Crying Wolfowitz

You may have heard that former Deputy Secretary of Defense for the Bush Administration, Paul Wolfowitz, is under fire in his current job as President of the World Bank. What many are undoubtedly unaware of is the fact that this is a scandal based on trumped charges designed to remove one President, and perhaps hamper another, who has been decidedly hard on corruption-plagued states that come seeking handouts from the World bank. The latest scandal stems from accusations that he directly helped his girlfriend’s career at the World Bank (emphasis added):

Paul Wolfowitz’s struggle to remain as president of the World Bank was dealt a setback when a group of two dozen of the world’s finance ministers and leaders of other international organizations delivered an unusually public rebuke of his leadership, expressing “great concern” about the institution’s future and the need to preserve its credibility and the morale of its staff.

Wolfowitz, responding at a news conference Sunday, vowed to stay on at the bank, however, saying that he too cared about the bank’s ethical standards. “Look, I believe in the mission of this organization, and I believe I can carry it out,” he said.

The extraordinary exchange between Wolfowitz and the ministers and officials on a global committee that oversees both the bank and the International Monetary Fund deepened the uncertainty over Wolfowitz’s future, which was thrown into doubt by the disclosure that he played a direct role in granting a pay raise and promotion to a female companion when she was transferred in 2005.

More from the Economist:

PAUL WOLFOWITZ’s first mistake after becoming president of the World Bank in June 2005 may yet be the final straw that breaks him. At the conclusion of the bank’s spring meetings in Washington, DC, its directors have yet to pass judgment on a lucrative deal he cut in August 2005 for his girlfriend, Shaha Riza, who was working at the bank when he arrived. To avoid a conflict of interest, she was posted to the State Department. But the terms he arranged for her show a worrying excess of chivalry, worth well over $200,000 over five years. The directors have promised to move “expeditiously” to a conclusion.

As this “scandal” (scare quotes explained below) unfolded, Wolfowitz authorized the release of some 109 pages of documents intended to clear up the matter. Instead, the documents are being used to sharpen the accusations of favoritism and increase the calls for Wolfowitz’s ouster. The only problem is, Wolfowitz didn’t actually do anything wrong or unethical.

The World Bank released its files in the case of President Paul Wolfowitz’s ethics on Friday, and what a revealing download it is. On the evidence in these 109 pages, it is clearer than ever that this flap is a political hit based on highly selective leaks to a willfully gullible press corps.

Mr. Wolfowitz asked the World Bank board to release the documents, after it became possible the 24 executive directors would adjourn early Friday morning without taking any action in the case. This would have allowed Mr. Wolfowitz’s anonymous bank enemies to further spin their narrative that he had taken it upon himself to work out a sweetheart deal for his girlfriend and hide it from everyone.

According to several sources, Wolfowitz disclosed the relationship prior to ever signing his employment contract and sought to be recused from any personnel matters having to do with Ms. Riza:

The bank’s general counsel at the time, Roberto Danino, wrote in a May 27, 2005 letter to Mr. Wolfowitz’s lawyers:

“First, I would like to acknowledge that Mr. Wolfowitz has disclosed to the Board, through you, that he has a pre-existing relationship with a Bank staff member, and that he proposes to resolve the conflict of interest in relation to Staff Rule 3.01, Paragraph 4.02 by recusing himself from all personnel matters and professional contact related to the staff member.” (Our emphasis here and elsewhere.)

The anti-Wolfowitz spin on that little nugget of info is reported in the Washington Post (emphasis added):

A final sticking point, conveyed in all capital letters in an e-mail to then-general counsel Roberto Dañino, was Wolfowitz’s insistence that, while he had earlier offered to recuse himself from all office matters involving bank employee and his girlfriend Shaha Riza, he insisted on retaining retain “professional contact” with her — something that the executive board later determined was a clear conflict of interest under personnel rules.

Even if it is true that Wolfowitz “insisted” on retaining professional contact, so what? This was negotiated prior to his becoming President. The World Bank could have simply declined the offer as it did his offer to recuse himself. Instead, the board decided that Ms. Riza had to go and turned the matter over to the ethics committee. The ethics committee, in turn, decided that Ms. Riza was being unfairly hurt by the decision and that she should be properly compensated. It then placed the responsibility for implementing the decision into the hands of one Mr. Paul Wolfowitz (emphasis added):

And it was the ethics committee that concluded that Ms. Riza’s job entailed a “de facto conflict of interest” that could only be resolved by her leaving the bank.

