World Bank panel finds Wolfowitz broke rules

WASHINGTON, May 15 (Reuters) A report by a World Bank panel has found that bank President Paul Wolfowitz violated several rules when he directed a promotion and pay increase for his companion that exceeded bank norms.

The panel said that Wolfowitz's involvement in the pay and promotion deal for World Bank Middle East expert Shaha Riza represented a conflict of interest, which also violated his contract.

''The salary increase Ms. Riza received at Mr. Wolfowitz's direction was in excess of the range established by Rule 6.01,'' the panel said yesterday.

''Mr. Wolfowitz's contract requiring that he adhere to the Code of Conduct for board officials and that he avoid any conflict of interest, real or apparent, were violated,'' the panel added.

The former US deputy defense secretary has been under pressure to resign for his handling of Riza's promotion for which he apologized in early April and later said it was part of a smear campaign by critics of the Iraq war and his campaign to fight corruption in developing countries.

Wolfowitz is due to appear before the World bank's full board on Tuesday to make a final pitch to hold on to his job, with the Bush Administration still firmly backing him even in the face of the panel's findings.

A spokeswoman for US Treasury Secretary Henry Paulson said ''he does not think the facts merit dismissal.'' The panel recommended that the 24-nation board in deciding the issue, should consider ''whether Wolfowitz will be able to provide the leadership needed to ensure that the bank continues to operate to the fullest extent possible in achieving its mandate.'' It called for the bank to review its own governance rules.

Reuters PDS VP0705