Image: Paul Wolfowitz
J. Scott Applewhite  /  AP
World Bank President Paul Wolfowitz encountered stiffening opposition to staying on as World Bank president amid allegations he showed favoritism in arranging a promotion and pay package for his girlfriend.
updated 4/30/2007 8:06:29 PM ET 2007-05-01T00:06:29

World Bank President Paul Wolfowitz decried what he called a “smear campaign” against him Monday and told a bank panel he had acted in good faith in securing a promotion and pay raise for his girlfriend. He said had no plans to resign, and President Bush gave him a fresh endorsement.

In a statement prepared for the panel, Wolfowitz said the institution’s ethics committee had access to all the details surrounding the arrangement involving bank employee Shaha Riza, “if they wanted it.”

Wolfowitz told the panel, “I acted transparently, sought and received guidance from the bank’s ethics committee and conducted myself in good faith in accordance with that guidance.”

The special bank panel is investigating Wolfowitz’ handling of the 2005 promotion and pay package of Riza, who was assigned to duties at the State Department to avoid a conflict of interest.

Riza, who appeared before the panel late in the day, said she didn’t want to move in the first place and wasn’t satisfied with the arrangement.

“I continue to believe that I should not have been asked to leave and that I was unjustly treated for reasons that I had no control over and still do not understand,” she said in a statement to the panel. She also defended her pay.

“I should not be singled out for isolated finger-pointing when my salary level is within the same range as staff in my grade level who were not forced to leave their jobs,” Riza said. She said the “media circus” over the issue has done “significant harm to my career, my personal well-being and my prospects to continue the work I love.”

The controversy has led to calls for the resignation of Wolfowitz, who was an architect of the Iraq war in his previous job at the Pentagon. The bank’s 24-member board is expected to make a decision this week.

Bush, meanwhile, said Wolfowitz “ought to stay. He ought to be given a fair hearing.”

Wolfowitz contended that the controversy over the pay package was part of an effort to oust him from the office, which he has held for nearly two years. The institution’s mission is to fight global poverty.

“The goal of this smear campaign, I believe, is to create a self-fulfilling prophecy that I am an ineffective leader and must step down for that reason alone, even if the ethics charges are unwarranted,” Wolfowitz said.

“I will not resign in the face of a plainly bogus charge of conflict of interest,” he said.

As to his future leadership, Wolfowitz said: “only when the cloud of these unfair and untrue charges is removed, will it truly be possible to determine objectively whether I can be an effective leader of the World Bank.”

Bush said Wolfowitz’s fate did not come up during a U.S.-European Union meeting at the White House. The European Parliament has called on Wolfowitz to resign.

As part of his defense, Wolfowitz, among other things, cited a Feb. 28, 2006, letter that he characterized as showing that bank’s ethics committee had looked at the arrangement.

The panel’s chairman, Ad Melkert, said in the letter that an allegation relating to “a matter which had been previously considered by the committee did not contain new information warranting any further review.”

The letter didn’t specifically mention Wolfowitz or Riza by name. However, Wolfowitz pointed to it as proof that ethics officials were aware of Riza’s compensation package.

The bank’s executive directors, however, have said the terms and conditions of the package had not been “commented on, reviewed or approved” by the ethics committee, Melkert or the bank’s board.

Melkert, who has since moved on to a post at the United Nations, echoed the executive directors’ assessment and disputed Wolfowitz’s characterization of the matter.

“The ethics committee was not consulted, nor did it approve, the specific terms and conditions .... including the large initial pay increase, the stipulation for subsequent annual increases and the stipulations for subsequent promotions,” Melkert said in a statement.

Melkert’s February 2006 letter informed Wolfowitz that the ethics committee had reviewed two e-mails from an anonymous whistleblower alleging ethical lapses by the World Bank’s president. One e-mail complained about the size of Riza’s pay raise.

Riza was working at the bank when Wolfowitz arrived in 2005 and had earned close to $133,000 a year as a communications adviser in the bank’s Middle East department. She was reassigned at the State Department to avoid a conflict of interest but remained on the bank’s payroll. Her pay then rose to $180,000 and eventually to $193,590.

Wolfowitz said the initial $180,000 she received “was in line with salaries paid to bank employees” holding similar H level positions. He said the salary “seemed reasonable to me” and noted that “many World Bank employees are, comparatively speaking, generously paid, and hundreds of them earn more than the U.S. secretary of state.”

He denied accusations that he sought to hide details of Riza’s pay package.

“I always expected that the ethics committee could know the details of how the matter was resolved if they so desired,” Wolfowitz said. “I also understood that experts in the human resources department would review the contract. It never occurred to me that they would not, and I believe that they did.”

Wolfowitz said the details of the pay package “were not ‘dictated’ by me but flowed from the back-and-forth negotiating process” between the bank’s vice president of human resources, Xavier Coll, and Riza, who had her own counsel in the matter.

Riza said that during negotiations on her package neither Coll nor anyone else suggested that it might violate bank policy. She also said there was no bank provision requiring her to leave to resolve the situation.

The Government Accountability Project, a watchdog group, however, said Riza “was not allowed to receive raises as high as she did, which are explicitly in excess of what bank rules stipulate.”

For World Bank officials to declare his actions to be improper, Wolfowitz argued would be “unjust and frankly hypocritical.”

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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