The Wolfowitz Death Watch Continues

by hilzoy

From the Financial Times:

“Paul Wolfowitz’s handling of a secondment deal for his girlfriend Shaha Riza broke the World Bank’s code of conduct, three staff rules and the terms of his contract as bank president, the final report by a panel investigating his role has concluded.

The report asks the bank’s board to consider, in the light of its findings, “whether Mr Wolfowitz will be able to provide the leadership needed to ensure that the bank continues to operate to the fullest extent possible in achieving its mandate”.

It suggested the board should take into account in making this judgment the “damage done to the reputation of the World Bank group and its president, the lack of confidence expressed by internal and external stakeholders in the present leadership, the erosion of operational effectiveness…and the important strategy and governance challenges the World Bank group is facing”.

Following the release of the panel’s report, 37 of the bank’s 39 country directors sent a letter to the board demanding it “practice what it preaches on governance and accountability.”

The letter, obtained by the Financial Times, stopped short of directly recommending that Mr Wolfowitz go. (…)

The report concluded that Mr Wolfowitz broke staff rule 3.01 on professional conduct, rule 5.02 on external service and 6.01 on pay.

It stated that the initial pay rise, 8 per cent a year, later rises and presumed additional promotion on Ms Riza’s return to the bank were excessive and never envisaged by the bank’s ethics committee.

It said Mr Wolfowitz’s attitude evidenced “questionable judgment and a preoccupation with self interest”.

The report also concluded that Mr Wolfowitz violated the terms of his contract, which require him to abide by the bank’s code of conduct.”

Actually, the report (pdf) also found that Wolfowitz’ contract “requires Mr. Wolfowitz to avoid any conflict of interest, real or apparent”, and that he violated that provision as well.

More below.

The report is generally interesting. Links to it and all its supporting documents are here. One quote from a meeting Wolfowitz held — “if these people f*ck with me or Shaha, I have enough on them to f*ck them too” — was quoted in various places, but I think the excerpts cited there don’t really get across the full flavor of it. Wolfowitz is speaking to Xavier Coll, Vice President for Human Resources, whom he seems to suspect of leaking something, or knowing people who did.

Coll generally comes across, in his and others’ interviews, as someone who had not been in his current job for all that long, and who was being asked to do things he knew were against the rules by a President who did not want to hear about the rules. He tried to consult with other people at the bank about what the rules were and what he should do, insofar as he could do so without violating Wolfowitz’ order not to tell anyone about the whole thing. (He made judicious use of hypotheticals, and tried not to construct them in ways that identified anyone.) He sent himself long emails documenting what had happened, and detailing all his conversations. He was, in short, a subordinate whom Wolfowitz put in what seems to me like an impossible situation, one that no one should never have been put in. In the end, he followed Wolfowitz’ orders for the most part, but blocked one of the most egregious provisions that Shaha Riza was asking for.

In any case, a fuller version of the quote than you’ll find in the papers is here (pdf), pp. 68-9:

“And he also told me that, in no uncertain terms, that — to tell friends, people like Shengman, Rathbani [ph.] and Jerry Rice to get out of his way and stop attacking him. And he asked me to tell my friends to stop doing that.

And he also stated very clearly that if these people f*ck with me or Shaha, I have enough on them to f*ck them too.”

As a result of this meeting, which Coll describes as “a threatening meeting, a very threatening meeting” (p. 72), Coll decided to leave the World Bank (he is usually described, in current press reports, as “the outgoing Vice President for Human Resources”, and saw a lawyer. I would have done the same. Speaking as someone who has had the odd horrible boss, that more or less dispelled any sympathy I might have had after reading the report itself, which is damning. Consider, for instance, this part (pp. 45-46):

“There is one central theme that runs throughout the submission: Mr. Wolfowitz believes that the blame for the current situation involving Ms. Riza rests with others. Mr. Wolfowitz is portrayed as the newcomer to the institution who was simply following the direction of others. The Ad Hoc Group finds this posture troubling for what it says about the leadership the Bank could expect from the man who had been selected to head a global institution with the central mission of fighting poverty. The Group finds the submission notable for the absence of any acceptance by Mr. Wolfowitz himself of responsibility or blame for the events that transpired. As President, he bore principal responsibility for safeguarding the institution and establishing the ethical standard that to which staff would be expected to adhere to. [sic] As noted in an earlier section of the report, he should have set the tone at the top. Instead, he casts himself as an intermediary between other seemingly larger forces. He saw his role as merely seeking to accommodate those forces. As noted above, this is in stark contrast to the role he had been selected to play as President of the World Bank. But even more to the point, it is in contrast to the events that actually occurred. The Ad Hoc Group concludes that in actuality, Mr Wolfowitz cast himself in opposition to the established rules of the institution. He did not accept the Bank’s policy on conflict of interest so he sought to negotiate for himself a resolution different from that which would have applied to the staff he was selected to head. He did not agree with the advice he received about the legal requirements in connection with conflict of interest, so he stopped seeking advice from the Bank’s Legal Vice Presidency and instead sought an inadequate review by external lawyers after the fact. The Ad Hoc Group sees this as a manifestation of an attitude in which Mr. Wolfowitz saw himself as the outsider to whom the established rules and standards did not apply. It evidences questionable judgment and a preoccupation with self interest over institutional best interest.”

Ouch. (Think it’s excessive?You can read the submission in question, along with Wolfowitz’ subsequent interview, here (pdf).)

***

Meanwhile:

“The Bush administration softened its support for World Bank President Paul D. Wolfowitz this morning, signaling a willingness to replace him if the bank’s executive board does not fire him and accepts some blame for the ethics controversy engulfing the institution.

