Wolfowitz fights to clear name as board presses

The battle over the fate of Paul D. Wolfowitz raged behind closed doors Wednesday, with World Bank directors trying to persuade him to resign as the institution’s president and Wolfowitz insisting his name be cleared before he will consider stepping down.

For weeks, Wolfowitz’s eventual departure from the bank has appeared to be inevitable, and pressure has continued to mount since the bank’s directors released a report Monday evening accusing him of ethics violations concerning his role in arranging a new job and substantial pay raise for a bank official with whom he was romantically involved.

A senior German official publicly advised Wolfowitz to skip a meeting of finance ministers scheduled later this week in Berlin.

Wolfowitz “would do the bank and himself a great service if he resigned,” German media quoted Development Minister Heidemarie Wieczorek-Zeul as saying Wednesday. “That would be the best for all involved.”

But in the face of such criticism, Wolfowitz has appeared to dig his heels in deeper. His lawyer, Robert S. Bennett, said Wednesday that there was no resignation deal. If the board wants to oust Wolfowitz, Bennett said, it will have to take a formal vote.

“Mr. Wolfowitz will not resign under this cloud,” Bennett told the Reuters news service after daylong negotiations with the board.

His client, Bennett added, would “rather put this matter to a full vote than to capitulate on his integrity.”

The directors, who represent the bank’s donor countries, generally make decisions by consensus and have been loath to take a formal vote on Wolfowitz’s future.

European nations, especially France and Germany, have pushed especially hard for him to resign, arguing that he has lost all credibility. They contend that his actions have besmirched the reputation of the bank, which must set an ethical example for the developing countries it serves.

“We’re in the endgame,” said a bank source familiar with the negotiations who spoke on condition of anonymity because no one had been authorized to speak for the bank’s board. “He may be denying it, but he is resigning.”

Wolfowitz canceled a trip to Slovenia to continue his talks with the board, which is to meet again today.

However, it was not clear whether he would attend the finance ministers’ meeting in Berlin on Friday and Saturday.

He has been accused of improperly intervening on behalf of Shaha Ali Riza, a bank communications official. The two were dating before President Bush nominated Wolfowitz to head the institution, which makes loans to fund development projects around the world.

In May 2005, while negotiating his contract with the bank, Wolfowitz told officials about the relationship and asked for advice from the bank’s ethics committee about avoiding a conflict of interest. The committee suggested that Riza be moved to a position outside the bank where Wolfowitz would have no supervisory authority over her.

Riza was reassigned to a job at the State Department but remained on the bank’s payroll. She received hefty salary increases that eventually brought her compensation to almost $194,000 a year -- more than the salary of the secretary of State.

A report by a seven-member panel investigating the controversy found that Wolfowitz’s role in arranging that new assignment and salary hike violated his contract and the bank’s code of conduct. The bank’s board released that report hours before Wolfowitz met with them Monday to present his case.

Before joining the bank, Wolfowitz served more than four years as deputy secretary of Defense, where he was seen as one of the architects of the war in Iraq -- a controversial role that made him highly unpopular with European nations.

Critics inside the bank have accused Wolfowitz of surrounding himself with politically minded senior aides and bringing the Bush administration’s agenda to an institution that is supposed to be nonpartisan. Wolfowitz has argued that the controversy over Riza is a proxy for other issues concerning his leadership, and he is insisting that they be separated.

The White House has supported Wolfowitz, saying that only after he has been cleared of serious wrongdoing in the Riza scandal is it appropriate to discuss whether he should resign because of other leadership issues.

“He, in good faith, made offers to try to recuse himself,” White House spokesman Tony Snow told reporters Wednesday. “He got what the World Bank itself admits is confusing guidance from people running the ethics [committee], and therefore it is certainly a mistake, but it is not a firing offense. And we stand by that.”

Board directors have seen the controversy as emblematic of Wolfowitz’s overall leadership -- tone-deaf to staff concerns and blind to appearances of bias. The report released by the board Monday evening described him as “the outsider to whom the established rules and standards did not apply” and said he had displayed “questionable judgment and a preoccupation with self-interest over institutional best interest.”

Bank directors have never before ousted a president and have no set procedures for doing so. Their votes are allocated by the percentage of bank funds a country contributes; collectively, European countries have more than twice the votes of the United States.

However, some board votes require a super-majority of 85%, and with 16.4% of the ballots, the U.S. would effectively have a veto.

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maura.reynolds@latimes.com

Times staff writers Joel Havemann and Nicole Gaouette contributed to this report.