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From Wolfowitz to Zoellick: An opportunity lost

Bretton Woods Update Number 56

Bretton Woods Project

May/June 2007

SARPN acknowledges the Bretton Woods Project as the source of this document: www.brettonwoodsproject.org
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In early April, US NGO Government Accountability Project revealed payroll data for Shaha Ali Riza, a Bank communications officer seconded to the US State Department to avoid a conflict of interest over her ‘romantic links’ with then incoming president Paul Wolfowitz. Riza had received pay rises which grossly exceeded those allowed by Bank staff rules. Wolfowitz, who had made the fight against corruption his signature issue (see Update 55, 53), had pushed the deal through.

The Bank’s board formed an ad hoc committee to investigate. Initially Wolfowitz apologised for his “mistake” and said he would “fully cooperate” with the board’s investigation. In an unprecedented move, ministers on the Bank’s highest body, the Development Committee, commented in the spring meetings communiqué: “We endorse the board’s actions in looking into this matter and we asked it to complete its work. We expect the Bank to adhere to a high standard of internal governance.”

The more that came to light, the longer grew the list of those calling for Wolfowitz’s head, including the Bank staff association, 37 of 39 country directors, 42 of the Bank’s most senior former executives, managing director Graeme Wheeler, and the Independent Evaluation Group who lamented that “the ability of staff to carry out daily interactions with clients is eroding”. Inside the Bank, work had come to a virtual halt under what staffers came to call “The Current Situation” or TCS.

Wolfowitz then hired attorney Robert Bennett, who accused detractors of leading a “smear campaign”, attempted to discredit members of the board and staff, and threatened to reveal board and staff salaries.

However, former general legal counsel Roberto Dañino, former board member and chair of the ethics committee Ad Melkert, and former head of human resources Xavier Coll, rebutted all attempts to pin the blame for the affair on staff and the board.

European, Asian and Latin American board members were in the resign camp. Aspokesperson for German development minister Heidemarie Wieczorek-Zeul was the first official to declare outright: “voluntary resignation [would be] the best solution for the Bank and its goals”. The US, Japan, Canada and Africa were said to remain defenders of Wolfowitz. The position of African ministers was made particularly difficult – Wolfowitz’s support for debt relief in some African countries and veiled US threats made it difficult for them to call for his resignation. African NGOs distanced themselves from the insinuation that ‘Africa backed Wolfowitz’.

After several delays as the board attempted to counteract Bennett’s charges of a “rush to judgement”, the ad hoc group released its findings 14 May. It concluded that Wolfowitz had violated the Bank’s code of conduct and a string of staff rules, and that his involvement in Riza’s external assignment constituted a conflict of interest.

Three agonising days later, Wolfowitz resigned. Diplomatic niceties required the board to retreat from the clear-cut conclusions of the ad hoc committee: “He assured us that he acted ethically and in good faith in what he believed were the best interests of the institution, and we accept that.” The date of his resignation was set for 30 June, with much speculation – neither confirmed nor denied – that his contract included a two-year service bonus which came due in June.

The staff association called on the board to place Wolfowitz on administrative leave effective immediately, “to protect staff against any retaliation” and to prevent Wolfowitz from making any decisions affecting the work of the Bank or its staff.

While Wolfowitz never embarked on a threatened ‘farewell tour’ to Africa, before his departure he did name Australian Simon Stolp, former consultant for the US Department of Defence, as Iraq country director. Stolp follows in the pattern of inadequately experienced political appointees. The Bank panel which interviewed candidates for the job said they “felt uncomfortable as to whether he could become a credible, substantive representative of the Bank ... on account of his weak analytical background, and lack of knowledge about the Bank.”



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