“All options are on the table,” said White House spokesman Tony Snow, addressing reporters at a morning briefing. “Members of the board, Mr. Wolfowitz need to sit down and figure out what is in fact going to be best for this bank.””

That shift may have something to do with this:

“The United States on Tuesday failed to rally support among key allies for a strategy aimed at saving Paul Wolfowitz’s job as World Bank president, which has been jeopardised by a pay and promotion controversy involving his companion.

The U.S. administration found support only from Japan in a conference call of officials from Group of Seven industrial countries for a plan to separate consideration of Wolfowitz’s ethics violations in the deal for his companion from whether he could continue credibly as head of the bank.”

And, just to round out the day’s news, the State Department has opened a probe of Wolfowitz’ actions in getting Shaha Riza seconded to the State Department.

***

As to the broader issues, Sebastian Mallaby (no flaming liberal) writes:

“Conservatives portray resistance to Wolfowitz as the work of corrupt and cosseted World Bank bureaucrats. But there’s no evidence that the bank’s staff is particularly corrupt. A probe instigated by Wolfowitz recently uncovered 10 instances of staff fraud or corruption in 2005 and another 10 in 2006 — this at an institution of 10,000 people. As to the cosseting, that depends on your benchmark. A World Bank infrastructure expert who leaves for a private equity firm gets paid a lot more. An economist who leaves to teach at a U.S. university comes out about even once you adjust for the bank’s tax exemption and the university’s long vacations.

But the biggest misconception about the bank is that it needs the goading force of Wolfowitz to fight graft in poor countries. Even before Wolfowitz arrived in 2005, the bank was trying to plug leaks in government budgets, reform civil services and back new anti-fraud units: From 2000 to 2004 the bank’s lending to improve public-sector governance grew 11 percent annually. Wolfowitz’s goal was to take these anti-corruption efforts to the next level. The instinct was noble; the implementation horrible.

Wolfowitz seemed oblivious to research finding that corruption projects often fail; he didn’t explain how a greater investment in this field would produce value for money. He brushed off the evidence that corruption is not the overarching blockage to development but merely one blockage among many; some corrupt countries manage to fight poverty effectively. And he mishandled the inevitable recriminations from the World Bank’s board. If the bank’s president cuts off a country on grounds of corruption, he better be able to show that it was really more corrupt than other places where the bank does business.

The scandal over his girlfriend’s pay is the final nail in Wolfowitz’s anti-corruption efforts. It has created a situation in which the bank can’t publicize its new anti-corruption manual, ” The Many Faces of Corruption,” because doing so would invite ridicule. Things have reached the point where anyone who believes in Wolfowitz’s anti-corruption agenda should be rooting for his departure. Surely even Wolfowitz himself can see that?”

More background in this profile in the New Yorker (h/t Scott Lemieux), including evidence that Wolfowitz’ anti-corruption initiative has been pretty selectively applied:

” In July, Islam A. Karimov, Uzbekistan’s dictatorial ruler, ordered the United States to remove its troops and aircraft from the Uzbek base it had been using to support the military campaign in Afghanistan. Around the same time, the Uzbek government expelled a number of Western nongovernmental organizations. Since joining the World Bank, in 1992, Uzbekistan had received more than five hundred million dollars in loans, mostly for rural water and health projects. In September, 2005, Wolfowitz withdrew an assistance package for Uzbekistan that was about to be presented to the bank’s board for approval. “It came out of the blue,” Dennis de Tray, who was country director for central Asia at the time, told me. “I got a call while I was on vacation and was told that he just did it. He didn’t even talk to the regional vice-president. We were all pretty shell-shocked.” (…)

I asked him [Wolfowitz] how he could simultaneously argue that the bank should stop lending to corrupt countries and become more involved in Iraq, which now trails only Haiti in some rankings of the most corrupt countries on earth. “It’s a problem to work on,” Wolfowitz said”

And management concerns (recall that before he arrived at DoD, Wolfowitz had basically no management experience):

” A few months after he took over, officials in the bank’s finance and planning departments presente Wolfowitz with several proposals for shifting resources to Africa from other parts of the world. “There were three options: one marginal, one moderate, and one radical,” a former bank staffer recalled. “The radical option said, ‘Cut the budget significantly from other parts of the bank, such as Eastern Europe and Central Asia, and move all the money to Africa.’ He looked up and said, ‘That sounds good.’ But nothing ever happened. He didn’t make a decision. (According to the Government Accountability Project, a Washington watchdog group, the World Bank’s lending to Africa in the first three quarters of fiscal year 2007, which began last July, has fallen by a billion dollars compared with the same period in the 2006 fiscal year.

Some important positions at the World Bank have been empty for months. The East Asia and Pacific department, which includes three of the bank’s biggest borrowers—China, Indonesia, and Vietnam—lacked a vice-president for more than a year. The Africa department didn’t have one for three months. “I get a lot of calls from people in the bank looking for jobs,” a veteran development expert said to me recently. “They are disillusioned with Paul. They think there is no other shoe to drop. There isn’t going to be a moment when his vision becomes clear and he defines where he wants to take the bank. It just isn’t there. It’s nothing to do with his record in Iraq, with being a neocon, all that stuff. It has to do with being an executive and a leader. I say this with great regret. I wanted him to succeed, and I still want him to succeed. McNamara had a lot of baggage, but he carried it with him to the bank and did great things.””

He should never have been appointed. He should have resigned long ago. Hopefully, when the Bank’s board meets tomorrow, his tenure there will be put out of its misery, and he can retire to the American Enterprise Institute, or wherever it is that bitter neocons go to spend their golden years cursing all the other people who betrayed them.