Update: Point, counterpoint, counterpoint...

2 May 2007

An overview of the back and forth between Paul Wolfowitz, Former World Bank Managing Director Shengman Zhang, Former World Bank General Counsel Roberto Dañino, Former World Bank Ethics Committee Head Ad Melkert, and some civil society critics. The Rashomonian drama continues...

Embattled World Bank President Paul Wolfowitz defended himself against allegations that he secured an improper salary raise and promotions for his girlfriend at a meeting with the Board committee investigating the situation on Monday April 30. His former companion Shaha Ali Riza also appeared before the committee. Wolfowitz presented both written and verbal statements.

Following are the key points from Wolfowitz's April 30 statements, and responses and challenges from the Government Accountability Project, Former World Bank Managing Director Shengman Zhang, Former World Bank General Counsel Roberto Dañino and Former World Bank Ethics Committee Head Ad Melkert. Wolfowitz's May 2 response to Dañino and Melkert are also included.

 

Wolfowitz 4/30 written statement: Before Mr. Wolfowitz came to the World Bank, he disclosed his personal relationship with Shaha Riza...He proposed that he would recuse himself from all personnel matters concerning her. (1)

 

Wolfowitz 4/30 written statement: The issue was submitted to the Ethics Committee. The Committee decided that recusal was insufficient. [It] decided that Ms. Riza should be relocated outside the Bank, over her objections. The Committee also said that she should receive a promotion that she was due, before she was out-placed, and also that the terms of her forced departure should recognize the damage this would do to her career. (1) The statement also refers to the unprecedented nature of this situation.

• GAP response: Riza was not actually shortlisted for a management level position, as implied by Wolfowitz's statement. In fact, she was interviewed "as a courtesy because she was 'acting' in the position." She had previously been denied a similar promotion the year prior because she lacked the required qualifications. And while seconding an employee to the State Department under these circumstances may be unprecedented, there are indeed previous cases of the need to compensate employees in this manner, which Wolfowitz could have referenced.
• Ad Melkert response: The Ethics Committee recommended external assignment as one possible option - not the only choice. Furthermore, the Ethics Committee was not consulted on the specific terms of the external placement, including the pay increase, or conditions for annual increases and promotions.
• Roberto Dañino response: Wolfowitz was told that Riza would need to be removed from his direct supervision through one of three options: termination, secondment or assignment to one of the Bank offices not reporting to the President (for example, the Inspection Panel). Wolfowitz furthermore refused to recuse himself from professional contact with Riza, leading to the case's referral to the Ethics Committee.

 

Wolfowitz 4/30 written statement: The Committee members did not want to implement this plan themselves...because they said they could not interact directly with staff member situations. Instead, they told Mr. Wolfowitz, over his strong and repeated objections, that he would have to work with the Vice President of Human Resources to implement their advice. (1)

• Ad Melkert response: The Committee gave Wolfowitz several choices for avoiding a conflict of interest. He made his own choice. "It was entirely Mr. Wolfowitz's decision to do exactly what he originally proposed not to do: to engage directly in personnel matters regarding his partner."
• Wolfowitz May 2 response: I vehemently deny that I went beyond what I understoof to be the guidance I received from the Committee. Mr. Melkert's oral and written advice to me was that I had to 'instruct' Mr. Coll and that Mr. Coll should report back to me. He now says I should have in effect simply delegated the matter entirely...I strongly questioned this advice and expressed my discomfort with being put in this position...The fact remains that the Committee said it could not take responsibility for implementing its own advice, and that I had to take responsibility. (2)

 

Wolfowitz 4/30 written statement: The agreement reached with Ms. Riza was in line with other World Bank settlement agreements and was consistent with the goals that the Ethics Committee set out for treating her fairly. (1)

