Calls for Wolfowitz to resign mount

14 April 2007

Calls are mounting from all directions for the resignation of World Bank president Paul Wolfowitz, following his admission that he personally intervened in the pay rise and promotion of his girlfriend.

Alison Cave, chair of the Bank staff association, has said that Bank president Paul Wolfowitz “must acknowledge that his conduct has compromised the integrity and effectiveness of the World Bank Group and has destroyed the staff’s trust in his leadership. He must act honourably and resign.”

After initially denying any involvement, Wolfowitz has now conceded the charges against him. Shaha Riza, who had worked in the Bank for eight years before Wolfowitz’s arrival in June 2005, was moved to the US state department to avoid any conflict of interest. Rapid rises in her salary from $136,000 to $193,000 tax free – which violated internal Bank rules – were approved by Wolfowitz. Her salary continues to be paid by the Bank. The Bank’s board has said that it never gave its approval for the wage rise, despite claims to the contrary by Wolfowitz’s aides. The board said the Bank’s ethics committee “had not been involved in the discussions with the concerned member of staff”.

He must act honourably and resign

The Bank’s board of executive directors met in emergency session on Thursday, considering the report of a committee investigating his actions and considering his future. One Bank source quoted in the Washington Post said that Ana Palacio, the former Spanish foreign minister Wolfowitz appointed as general counsel after her predecessor resigned in late 2005 over the Riza issue, was asked to leave the room during the panel’s deliberations. Troublingly the staff association have been told by some Bank board members that the board’s enquiry is “not being properly conducted”. Accordingly, they have demanded “that the Board release all of the documents that it has collected in this case”, which include: a dated memorandum from the president to the human resources vice president instructing him to agree on the terms for Riza’s external assignment; the contract formalising these terms; and testimony from the former chair of the ethics committee, the former legal counsel Roberto Dañino; and the vice president of human resources, Xavier Coll. The report of an ad hoc group formed to investigate the allegations for the board has been made public (see link below).

At an open meeting of the staff association on Thursday, Wolfowitz said that he was “constrained to talk about the details” of the situation and that his “biggest mistake was that [he] didn’t try hard enough to stay out of it” in reference to Riza’s external assignment. Finally, Wolfowitz stated that he “will abide by any remedies the board proposes.” As Cave rebutted his comments members of the crowd began chanting “resign”. Visibly uncomfortable, Wolfowitz left with his advisors while Cave continued taking comments and questions.

Riza failed to get Bank approval to work for US defence contractor in Iraq

US NGO Government Accountability Project (GAP) has verified with “inside sources at the Bank” that Riza never applied for nor received permission to provide consultant services to a US defence contractor in Iraq while in the employ of the Bank. Riza served as a “subject matter expert for the Middle East” in the run-up to the Iraq war at Science Applications International Corporation, a US firm “focused on defence capabilities and intelligence gathering. At that time, Paul Wolfowitz was deputy secretary of defence.

The Financial Times has called for Wolfowitz’s resignation. In a 12 April editorial they ask “What then do we see here? The answer is: an apparent violation of Bank rules; favouritism that borders on nepotism; and a possible cover-up. The World Bank has moved from being a self-proclaimed exemplar of best practice in corporate governance to an example of shoddiness. As long as Mr Wolfowitz stays, this can be neither repaired nor forgotten, be it outside the Bank or inside it. In the interests of the Bank itself, he should resign. If he does not, the board must ask him to go.”

Wolfowitz’s position was further undermined by US treasury response, which deals with the bank for the US government. Asked by UK daily The Guardian if the Treasury had confidence in Wolfowitz, Timothy Adams, Treasury undersecretary for international affairs said: “There is a mechanism in place, and I am going to allow that mechanism to work rather than inject myself into the middle of it.”

Nancy Birdsall, president of the influential US thinktank Center for Global Development, has joined the calls for Wolfowitz’s resignation, emphasising the need to reform the process whereby the selection of the World Bank president is left in the hands of the US administration: “By resigning now, Mr. Wolfowitz can rescue for himself a lasting legacy. He can do so by linking his own resignation to a clarion call for a transparent and openly competitive process in the selection of his successor, in which it is merit not politics and power that matter.”

European civil society groups, in a 13 April press release headed by NGO Eurodad, have backed Wolfowitz resignation calls and urged comprehensive reform of Bank governance. “In 2005 several European governments, the European Parliament and nearly 2000 NGOs stated their concerns about the appointment of Mr. Wolfowitz,” stated Antonio Tricarico, Director of the Campagna per la Riforma della Banca Mondiale in Italy. “His admitted irresponsibility at the Bank’s helm show those concerns were well founded. European governments must join others to demand Wolfowitz’s resignation and institute real changes. We hear that some European governments propose a backroom deal to throw Wolfowitz a life line. That would be wrong”.

The board will meet again today to make a decision on Wolfowitz’s fate. Civil society pressure is expected to mount over the selection process for any replacement of Wolfowitz. The ‘gentleman’s agreement’ which allows the United States to choose the head of the World Bank has been denounced by civil society and officials alike. In a speech delivered at the Royal African Society 12 April in London, UK secretary of state for international development Hilary Benn said it was “inconceivable” that such a selection system should be allowed to continue.