Two years ago, upon learning of President Bush’s nomination for president of the World Bank, I expressed relief (Cultural Revolutions, May 2005) that, “at his new post, [Paul] Wolfowitz will not be able to do nearly as much damage as he has done at the Pentagon.”  The damage, however, has continued.  For the past three months, Wolfowitz has been at the center of a corruption scandal that has brought discord and discredit to the World Bank—the kind of scandal more commonly associated with places such as Lagos or Asunción than with Washington, D.C.

When Wolfowitz’s appointment was announced, it became known that he was having an affair with a World Bank employee, Sha-ha Ali Riza.  Described by her colleagues as “an Arab feminist,” Mrs. Riza—a divorcée—was the World Bank’s “gender coordinator” for the Middle East and North Africa.  She tried to be discreet about the affair, but her neighbors in Washington—unhappy about the late-night presence of Wolfowitz’s security detail on their quiet street—did not cooperate.

Even before Wolfowitz’s appointment was confirmed in June 2005, senior executives at the World Bank were commenting that, “unless Riza gives up her job, this situation will present an impossible conflict of interest.”  The bank’s staff association complained about an “untenable” situation, as its ethics rules clearly precluded the employment of couples (married or not) if one reports to the other directly or indirectly.

Wolfowitz responded by declaring that, “if a personal relationship presents a potential conflict of interest, I will comply with bank policies to resolve the issue.”  He “resolved the issue”—as we now know—by ordering Xavier Coll, the World Bank’s vice president for human resources, to send Mrs. Riza on a temporary assignment to the State Department and to raise her tax-free salary by one half to $180,000.  Coll was additionally instructed to grant Riza automatic annual pay increases of eight percent and to ensure her eventual promotion to the highest position of any civil servant at the bank.  She was on track to make $245,000—again, tax-free—by 2010.

Soon thereafter, Wolfowitz negotiated a pay raise for himself up to $400,000 —equal to President Bush’s salary, but tax-free.  He then brought over two Bush aides, Robin Cleveland and Kevin Kellems, from the White House, installed them in senior positions, and rewarded them with open-ended contracts and $250,000 tax-free salaries, despite their lack of training or experience related to the World Bank’s core activities.

Wolfowitz’s initial denial that he had engineered Riza’s transfer was simply untrue.  Furthermore, he tried to conceal his role in securing her hefty pay package—until documents surfaced showing his direct involvement.  His earlier insistence that he had consulted with the bank’s ethics officials was also contradicted by Ad Melkert, the ethics committee’s former chairman.

World Bank sources confirm that, on top of other problems surrounding the case, the specific terms of Riza’s external assignment were in gross violation of the World Bank’s staff policies: She was given a noncompetitive promotion to a senior level on the same day that she left on external assignment, although such a promotion “is supposed to be competitive, vetted and approved by the relevant sector board and is supposed to be against a specific position (Staff Rule 5.05) . . . [S]he was given a promotion increase . . . more than double the amount allowed by the Staff Rules.”

At a meeting on April 12, Alison Cave, chairman of the World Bank Staff Association, produced a document that, according to Wolfowitz, never existed: his instructions for Riza’s promotion and salary.  Then, according to a World Bank source who attended the meeting, Wolfowitz and his security detail unexpectedly showed up and addressed the meeting: “He looked extremely uncomfortable; boos and more boos ensued from the audience, with voices calling ‘Resign, resign!’  He stared back at the assembly, the way Ceausescu stared at his people when they started booing him in Bucharest.  He climbed the stairs again, visibly shaken, said one sentence to the effect that he wished he could give us more information, promptly walked back to the safety of his detail, and left.  [Alison] destroyed him.”

Well, not quite.  Wolfowitz does not want to go.  He has apologized for his “mistakes” and promised changes in his “management style”—and the White House is behind him.  At a meeting with the vice presidents of the bank, Wolfowitz asked for “suggestions on how to restore faith in his management,” even after Graeme Wheeler, one of his two senior deputies, said he needed to step down.  Just to be on the safe side, Wolfowitz has retained the same attorney Bill Clinton hired a decade ago—Bill Bennett’s big brother, Robert.

Upon joining the World Bank, Dr. Wolfowitz named the struggle against corruption as one of his primary tasks.  Somewhat amusingly, the Wall Street Journal claims that this is the reason he is being targeted: “The real fight here is over his attempts to make the bank and its borrowers more accountable.”

The Europeans say they want Wolfowitz to go.  Two years ago, their fear was that he would turn the bank into a tool of the White House; but, as the Guardian has commented, “the reality has been far worse: in two years Wolfowitz has turned the bank into a rudderless, divided institution that is seeing its credibility drain away.”  Yet rumor has it that several European governments (including that of France, a leading Western opponent of the Iraq war) actually do not mind Wolfowitz staying, as he would be a lame duck who could easily be manipulated.  As one well-placed World Bank source explains, “They know perfectly well that he is only interested in his salary and his pension, and ready for any deals.”