News Compass

Friday, May 18, 2007

Wolfowitz RESIGNED as President of World Bank - Effective June 30, 2007

Read here article by William McQuillen and Christopher Swann

World Bank President Paul Wolfowitz quit less than halfway into his five-year term, bowing to an international furor sparked by his involvement in a pay raise for his companion.

``I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership,'' Wolfowitz, the former U.S. deputy defense secretary and Iraq war architect, said in a statement today in Washington.

His departure is effective June 30.

Wolfowitz resigned after three days of negotiations with the bank's directors yielded a compromise that allowed him to avoid sole responsibility for his involvement in a pay-and- promotion package for his companion, Shaha Riza.

``He assured us that he acted ethically and in good faith in what he believed were the best interests of the institution, and we accept that,'' the directors said in a statement.

Wolfowitz, 63, faced rising calls to leave from donor governments and staff members, who said he had hobbled the credibility of the world's largest development institution just as it geared up to raise $28 billion in fresh funds.

Wolfowitz was the first president to resign under fire since the group was founded in 1944. President George W. Bush, the only world leader to say he should stay in office, yielded to pressure from European nations including France, Germany, the U.K. and the Netherlands.

``There's no way he could have remained an effective leader because of the acrimony and rancor,'' said George Ayittey, an economist at American University in Washington and a former World Bank consultant. ``There was too much animosity within the bank.''

White House spokesman Tony Fratto said that Bush would name a replacement ``soon.''

Admirers praised Wolfowitz's devotion to helping the poor, especially in Africa, which he made a priority. Wolfowitz ``has shown a strong will to help Africa,'' Burundi's finance minister, Denise Sinankwa, said in an interview on May 15. ``I feel sorry for what has happened.''

A panel of seven directors on May 6 told Wolfowitz that he had violated staff rules and his employment contract when he dictated the terms of a 36 percent pay increase for Riza, along with guarantees of further 8 percent annual increases. The panel, in its report, told the full 24-member board that it should consider firing him.

Wolfowitz argued that the package represented a good-faith effort to carry out the instructions of the bank's ethics committee, and that the bank should bear some of the responsibility. That was an argument that the board accepted today, saying that ``mistakes were made by a number of individuals in handling the matter.''

Wolfowitz initially apologized for the scandal, which overshadowed last month's twice-yearly meeting of the World Bank's 185 members in Washington. He later adopted a more belligerent tone, hiring attorney Robert Bennett to represent him and saying he was the victim of a ``smear campaign.''

Even before the controversy erupted in April, Wolfowitz aroused hostility by pushing aside senior managers in favor of advisers recruited from the Bush administration. His proposal to beef up the bank's presence in Iraq exposed him to charges he was using the World Bank to further U.S. foreign policy goals.

Wolfowitz on May 15 appeared before the board and delivered a final plea to keep his job. He conceded he had relied ``much too long'' on advisers brought in from the White House and promised to put more trust in bank vice presidents.

``It is quite apparent that this matter has ceased to have much to do with the case itself -- and everything to do with issues about my management style and my policy choices,'' he said.

Wolfowitz, a former political science professor who also worked for Presidents Ronald Reagan and George H.W. Bush as a diplomat and policy maker, came to the World Bank bearing the baggage of his role in the Iraq conflict. He was often heckled by anti-war protesters during trips around the U.S. and abroad.

``For those who disagree with the things that they associate me with in my previous job, I'm not in my previous job,'' Wolfowitz said in an April 12 statement. ``I'm not working for the U.S. government, I'm working for this institution and its 185 shareholders.''

His anti-graft campaign also ruffled feathers. Wolfowitz failed to consult bank directors when he suspended loans to Chad, Kenya, India and Bangladesh in his drive to ensure aid money didn't line the pockets of corrupt politicians.

Detractors said the campaign had gone too far and had distracted the bank from its primary mission of fighting poverty.

Last year, the U.K. briefly withheld about $94 million from the World Bank, saying too many conditions had been attached to its loans.

Wolfowitz said he was surprised by the criticism.

``There's a little more resistance than I would have expected, and it doesn't come from the poor countries, it comes from the rich ones, which is kind of odd,'' he said in a March 9 interview in Kinshasa, Congo.

A former professor of political science at Yale, he served as ambassador to Indonesia and assistant secretary of state for East Asian and Pacific Affairs in the 1980s.

Yet he had scant experience running large organizations, unlike predecessors such as James Wolfensohn, a former Salomon Brothers executive, and Robert McNamara, the Vietnam-war era defense secretary and one-time president of Ford Motor Co.