I acted in good faith, Wolfowitz tells bank

World Bank president Paul Wolfowitz condemned what he called a “smear campaign” against him and told a special bank panel he acted in good faith in securing a promotion and pay rise for his former girlfriend.

He repeated that he had no plans to resign, and President George Bush gave him a fresh endorsement.

In a prepared statement to the panel yesterday, Wolfowitz said the institution’s ethics committee had access to all the details surrounding the arrangement involving bank employee Shaha Riza, “if they wanted it”.

Wolfowitz told the panel: “I acted transparently, sought and received guidance from the bank’s ethics committee and conducted myself in good faith in accordance with that guidance.”

The special bank panel is investigating Wolfowitz’s handling of the 2005 promotion of bank employee Riza.

The controversy has prompted calls for the resignation of Wolfowitz, an architect of the Iraq war in his preceding Pentagon job. The bank’s 24-member board is expected to make a decision in the case this week.

Wolfowitz lamented that the controversy over the pay package was part of an effort to oust him from the office, which he has held for nearly two years. The institution’s mission is to fight global poverty.

“The goal of this smear campaign, I believe, is to create a self-fulfilling prophecy that I am an ineffective leader and must step down for that reason alone, even if the ethics charges are unwarranted,” Wolfowitz said.

He vowed to fight for his job. “I will not resign in the face of a plainly bogus charge of conflict of interest,” he said.

As part of his defence, Wolfowitz, among other things, cited a February 28 2006, letter which he said showed the bank’s ethics committee had looked at the arrangement.

The panel’s chairman, Ad Melkert, said in the letter that an allegation relating to “a matter which had been previously considered by the committee did not contain new information warranting any further review”.

The letter did not specifically mention Wolfowitz or Riza by name. However, Wolfowitz pointed to it as proof that ethics officials were aware of Riza’s compensation package.

The bank’s executive directors, however, said the terms and conditions of the package had not been “commented on, reviewed or approved” by the ethics committee, Melkert or the bank’s board.

Melkert’s February 2006 letter informed Wolfowitz that the ethics committee had reviewed two emails from an anonymous whistleblower alleging ethical lapses by the World Bank’s president. One email complained about the size of Riza’s pay rise.

Riza was working at the bank when Wolfowitz arrived in 2005 and had earned close to £65,000 as a communications adviser in the bank’s Middle East department. She was reassigned at the State Department to avoid a conflict of interest but remained on the bank’s payroll. Her pay then rose to £90,000 and eventually to £96,000.

Wolfowitz said the initial £90,000 she received “was in line with salaries paid to bank employees” holding similar H level positions. He said the salary “seemed reasonable to me” and noted that “many World Bank employees are, comparatively speaking, generously paid, and hundreds of them earn more than the US secretary of state”.

He also denied accusations that he sought to hide details of Riza’s pay package.

“I always expected that the ethics committee could know the details of how the matter was resolved if they so desired,” Wolfowitz said. “I also understood that experts in the human resources department would review the contract. It never occurred to me that they would not, and I believe that they did.”

Wolfowitz said the details of the pay package “were not ’dictated’ by me but flowed from the back-and-forth negotiating process” between the bank’s vice president of human resources, Xavier Coll, and Riza, who had her own counsel in the matter, Wolfowitz said.

For World Bank officials to declare his actions to be improper, Wolfowitz argued would be “unjust and frankly hypocritical”.