CHARGES OF DISHONESTY FLY AT WORLD BANK

by Emad Mekay

(IPS) WASHINGTON -- The controversy over allegations of misconduct by World Bank President Paul Wolfowitz is turning ever more sour, with Wolfowitz and former top managers, who together oversaw billons of dollars in loans to thousands of projects in developing nations, trading barbs and accusations of dishonesty.

On Thursday, an embattled Wolfowitz sent a message of protest to Herman Wijffels, who is chairing the ad hoc committee probing allegations that he may have violated Bank rules by giving his girlfriend, Shaha Riza, an unusually generous pay and promotion package.

The committee will issue a report to the 24-member board of the Bank, which shares the responsibility of running the institution's day-to-day affairs with the management. The Board will likely decide Wolfowitz's fate sometime next week.

In the message, Wolfowitz said he was "dismayed and troubled" at the tone of recent statements by the Bank's former managing director, Roberto Danino, and Ad Melkert, former chair of the Ethics Committee of the World Bank Board of Directors.

Both have disputed Wolfowitz's account of how he came to organize the lucrative package that triggered accusations of nepotism and charges that he had failed to gain approval from the Bank's personnel department or the Board.

Last week, Wolfowitz defended his decision by saying that he acted in good faith and had sought an early recusal from the affair.

Melkert and Danino directly challenged those statements. Both contended that Wolfowitz insisted on having ongoing professional contact with Shaha Riza while on the job, a violation of Bank rules.

"Contrary to what the staff rules allowed for, Mr. Wolfowitz's proposal explicitly insisted on the possibility of maintaining professional contacts with Ms. Riza. He kept that opinion even after grudgingly following the advice by the Ethics Committee," Melkert said in his statement, referring to the committee he chaired.

"The Ethics Committee was not consulted, nor did it approve, the terms and conditions of the external placement," he added.

The heated exchange saw Melkert accusing Wolfowitz's lawyer of spreading lies.

"I only became involved with the press when it became clear that those speaking for Mr. Wolfowitz were intent on continuing to spread erroneous information on the role and actions of the Ethics Committee," he said.

In his statement, Danino also said that Wolfowitz appears to be deliberately misleading the public by selectively releasing certain documents. He took issue with Wolfowitz's definition of "recusal," saying the president "wish[ed] not to comply with Bank rules."

He said the selected statements omit a statement from Wolfowitz that expressly indicated that the president would not be isolated from professional contact with Riza.

"The omission thus presents a half-truth that misleads the reader and hides (Paul Wolfowitz) PW's wish not to comply with Bank rules," Danino said.

Sources inside the Bank say that Danino had originally rejected the terms of Riza's reassignment at the U.S. State Department, leading to his exclusion by Wolfowitz from the actual contract negotiations.

But in his message on Thursday, Wolfowitz urged the committee to reject their allegations that he lacks credibility. He contended again that he had acted within the guidelines of the World Bank.

"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," Wolfowitz said.

Bank critics following the controversy from the start say, however, that it appears as if Wolfowitz, seemingly on the advice of his attorney Robert Bennett, is still being misleading about his role in the affair.

"Wolfowitz and Bennett are engaging in wordplay with the term 'recusal' in order to deceive the public about what really happened," said Bea Edwards of the Government Accountability Project (GAP), a whistleblower protection agency based in Washington that leaked information about the controversial high-paying package given to Wolfowitz's girlfriend.

"The fact is that Mr. Wolfowitz never intended to end professional contact with Shaha Riza. Wolfowitz's 'recusal' was nothing of the kind," she added.

The controversy continued to unravel this week with more voices calling for Wolfowitz's resignation, citing the negative impact to the international standing of the Washington-based World Bank.

On Tuesday, five former finance ministers from Latin America wrote to the Financial Times newspaper saying that they were concerned with "the unprecedented state of turmoil at the World Bank resulting from the confrontation of Paul Wolfowitz with the board of directors and the staff."

They urged Wolfowitz's ouster. "In the interest of multilateral cooperation for the alleviation of poverty, Mr Wolfowitz should resign," said the group that included Domingo Cavallo, former minister of finance in Argentina and Rubens Ricupero, former Brazilian finance minister.

While the Bank has often been accused of subjugating economies in developing countries to the world's richest governments and companies, its reputation has been further undermined by the charges of nepotism at its highest levels.

The controversy has been particularly embarrassing for Wolfowitz and the Bank because since he came to office in 2005, Wolfowitz has sought to make fighting corruption a signature of his tenure.

Last year, he announced a "long-term strategy" for using the Bank's funds and expertise to help developing countries rid their governments of bribe-taking and other dishonest practices.

Many now say that by clinging to his job, Wolfowitz is taking down the Bank with him.