Ms. Riza was on a promotion list at the time, and so the bank’s ethicists also proposed that she be compensated for this blow to her career. In a July 22, 2005, ethics committee discussion memo, Mr. Danino noted that “there would be two avenues here for promotion–an ‘in situ’ promotion to Grade GH for the staff member” and promotion through competitive selection to another position.” Or, as an alternative, “The Bank can also decide, as part of settlement of claims, to offer an ad hoc salary increase.”

Five days later, on July 27, ethics committee chairman Ad Melkert formally advised Mr. Wolfowitz in a memo that “the potential disruption of the staff member’s career prospect will be recognized by an in situ promotion on the basis of her qualifying record . . .” In the same memo, Mr. Melkert recommends “that the President, with the General Counsel, communicates this advice” to the vice president for human resources “so as to implement” it immediately.

And in an August 8 letter, Mr. Melkert advised that the president get this done pronto: “The EC [ethics committee] cannot interact directly with staff member situations, hence Xavier [Coll, the human resources vice president] should act upon your instruction.” Only then did Mr. Wolfowitz instruct Mr. Coll on the details of Ms. Riza’s new job and pay raise.

Needless to say, none of this context has appeared in the media smears suggesting that Mr. Wolfowitz pulled a fast one to pad the pay of Ms. Riza. Yet the record clearly shows he acted only after he had tried to recuse himself but then wasn’t allowed to do so by the ethics committee. And he acted only after that same committee advised him to compensate Ms. Riza for the damage to her career from a “conflict of interest” that was no fault of her own.

See also the Economist’s somewhat less charitable take:

When Mr Wolfowitz told the directors about his prior relationship with Ms Riza, its ethics committee refused his proposed solution, which was to keep Ms Riza at the bank but recuse himself from decisions about her pay and posting. Instead they advised him to post Ms Riza outside the bank (or beyond his authority, which extends over most of the institution) and invited him to give her a promotion to compensate her for the disruption to her career. The rest, astonishingly, they left up to him. Sadly, that gave the president more discretion than he knew how to use.

Since it was Mr. Melkert that started this roller coaster ride, one wonders why Wolfowitz is under fire at all. The answer to that lies in whose feathers have been ruffled by Wolfowitz’s hard-line posture concerning lending to corrupt states (my emphasis):

Since arriving at the bank, Wolfowitz has argued that the biggest barrier to development in many poor countries is a high level of government corruption.

“Corruption is often at the very root of why governments do not work,” Wolfowitz argued in a speech in Indonesia in April 2006.

He felt so strongly about the need to fight corruption that he moved on his own to suspend World Bank assistance to several countries because of his dissatisfaction with their anti-corruption efforts. In the process, however, Wolfowitz angered key European governments. He also alienated many staff members who felt he was acting arbitrarily and disregarding the views of development professionals with many years of World Bank experience.

Although “key European governments” and inside staff members were upset with his stance, developing world leaders in places such as Africa have been more appreciative:

Among African leaders, the emphasis Wolfowitz has placed on their continent’s development has won him support. “He has been a visionary, absolutely supportive and responsive,” said Antoinette M. Sayeh, finance minister of Liberia. “We have visionary leadership and steadfast progress under Mr. Wolfowitz, and we look forward to it continuing.”

Zambian Finance Minister N’gandu Peter Magande cautioned against a rush to judgment. “We don’t want to go back to old days in our jungles,” he said. “We want to be sure that issues are dealt with correctly. It is not that we are being soft; we didn’t come here to make a judgment on this issue.”

My take is that Wolfowitz is pushing the wrong buttons by being so insistent on weeding out corruption and those most offended, who curiously enough always seem to be European nations connected to the corrupt nations somehow, have ginned up a scandal by raising the specter of favoritism. While self-interest may explain the behavior of the World Bank insiders attempting to rid themselves of Wolfowitz, I can think of no other explanation than bias as to why the media plays along. They are all in possession of the full packet of documents released, and they all know that Wolfowitz did not push anything through. There was no “hide the ball” going on, and ultimately the ethics committee not only cleared, but demanded that Wolfowitz take the very action for which he is now held up for international opprobrium. As per usual in these situations, the winners will be those who prefer to maintain the status quo and the losers are the very people whom the World Bank and other international organizations profess to help.

[tags] World Bank, Paul Wolfowitz, Shaha Riza, scandal, media bias, anti-corruption, developing nations, European elitism [/tags]