• GAP response: While it is true that other Bank employees at the same level do receive similar salaries, the raises Riza received to bring her to that level directly violated Bank rules. Staff rules would have capped her two raises as 12% and 3.7%; in reality, Riza received raises of 35.5% and 7.5%.
• Roberto Dañino response: The Committee advised that Riza be seconded externally with an in situ promotion. As far as he knew, no other benefits were recommended. "I believe PW [Wolfowitz] acted correctly when he instructed the Vice President, Human Resources (VPHR) to process with (a) the secondment and (b) the in situ promotion...I believe PW acted incorrectly when he instructed that in addition to (a) and (b), the VPHR should also (c) make an extraordinary salary increase, (d) guarantee an outstanding review for each year of secondment...and (e) guarantee a second promotion upon her return to the Bank...These benefits far exceeded, and were granted in addition to, those recommended by the EC."
• Wolfowitz May 2 response: I believed at the time [the terms and conditions of Riza's agreement] were the only practical, mutually acceptable resolution to an unprecedented situation...Mr. Coll told me there were no rules and policies that clearly applied to this situation, but we attempted to fashion an agreement that comported as closely as possible to the precedents and policies of the Bank...the only dispute is whether the initial pay increase was larger than it should have been... (2-3) Wolfowitz quotes a July 22 Board discussion: "[o]utside the mutually agreed separation provisions, a larger payment could be made a managerial discretion." ... Finally...[Riza's] agreement does not provide for 'automatic' promotions, but simply that she would be eligible to be 'considered' for promotion...and that her eligibility would be subect to evaluation and review by a panel of Bank staff independent of hte President's office. (3)

 

Wolfowitz 4/30 written statement: The Committee reviewed the resolution of this matter on two occasions and determined that it had been dealt with in a manner consistent with the Committee's findings and advice. (2)

 

Wolfowitz 4/30 written statement: Mr. Wolfowitz did not violate his contract...complied with pertinent ethics rules...[and] did not hide anything. Mr. Wolfowitz believed he had to follow the Committee's advice. (11-15) "At the time, I was new to the Bank. I was just learning its culture and politics. I relied on the guidance provided by the Ethics Committee and Mr. Coll," he remarked in his verbal statement.

 

Wolfowitz 4/30 verbal statement: "Clearly, Managing Director Shengman Zhang, who would have been the logical person for the Committee to call on to handle the matter, was compromised because his wife worked under him and had not been required to relocate." (5) 

• Shengman Zhang response: The rules for spouses and domestic partners is different than that for sexual relationships between supervisors and staff members. "The rule for spouses in a conditional PERMISSION and the rule for sexual relationships is an express PROHIBITION...My wife and I worked at the Bank under a rule which expressly permitted it. Mr. Wolfowitz attempted to have Ms. Riza work for him in defiance of an express prohibition. These were two completely different situations."

 

OTHER RELEVANT STATEMENTS:

• Dañino: "I have now learned...that I, as General Counsel, was barred from participating [after a certain point in the negotiations}...As a consequence...the Bank did not have legal representation to assure compliance with its own legal ."
• Dañino: "I would also like to record my strong protest at the way PW has excerpted the published documents of the EC [Ethics Committee] in the Bank's web site."
• Dañino: "PW [Wolfowitz] acted incorrectly, not only providing the additional benefits discussed...above, but also by trying to blame the Board, the EC, the General Counsel and the VPHR when these actions became public. It is only after the inaccurate assertions of PW or his spokespersons were denied by the affected parties and when PW's express instructions in writing became public, that PW admitted he had made a mistake."

• Dañino: "In my opinion, the matter presents not merely questions of legal compliance but also - and more importantly - questions about the moral authority of the Bank's President and the confidence he commands from the BAnk's own staff and around the world. I believe that PW made serious substantive errors by providing unauthorized benefits to a person with whom he had a relationship that created a conflict of interest...He then failed to disclose these actions and later blamed them on others, apparently trying to deceive the board, the staff and the general public. He or his spokespersons falsely suggested that his actions had been approved by the Board, the EC, the GC and/or the VPHR. Later statements have charged his accusers with political motivations. In my judgment, these actions and statements have badly hurt the morale of the staff, damaged the reputation of the Bank, and eroded his moral authority to lead the Bank."  

• Wolfowitz on May 2: Rather than attempt to adjudicate between our [Wolfowitz and Ethics Committee] conflicting interpretations of the events that occurred here, the Board should recognize that this situation is the product of ambiguous Bank rules and unclear governance mechanisms. That should be the focus of the Ad Hoc Group and the Board... (3)

Notes:

• Paul Wolfowitz statements are direct quotations from either written or verbal statements.
• GAP, Melkert, Dañino and Zhang responses are summaries of their respective statements.

Sources:

• GAP, Melkert and Dañino statements: GAP
• Zhang statement: worldbankpresident.org
• Wolfowitz 4/30 statements: Washington Post website
• Wolfowiz 5/2 statement: Financial Times website