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Financial Times

Row over Wolfowitz's Partner Intensifies

Krishna Guha / Mark Turner

The dispute over the pay increase and promotion awarded to the partner of the World Bank president, Paul Wolfowitz, when she was seconded from the bank to the US State department intensified on Friday when both the then head of the board's ethics committee and its then general counsel challenged the version of events put forward by bank officials.Ad Melkert, who chaired the committee and is now number two at the United Nations development programme, is said to be unhappy at the way bank officials characterised his role in the agreement over Shaha Riza, which news reports, unchallenged by the bank, say raised her salary to $193,000 (£98,000) free of tax. 0407 05

Mr Melkert's spokesman told the Financial Times it was "entirely up to management to determine the specific terms and conditions of the placement".

A senior bank official had earlier told the FT: "After consultation with the then general counsel, the ethics committee of the board approved an external assignment agreement."

Mr Melkert's spokesman challenged this explanation, stating that the members of the committee "were not aware of, nor did they approve, the details of the agreement".

The spokesman for Mr Melkert also took issue with the official's claim that the board had "instructed" Mr Wolfowitz to resolve the issue of what would happen to Ms Riza, who under bank rules could not work for her partner, through an external assignment.

Mr Melkert's spokesman said: "The role of the ethics committee is to advise on issues of integrity, not to mandate."

Meanwhile, Roberto Danino, the bank's then general counsel, told the FT: "I categorically deny that I was involved in any way in the implementation of the ethics committee advice to the president regarding the Shaha Riza matter."


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Earlier, Reuters had reported that a bank official claimed Mr Danino negotiated the deal along with Ms Riza's lawyer and Xavier Coll, the bank vice-president for human resources.

According to the bank staff association - which sent an e-mail to all employees this week demanding an explanation of how the agreement was reached - the Riza terms violated three specific bank rules.

The bank's board, which is made up of representatives of its shareholder governments, met in emergency session on Thursday afternoon to discuss the allegations and agreed to investigate them.

The claim that Ms Riza received special treatment could hugely embarrass Mr Wolfowitz, who has championed the cause of good governance globally.

The FT asked the bank whether Mr Wolfowitz or any members of his office had been involved in the negotiations. At the time of going to print, the bank was unable to respond to this request.

The controversy has inflamed tensions between Mr Wolfowitz and staff at the bank's headquarters in Washington and has the potential to ignite fresh conflict between him and the board and between the bank and the UNDP.

Mr Wolfowitz declined to comment. Ms Riza did not respond to a request for comment.

Copyright The Financial Times Limited 2007

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