undecided whether a decision on Wolfowitz will be determined through board consensus or a vote.

US President George W Bush made clear his support for Wolfowitz when he raised it during an April 30 meeting with German Chancellor Angela Merkel at the White House, bank and board sources who have details of the meeting told Reuters.

The controversy also has raised questions about the bank's traditional management procedures, especially the selection of its president and the transparency of the board.

Since the bank's inception after World War Two, the United States has always nominated the president without objection while the head of its sister institution, the International Monetary Fund, has always been a European.

Reuters>