Paul Wolfowitz ’65 Sparks Controversy at World Bank

WASHINGTON (AP) — It’s been a stormy two years for Paul Wolfowitz ’65 as head of the World Bank — even before the controversy that recently put his job in jeopardy.
Wolfowitz grew up on The Hill, even taking classes at Cornell as a student at Ithaca High School while his father, Jacob, taught mathematics at the University.
He began his undergraduate career following in his father’s footsteps, studying theoretical mathematics, but drifted away from that path after he graduated with a bachelors in mathematics.
Before President Bush nominated him to serve as president of the World Bank, Wolfowitz served as Deputy Secretary of Defense at the Pentagon, where he had become a lightning rod for criticism on the Iraq war because he was one of its principal architects. He has also been criticized for underestimating the amount of troops need in the Iraq war.
When he arrived at the bank, an institution fighting global poverty, he was followed by criticism of his previous job as deputy secretary of defense, where he helped to map out the U.S.-led Iraq war.
Then he touched a nerve when his hard line on corruption led to the suspension of aid to several poor countries. He raised eyebrows when he pressed to open an office in Iraq amid worries about security in the country.
Now he is fighting to keep his job as president of the World Bank after disclosing that he had a direct hand in arranging a promotion and generous compensation for bank employee and close companion Shaha Riza. The controversy has provoked calls from many bank employees and aid groups for Wolfowitz to resign.
The World Bank’s board, which expressed “great concern” over the situation, is looking into it and will decide what action should be taken, if any. No timetable has been released.
The fracas couldn’t come at a worse time. Wolfowitz recently began the arduous process of trying to raise billions of dollars from the United States, Europe and other countries that would bankroll a World Bank program that provides financial help to poor countries. Some fear the flap could hobble efforts to come up with close to $30 billion in funding for the program.
“We are concerned about the institution, we are concerned about these allegations,” said European Commission spokesman Amadeu Altafaj Tardio. “We hope this will be dealt with in a proper away and we hope that it will not affect our cooperation.”
The controversy cast a pall over the just ended weekend meetings of the 185-nation World Bank and the International Monetary Fund.
“While this whole business has damaged the bank and should not have happened, we should respect the board’s process,” Hilary Benn, Britain’s secretary of state for international development said over the weekend.
Wolfowitz hopes to weather the storm and indicated he does not plan to resign.
“Look, I believe in the mission of this organization, and I believe that I can carry it out,” he said Sunday at the close of the spring meetings. “The board is looking into the matter, and we’ll let them complete their work.”
While Europeans have raised concerns about Wolfowitz, the United States — the bank’s largest shareholder — is standing by him. The White House and Treasury Secretary Henry Paulson have expressed support.
Hoping to quell criticism, Wolfowitz acknowledged last week that he had made a mistake and apologized for securing a State Department job for Riza in September 2005 that pays her $193,590. Before the transfer, Riza was earning close to $133,000 as a communications adviser in the bank’s Middle East department.
Documents released Friday showed that Wolfowitz personally dictated the terms of Riza’s compensation package. The terms and conditions of the package had not been “commented on, reviewed or approved” by the World Bank’s ethics committee, its chairman or the bank’s board, according to the bank’s executive directors.
Riza remains on the World Bank’s payroll even though she left the State Department job in 2006 and now works for Foundation for the Future, an international organization that gets some money from the department. “I have now been victimized” for agreeing to the arrangement, Riza said in a memo to the bank last week.
Wolfowitz also has been criticized for surrounding himself at the bank with aides from the White House — namely Kevin Kellems and Robin Cleveland — and paying them salaries topping $200,000 each. The two lack development experience.
German Development Minister Heidemarie Wieczorek-Zeul said Wolfowitz must do some soul-searching about whether he can continue to lead the bank. “At this point, it is my conclusion that he has to decide for himself whether in regard to this mistake he can credibly fulfill his duties,” she said over the weekend.
Wolfowitz took over the bank on June 1, 2005 after leaving the Pentagon, and it was rocky from the start.
Europeans and international aid and other groups worried he might use the bank to help America’s allies and punish its enemies. Some were especially concerned that shortly after his arrival, Wolfowitz pushed to put bank staff members back into Iraq despite widespread security concerns. The World Bank has been administering millions of dollars to finance a variety of development projects in Iraq.
And the Europeans and aid groups were upset when Wolfowitz — as part of his plan to tackle corruption — moved to suspend aid to poor countries like Chad and Congo. In protest, the British government threatened to withhold a $94 million contribution to the World Bank. In the end, Wolfowitz allowed aid to flow to Chad and provide debt relief to Congo.
Wolfowitz’s crusade to help Africa has won him some supporters.
“We have seen visionary leadership, steadfast progress under Mr. Wolfowitz,” said Liberia’s finance minister Antoinette Sayeh. “We can only say that we look forward to that continuing.”
By tradition, the World Bank has been led by an American. President Bush tapped Wolfowitz. The bank’s board approved the selection despite complaints from Europeans about his role in the Iraq war. The bank’s board also has the power to remove Wolfowitz.
“With Wolfowitz, the World Bank is losing face,” said Amy Gray of ActionAid. “If it wants its politics on corruption to be taken seriously, it must first look within.”