World Bank president Paul Wolfowitz broke the rules and engaged in an actual conflict of interest when in 2005 he arranged for a rather generous salary boost for his girlfriend, Shaha Riza, a communications official at the Bank.
That’s the conclusion of a special panel of the Bank’s board of directors, which on Monday released its report on the Wolfowitz matter. This judgment was no surprise; the basics had been leaked days earlier. But the report presented more information that places Wolfowitz in a tough spot–for it suggests that he and Riza brazenly took advantage of the situation created by his appointment to the Bank to guarantee her a promotion and pay rise she had failed to obtain previously. And the question of the moment is the obvious one: can he survive?
Here are some interesting portions of the report:
According to Mr. [Xavier] Coll [vice president of human resources], he met with Mr. Wolfowitz and Ms. [Robin] Cleveland, Counselor to the President, on August 10, 2005, in preparation for a meeting on August 11 with Ms. Riza. During that meeting, Mr. Coll was told to stop consulting with the Bank’s General Counsel on this matter.
In retrospect, it’s clear there was the need for more legal advice, not less, about what to do about Riza, who could not continue to work at the Bank in a position under the supervision of Wolfowitz. Yet Wolfowitz kept the circle small. He has claimed it would have been a conflict of interest to involve the Bank’s general counsel–a contention rejected by the special panel. But even if Wolfowitz had been right about that, he could have sought another way for the human relations department to obtain appropriate legal guidance. He did not.
According to Mr. Wolfowitz, he knew of Mr. Coll’s “discomfort” with the proposed agreement with Ms. Riza. He stated that Mr. Coll did not tell him the proposals were outside the Bank’s rules, and that, in any case, “there were no established Bank practices for a situation like this.” According to Mr. Coll, he told Mr. Wolfowitz and Ms. Cleveland that the terms proposed by Ms. Riza, regarding her promotion increases and guaranteed promotions…were “outside the Staff Rules” and that moving forward with them was a reputational risk to the Bank. In Mr. Coll’s view, there is “no doubt that the President knew or had been made aware of by me that this was outside the rules.”
If this is so–if the Bank’s board believes Mr. Coll–it’s end of story. Had Wolfowitz indeed proceeded with a deal after he was warned it was “outside the rules”–a deal that was rather lucrative for his girlfriend–that ought to be a firing offense.
According to Mr. Coll, after he received the written August 11  instructions from Mr. Wolfowitz [dictating the terms of the Riza deal], he asked again whether he could consult with the Bank’s General Counsel, or anyone in the Bank’s Legal Department, and was told he could not.