Wolfowitz’s critics are having a field day

Two years ago, when Paul D. Wolfowitz left the Pentagon to head the World Bank, he was under fire over his role in the Iraq war, but he approached his new job with the same moral fervor and appetite for shaking up the status quo that had marked his tenure at the Defense Department.

Wasting no time, he launched a campaign against corrupt borrowers. He cut off loans to uncooperative countries without consulting other officials. He created ethics police to monitor employees. He even chopped back the bank’s traditionally lavish Christmas party.

Now, having sown the wind, Wolfowitz has reaped the whirlwind.

The controversy over how his girlfriend landed a good job and large salary increases has brought to the surface deep-seated resentments from almost every quarter.

“When the match was lit, the fire exploded. The gas was already in the room,” said a former Treasury Department official who spoke on condition of anonymity because of close ties to the bank.

On Friday, with Wolfowitz’s job on the line, the Bush administration faced two questions: how hard to fight for him and how much damage his ouster would cause.

The bank’s board of directors continued to say it was pondering the matter. But one clue emerged about how tough the infighting had become: a leaked report that European governments had decided to cut off contributions to the bank’s loan funds if Wolfowitz did not resign.

Publicly, the White House reiterated its support for Wolfowitz, but it was not clear how hard it was prepared to push behind the scenes. Wolfowitz is not a U.S. official but was nominated by President Bush; by tradition, the United States -- the bank’s largest financial backer -- picks the president.

“The president has full confidence in Paul Wolfowitz,” White House spokeswoman Dana Perino said. “He’s done a remarkable job at the World Bank, where they are working to lift people up out of poverty from around the world. He’s apologized for the matter, and his board is undergoing an internal review.

“And we expect him to remain as World Bank president -- he has the president’s support,” she said.

White House spokesman Tony Fratto said the U.S. representative on the World Bank’s board -- Clay Lowery, assistant Treasury secretary for international affairs -- “is representing the United States and he knows that President Bush supports President Wolfowitz.”

Bush has a record of sticking by beleaguered appointees, including former Defense Secretary Donald H. Rumsfeld, former Treasury Secretary John W. Snow and Atty. Gen. Alberto R. Gonzales. Bowing to criticism emboldens the administration’s enemies, White House strategists think.

Another former Treasury Department official familiar with relations between the bank and the administration said that because the board of directors operated largely by consensus, the U.S. exercised substantial influence. But the emphasis on consensus means that if the board turned against Wolfowitz, he would probably step down.

“I believe we could block an effort to remove Wolfowitz. That said, if there were an overwhelming mood against him, he would cease trying to stay,” said the former Treasury Department official, who works elsewhere in government and spoke on condition of anonymity, lacking authorization to discuss the matter.

The Wolfowitz imbroglio involves one of the most polarizing figures to serve in the Bush administration and one of the most unusual institutions in Washington.

At the Pentagon, where he was deputy Defense secretary, Wolfowitz bruised feelings among senior military leaders and career bureaucrats because of what they saw as his lack of respect for their expertise and his tendency to disregard opinions outside his inner circle.

In Congress, during the run-up to the Iraq invasion, even some Republicans questioned Wolfowitz’s assertions that Iraqis would welcome U.S. troops as liberators and that the war would end quickly.

At the World Bank, many members of its multinational staff resented Wolfowitz’s role as an architect of the Iraq war. They also resented his efforts to shake up an entrenched bureaucracy that had long operated with little outside supervision.

Career bank officials had strong views on how international aid programs should be run, and they were accustomed to salaries and perks far more lavish than those of U.S. government workers.

The new president challenged the staff on both counts, and he did it with a managerial style that added to the resentment, said sources with close ties to the institution who spoke on condition of anonymity because they feared reprisals.

Bank workers were especially infuriated by Wolfowitz’s decision to create an internal unit to oversee employees’ conduct. The unit cracked down on travel, checking whether employees spent extra days on overseas trips at the bank’s expense. It also increased efforts to assure compliance with a rule that staff members not accept gifts worth more than $50.

Many of the bank’s experts thought Wolfowitz and a small group of aides he brought with him from the Pentagon had bypassed them on decisions about key projects. This approach contrasted sharply with the previous World Bank president, James Wolfensohn, who became a favorite of employees by consulting them on decisions.

Many World Bank employees thought they weren’t paid enough, even though their salaries surpassed U.S. government standards.

Some bank employees see Wolfowitz’s efforts to cut employee perks and police their ethics as hypocritical in light of his role in assuring that his girlfriend was highly paid and because he gave huge raises to two close aides who followed him from the Pentagon.

Wolfowitz brought with him Robin Cleveland, whose title is counselor and whose salary is $263,000, and Kevin Kellems, a communications specialist who makes $249,000. The only Bush administration official with a higher salary is Bush, at $400,000.

The World Bank declined to provide Wolfowitz’s salary, though published estimates range from $300,000 to $400,000.

The most senior policy makers at the bank are paid as much as $200,000, and a few make more than $300,000. Unlike U.S. workers’, the salaries of World Bank employees are largely tax-free.

According to documents released Friday by the World Bank, Wolfowitz told bank officials about his relationship with his girlfriend, Shaha Ali Riza, before becoming president in June 2005. She worked for the bank at the time and made a salary of $132,600.

He offered to recuse himself from all personnel decisions concerning Riza, but the bank’s ethics committee thought that didn’t go far enough.

“Even with recusal, the issue of ‘perception’ remains” regarding a conflict of interest, according to notes of an ethics committee meeting June 2, 2005.

A month later, the ethics committee informed Wolfowitz that the best resolution to the conflict would be for Riza to be reassigned to a new job.

The committee noted that she was a top contender for a promotion and that “the potential disruption of the staff member’s career prospect will be recognized by an in situ promotion on the basis of her qualifying record.”

The promotion came with a salary increase of $50,000, the documents said.

Riza eventually accepted reassignment to the State Department, where her salary grew to $193,590. But she made clear she wasn’t happy.

“I have now been victimized for agreeing to an arrangement that I have objected to and that I did not believe from the outset was in my best interest,” she wrote last April.

joel.havemann@latimes.com

maura.reynolds@latimes.com

paul.richter@latimes.com