...Getting Out Painfully
The Wolfowitz fight was about more than a raise for a friend
As the president of the World Bank, Paul Wolfowitz relied on a small group of aides and a bare-knuckled management style that angered many staff members and senior bank officials. Last week, he stepped down, effective June 30, a decision that seemed to end the uproar over his leadership-an uproar that came to a head because of a hefty pay raise and promotion he arranged for a companion, Shaha Riza.
But the purge is far from over. More heads are certain to roll, and his vaunted anticorruption program is likely to suffer in the process.
In the meantime, the White House is pressing to name a new bank president, perhaps within a week to 10 days. The United States customarily selects the bank's president, and several names were in play at week's end, including Robert Zoellick, the former deputy secretary of state; Robert Kimmitt, the No. 2 at the Treasury Department; and John Snow, the former treasury secretary.
Wolfowitz, insistent that he did not violate the bank's ethics rules, negotiated his resignation with the antipoverty institution's 24-member executive board. Board members, many displeased with his leadership, agreed to issue a statement thanking him for his service. Its statement also said, in referring to the uproar over Riza, that Wolfowitz "assured us that he acted ethically and in good faith ... and we accept that."
Bank documents show that Riza was transferred to the State Department and given a healthy raise after Wolfowitz took over the presidency in June 2005. Wolfowitz sought to recuse himself in dealing with the issue but was directed by the board's ethics committee to handle the matter.
Many board and staff members were long critical of Wolfowitz's stewardship. Some denounced his reliance on a group of Republican aides who were viewed as overtly political. Others believed his program to crack down on corruption in bank projects was inconsistent with the bank's mission. And some criticized him for his previous role, as a Defense Department official, in planning the Iraq war.
That resentment was on vivid display in Wolfowitz's battle to save his job. He got no help from the United Kingdom, a close U.S. ally. One reason: Last year, Wolfowitz held up $800 million in new loans for a health program in India because of corruption concerns. The British, who also provided funds for the program, were "disillusioned," says a senior bank official. Although Wolfowitz eventually released the funds, the damage was done. "The U.K. was conspicuous by its absence of support for Wolfowitz at the end," says the official.
Cracking down. Wolfowitz made fighting corruption a hallmark of his presidency, which many bank insiders supported. He increased funding and staff for the Department of Institutional Integrity, the corruptionbusting unit. But many staffers argue that the unit's aggressive investigations unfairly created an impression that employees were corrupt. One casualty could be Suzanne Rich Folsom, an ethics lawyer who heads the department. Folsom came to the bank under Wolfowitz's predecessor, James Wolfensohn, but some bank staffers complained that she got the unit chief's job merely because she was a Republican.
Wolfowitz's political ties hurt him, no doubt. He relied on a few aggressive Republican aides, including Kevin Kellems, who worked for him at the Defense Department, and Robin Cleveland, a former Bush administration budget official. Kellems has already resigned, and Cleveland may soon be gone, too, sources said. Still others could be on the chopping block, including Wolfowitz's general counsel, Ana Palacio, and one of his managing directors, Juan Jose Daboub, according to bank officials.
In the end, the uproar over Wolfowitz's role in the pay-and-promotion scandal was but one piece of a larger mosaic. "That was just the lightning rod that traveled all the way down the wire into the basement of the bank," says one official. "That was basically the tipping point."
This story appears in the May 28, 2007 print edition of U.S. News & World Report.