Pentagon report piles pressure on Wolfowitz

Pentagon report piles pressure on Wolfowitz
By Eoin Callan and Krishna Guha in Washington and Hugh,Williamson in Berlin
Copyright The Financial Times Limited 2007
Published: May 10 2007 03:00 | Last updated: May 10 2007 03:00


Paul Wolfowitz's tenure as president of the World Bank faces a further test after the emergence of a classified Pentagon report pointing to a fresh conflict of interest apparently involving his girlfriend, Shaha Riza.

The report said Mr Wolfowitz told Pentagon investigators he enlisted the help of a World Bank employee with whom he had a "close personal relationship" in "activity supporting the war" in Iraq when he was deputy secretary of defence.

This is likely to be viewed as a violation of bank rules by the World Bank's board, according to bank officials.

The board is expected to hear from a special panel in the coming days that Mr Wolfowitz separately broke the bank's ethics code in his handling of a secondment to the State Department for Ms Riza.

Although Ms Riza is thought to be the bank employee referred to in the Pentagon report, the name has been blacked out in a copy of the report obtained by the Financial Times.

People close to the World Bank board said some members hoped an understanding would be reached that Mr Wolfowitz would step down before the board was forced to decide whether to demand his resignation.

Mr Wolfowitz has received measured support from the White House, while Democrats in Congress have called for him to go.

Congressman Barney Frank, chairman of a key committee, yesterday called into question whether Democrats would support fresh financing for the bank under Mr Wolfowitz's leadership.

The comments will add to concerns that European governments could withhold financing if the Bush administration exercises its votes and influence on the board to keep Mr Wolfowitz in place. There was a repeated call for Mr Wolfowitz to resign yesterday from Germany, which heads the bank's 24-nation board.

Heidemarie Wieczorek-Zeul, development minister, said Mr Wolfowitz's "voluntary resignation was the best solution for the bank and its goals", according to Karin Kortmann, one of her deputies. Ms Kortmann told parliament Berlin supported Washington's right to name a successor.

Bank officials said the board was also assessing possible conflicts of interest in 2003 when Ms Riza entered into a contract with a company that provides logistics, intelligence and advice to the Pentagon.

E-mails show the company entered into the contract at the direction of Mr Wolfowitz and following a recommendation by State Department officials, including Elizabeth Cheney, daughter of Dick Cheney, US vice-president. The Pentagon investigation was carried out in 2005 as Mr Wolfowitz was leaving the defence department to join the bank.

Beatrice Edwards, of the Government Accountability Project, a non-governmental organisation, said that based on Mr Wolfowtiz's account, Ms Riza's work in Iraq "constitutes a violation of World Bank rules".

The Financial Times was unable to obtain a response from lawyers acting for Mr Wolfowitz and Ms Riza or a World Bank spokesperson.