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Inside Politics

Panel: Wolfowitz broke bank rules

Story Highlights

• The bank is suffering a "crisis in leadership," the special ad hoc committee says
• Wolfowitz blames what he calls "ambiguous bank rules"
• World Bank board will meet Tuesday with Wolfowitz to determine his future
• White House voices support for Wolfowitz but says probe should run its course
From Elise Labott and Zain Verjee
CNN Washington Bureau
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WASHINGTON (CNN) -- An internal panel concludes World Bank President Paul Wolfowitz violated staff rules in arranging a promotion and pay raise for his girlfriend and questions whether he can still lead the bank, according to its report.

The special ad hoc committee looked into allegations Wolfowitz broke conflict of interest rules in dealing with his girlfriend, Shaha Riza, who left the World Bank when Wolfowitz took over the top spot in 2005.

The bank is suffering a "crisis in leadership," the committee said, according to its report released Monday evening on its Web site. The executive board of the organization needs to consider whether Wolfowitz "will be able to provide the leadership needed" to effectively carry out the mission of the World Bank, the report said.

After Wolfowitz took over at the World Bank, Riza was transferred to a State Department foundation and receives a government salary of almost $194,000 a year, tax free.

Wolfowitz rebuts statements from former World Bank officials who claimed he ignored Bank ethics committee directions on the Riza case and acted improperly. He blames what he calls "ambiguous bank rules and unclear governance mechanisms."

The panel concluded that Wolfowitz's role in the matter "went beyond the informal advice" given by the bank's ethics committee, and that he "engaged in a de facto conflict of interest," according to the report.

"I am very disappointed that the ad-hoc committee that insisted on confidentiality put its report on its Web site before the full board had a chance to consider the report," Wolfowitz's attorney, Robert Bennett, told CNN. "This is just one more example of unfair dealing and the unfair effort to get him to resign."

The 24-member World Bank board will meet Tuesday with Wolfowitz and have the final say on Wolfowitz's future. A decision could come this week and could include reprimanding him, asking him to step down, or firing him.

Bennett said he was "still hopeful" the full board will look at the evidence carefully and objectively.

"I believe that any person that looks at the evidence will find that Mr. Wolfowitz acted in good faith and acted in accordance with staff rules," he said.

Some of the criticism against Wolfowitz dates back to when he was the No. 2 official at the Pentagon and one of the chief architects of the Iraq war. He also drew fire for his anti-corruption policy, which some long-time bank employees thought unfairly victimized the poor in certain countries. There also is some general resentment against the tradition at the bank that the president is always an American and named by the U.S. president.

The White House has voiced support for Wolfowitz but said the World Bank investigation should run its course.

U.S. Treasury Secretary Henry Paulson has spoken with his colleagues from other countries and argued he "does not think the facts merit dismissal," according to a Treasury Department spokesperson.

"A clear reading of the facts in this report demonstrates that this was a unique situation, missteps occurred on all sides, and communication may not have been clear enough," Brookly McLaughlin told CNN. "The facts reveal that President Wolfowitz acted to find a pragmatic solution and to carry out the direction he received from the Ethics Committee."


    • Europe, U.S. differ on Wolfowitz
    • Wolfowitz: I won't resign
    • Oxfam wants Wolfowitz to step down
    • Executives urge Wolfowitz to resign
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