World Bank Finds Wolfowitz Guilty Now What?

World Bank president Paul Wolfowitz, a former Bush’s Deputy Secretary of Defense, has been found guilty of a conflict of interest in arranging for a pay raise and promotion for Shaha Ali Riza, his girlfriend and a bank employee, in 2005.

The conclusions of the bank special committee, not made public, are bound to step up pressure on Wolfowitz from governments and bank staff, despite his statements last week suggest he’s not willing to resign in the event committee finds him guilty. Calls for resignation have been increasing and have forced one of his top aide, Kevin Kellems, to quit the World Bank.

Staff complaints are targeting a second aide, Robin Cleveland, who followed Wolfowitz after his appointment to the top post at the World Bank., still in place. Both Cleveland, still in place, and Kellems have been the focus of critics over their high salaries — more than $250,000 a year.

According to The New York Times, the panel’s report said that it reviewed extensive documents and testimony before concluding that Wolfowitz breached his obligations in arranging for Riza’s reassignment from the bank to the State Department.

But what is next for Wolfowitz? The panel’s report does not recommend specific actions against him. However, the committee is still working and might forward a recommendation to the bank’s Board of Directors in the next couple of days.

Last week, Wolfowitz issued a broad-based rebuttal that blamed unclear bank rules for creating questions about his handling of hefty pay raises for his girlfriend.

“Rather than attempt to adjudicate between our 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,” Wolfowitz wrote to the special panel’s chief, Herman Wijffels.

“While I am prepared to acknowledge that we all acted in good faith at the time and there was perhaps some confusion and miscommunication among us, it is grossly unfair and wrong to suggest that I intended to mislead anyone, and I urge the committee to reject the allegation that I lack credibility,” he wrote.

The board has a few choices: it may force Wolfowitz to resign the post or, more likely, express a loss of confidence in his leadership. Such a decision, would leave Wolfowitz at the helm of the organization, but would increase the tensions between the staff and the top management, undermining the effectiveness of the World Bank in the third world – Wolfowitz seems to have the support of only the United States, Canada and Japan at the moment.

But the Wolfowitz affair, as many are now referring to it, might change the face of the World Bank entirely. Since its foundation, the President of the United States has been given the prerogative to choose and nominate the head of the organization – the US holds around 16.4% of total votes, and major decisions require an 85% super-majority. Instead, European government have the prerogative f electing the chief of another Washington-based Bretton Woods institution, the International Monetary Fund.

The recent scandal and new pressure coming from the public opinion in Europe might forced European governments to unprecedentedly put an end to the US role in the selection’s process. Experts and observers are now advising the White House to intervene and ask Wolfowitz to step down – last week Bush voiced his support to his pick.

“If the bank is to carry out its task of helping the world’s poorest countries, it must have a president who possesses the required credibility and support,” a Financial Times editorial read last week. “A change in the method of selecting the heads of the World Bank and the International Monetary Fund is overdue. In the current emergency, however, the US should be asked to nominate someone demonstrably suitable for that task.”

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