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Former World Bank official says Wolfowitz acted 'incorrectly' in girlfriend's pay package

WASHINGTON -- The former general counsel of the World Bank says he believes bank chief Paul Wolfowitz acted "incorrectly" in helping arrange the hefty compensation package for a bank employee who was also his girlfriend.

Roberto Danino, in a written statement late Monday to a special bank panel looking into the 2005 promotion and pay package of Shaha Riza, said that he wasn't aware of details about what Danino called an "extraordinary salary increase" for Riza when he served as the bank's general counsel.

"I did not learn of these actions prior to my departure from the bank in January 2006," Danino said in the statement.

The World Bank's 24-member board has been meeting on and off for the past few weeks, and will ultimately decide what action to take in the Wolfowitz case. Photo: Joshua Roberts/Bloomberg News

Danino said he believed Wolfowitz "acted incorrectly" in helping to arrange Riza's pay package. He said the situation has "badly hurt the morale of the staff, damaged the reputation of the bank and eroded his (Wolfowitz) moral authority to lead the bank."

The panel is still considering the case. Ultimately, the bank's 24-member board will decide what action, if any, should be taken. The board, which has been meeting on and off over the past weeks, was expected to gather later in the day Tuesday. It was unclear whether any decision would emerge from that session.

The board could ask him to resign, signal it does not have confidence in his leadership, reprimand him or take no action. However, people familiar with the workings of the bank and legal experts suggest the best route might be a compromise in which Wolfowitz is found to have acted in good faith or something along those lines but later resigns.

"He could step down with his reputation as intact as is possible," said Carl Tobias, law professor at the University of Richmond's law school.

Wolfowitz' attorney, Robert Bennett, on Tuesday continued to maintain that his client "is not going to resign in the face of this bogus conflict of interest charge." Wolfowitz has led the bank -- whose mission is to fight global poverty -- for close to two years. Before he took over, Wolfowitz served as the No. 2 official at the Pentagon, where he played a key role in mapping out the Iraq war.

Wolfowitz, who appeared before the panel on Monday, said he acted in good faith and that the bank's ethics committee has access to all the details surround the arrangement "if they wanted it." He likened the controversy which has prompted calls for his resignation to a "smear campaign" against him.

In his remarks on Monday, Wolfowitz said he rejected a suggestion by the bank's human resources chief to involve Danino in the negotiations involving Riza. "I assumed that Mr. Danino, as adviser to the ethics committee, would participate in their final review of the outcome of the negotiations, and I assume that he did so," Wolfowitz said.

Riza was working at the bank for eight years when Wolfowitz arrived in 2005. She had earned close to $133,000 a year 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 eventually rose to $193,590.

Riza, who also appeared before the special panel on Monday, said she didn't want to move in the first place, defended her pay as being within the same range as employees at the same grade level and said the ensuing "media circus" has hurt her career and her personal well being.

The United States is the bank's largest shareholder, and President Bush has said Wolfowitz ought to stay on the job. The European Parliament, many of the bank's staff, former bank officials and some Democratic politicians have called on him to resign.

For his part, Wolfowitz was trying to carry on with his duties. He was still planning on Tuesday to fly to an education summit in Brussels.

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On the Net:

World Bank: http://www.worldbank.org/

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