Panel: Wolfowitz broke World Bank rules

WASHINGTON - A special panel has found that World Bank President Paul Wolfowitz broke bank rules in arranging a pay package and promotion for his girlfriend, a person familiar with the report said Monday.

World Bank President Paul Wolfowitz during a news conference at the European Union headquarters in Brussels, May 2, 2007. The World Bank has never fired its president in its more than 60-year history. That could change this week. The bank's board of shareholder nations will meet as soon as Tuesday, possibly followed by a second meeting, to decide whether Wolfowitz will be forced out or given the chance to negotiate his departure, according to board sources who declined to be identified. [Reuters]

Wolfowitz was presented with the findings by the special bank panel investigating his handling of the 2005 promotion and pay raise of bank employee Shaha Riza.

The report was not made public, but the person familiar with its findings confirmed that violations were cited but did not provide any details. The person spoke on the condition of anonymity because the report has not yet been released.

World Bank officials were bracing for a finding that Wolfowitz may have breached conflict of interest rules in arranging the pay package for Riza.

The controversy over Riza's pay package has spurred calls for Wolfowitz' resignation. He is fighting to hold onto his job.

The special panel, which has been meeting over the last several weeks, met again Monday and has sent a report of its findings to Wolfowitz, according to people familiar with the probe. Wolfowitz will be given a chance to weigh in before the report is forwarded to the bank's board, those people said.

Wolfowitz' attorney, Robert Bennett (news, bio, voting record), said his client was being given 48 hours to respond, which he called "unreasonable and unfair," and said they had requested to have until next Monday.

White House spokesman Tony Fratto offered a fresh endorsement of Wolfowitz on Monday.

"The president continues to strongly support Paul Wolfowitz and believes he should continue to lead the World Bank," Fratto said, adding, "We have not seen the committee's report."

By tradition, the World Bank has been run by an American. President Bush tapped Wolfowitz, a move that was approved by the bank's board.

The developments come as a top adviser to Wolfowitz, Kevin Kellems, said he is leaving the institution.

"Given the current environment surrounding the leadership of the World Bank Group, it is very difficult to be effective in helping to advance the mission of the institution. Therefore, I have decided to leave for other opportunities," Kellems told The Associated Press on Monday.

Wolfowitz had tapped Kellems, who came from the White House and worked with him previously at the Defense Department, to become his adviser at the poverty-fighting institution. Kellems' arrival in the summer of 2005 eventually touched off criticism among staff that Wolfowitz was sealing himself off with a small cadre of trusted advisers.

Among the things the special panel has been looking at is whether Wolfowitz violated bank rules, including conflict-of-interest rules, in getting involved in Riza's promotion and compensation package.

The bank's 24-member board will decide what action should be taken, if any. A decision is expected soon.

A range of disciplinary options has been discussed. The board could fire Wolfowitz, ask him to resign, signal that it lacks confidence in his leadership, reprimand him or take no action. Some believed that prospects were fading for a compromise under which Wolfowitz would avoid a harsh reprimand but would resign anyway.

Wolfowitz has maintained that he acted in good faith in arranging Riza's pay package and has accused his critics of launching a "smear campaign" against him.

The bank's executive directors, however, have said the terms and conditions of the package had not been "commented on, reviewed or approved" by the bank's ethics committee, its chairman or the bank's board.

A person close to the investigation said there was a recognition in the special panel's report that some of the ethics committee's direction concerning the matter wasn't clear.

Riza worked for the bank before Wolfowitz took over in June 2005. She was moved to the State Department to avoid a conflict of interest but stayed on the bank's payroll. Her salary went from close to $133,000 to $180,000. With subsequent raises, it eventually rose to $193,590.

Before he took over the bank, Wolfowitz was the No. 2 official at the Pentagon. He helped mapped the U.S.-led war in Iraq.

The United States is the bank's largest shareholder, and Bush has said Wolfowitz should remain on the job. European countries, however, are leading the charge for Wolfowitz to go.

The European Parliament, many of the bank's staff, former bank officials and others have called on Wolfowitz to resign. Critics say the flap has hurt the bank's reputation and may hobble its ability to raise billions of dollars to help poor countries.

The special bank also was examining other employment arrangements, including the one involving Kellems.

Kellems and another close Wolfowitz adviser, Robin Cleveland, each are paid more than $200,000 a year ¡ª compensation that has irked some bank staff. Critics say they lacked extensive development experience.

Kellems' last day is expected to be next week. He didn't say what he will do after leaving the bank.