World Bank Wolfowitz Report with Wolfowitz's Response

editor's note
MAY 6, 2007 DRAFT REPORT OF THE AD HOC GROUP WITH PROPOSED AMENDMENTS SUBMITTED ON BEHALF OF PAUL WOLFOWITZ

The Ad Hoc Group's May 6, 2007 draft report omitted substantial evidence, and in some cases erroneously or incompletely described witness statements and documents. Paul Wolfowitz therefore submits this draft, amended to reflect the important omitted material and to correct erroneous statements and findings. The comments added on behalf of Mr. Wolfowitz appear in bold. Significant deletions appear crossed-through, with an explanation for the deletion. It should not be assumed that Mr. Wolfowitz adopts or endorses any portion of the May 6 draft that he did not propose to delete or amend.

I. Introduction
  1. On April 6, 2007, the Executive Directors decided to establish an Ad Hoc Group "to acquire information" related to a matter "concerning a possible violation of Staff Rules in favor of a staff member closely associated with the President."1
  1. The Ad Hoc Group ("Group") held meetings with current and former officials of the Bank2 and obtained and reviewed the relevant files of the Ethics Committee3 and documents from the President. The Group prepared a "Report of the Ad Hoc Group" dated April 11, 2007, which was presented to the Executive Directors on April 12, 2007.4
  1. The April 11, 2007 report stated that the Ethics Committee, including its Chairman, has not been involved in the discussions with the concerned staff member. It also did not find that the terms and conditions of the agreement had been commented on, reviewed or approved by the Ethics Committee, its Chairman or the Board. The Ad Hoc Group was informed by the former Senior Vice President and General Counsel that he was not involved in any way in the implementation of the Ethics Committee's advice to the President. The April 11 report took note of the fact that the Ethics Committee Chairman had provided written advice on a number of occasions to the President and specifically, on July 27, 2005, advised Mr. Wolfowitz "that the staff member will be relocated to a position beyond (potential) supervising influence by the President and therefore will withdraw from the current selection procedure for job promotion" and that "at the same time the potential disruption of the staff member's career prospect will be recognized by an in situ promotion . . . with immediate effect." The April 11 Report further noted that on October 24, 2005, the Ethics Committee Chairman told Mr. Wolfowitz that "the outcome [of the conflict issue] is consistent with the Commitee's [July 27, 2005] findings and advice," and that on October 25, 2005, the Chairman reported to the Executive Directors that "the conflict of interest has been dealt with appropriately" and the matter was therefore closed.5 After consideration of the Report of the Ad Hoc Group, the Executive Directors issued a communication, including a release of the report and the documents obtained by the Group.
  1. This matter was discussed during the Development Committee meeting held in Washington on April 15 and its Communiqué read in relevant part as follows:
We have to ensure that the Bank can effectively carry out its mandate and maintain its credibility and reputation as well as the motivation of its staff. The current situation is of great concern to all of us. We endorse the Board's actions in looking into this matter and we asked it to complete its work. We expect the Bank to adhere to a high standard of internal governance.6
  1. On April 20, 2007, nearly 18 months after the Ethics Committee advised the President the matter was closed, the Executive Directors issued a communication requesting the Ad Hoc Group to consider immediately the arrangements made for the secondment of the staff member. The Executive Directors stated that the Ad Hoc Group would consider such other information as it deemed appropriate with reference to, inter alia, the Staff Rules, the Code of Conduct applicable to Board officials and the President, and the contract of the President,7 as well as to conflict of interest, ethical, reputational and other relevant standards. The Executive Directors also stated that, on this basis, the Ad Hoc Group would make early recommendations for decision by the Executive Directors.
  1. Taking all of the above into account, the Ad Hoc Group decided that it should engage in additional fact finding and that its work should result in a report to the Executive Directors presenting the findings, conclusions and recommendations of the Ad Hoc Group regarding the matter under review. The Ad Hoc Group believed that additional review of pertinent information, including the Staff Rules, the Code of Conduct for Board Officials, the President's contract, as well as any applicable standards relating to conflict of interest, ethical or reputational considerations, is warranted. It also believed that follow-up meetings, on the record and recorded by a stenographer, should be conducted with persons who may shed further light on the information already collected.
  1. The Ad Hoc Group therefore met on the record and recorded by a stenographer with current and former officials of the World Bank8 to gather relevant information on the issues identified in the course of its initial meetings, as well as on issues identified through review of the documents collected to date.
  1. Upon completion of its meetings with persons having relevant information on the matter and obtaining further documentary information, the Group engaged in deliberations of the issues dealt with in the mandate given to it by the Executive Directors. The Group examined the following questions in light of the information it has collected:
      1. whether the facts show the violation of any staff rule;9
      1. whether the facts show a violation of the terms of the contract of the President of the World Bank;10
      1. whether the facts show a violation by the President of the obligation imposed by his contract, to "avoid any conflict of interest, real or apparent."
      1. whether, based on the totality of circumstances, including any reputational damage that may have been done to the institution as a result of the matters under review, any changes would appear to be necessary to the governance framework to enable the World Bank to continue to operate to the fullest extent possible in achieving its chartered objectives.
The Ad Hoc Group did not examine, as the President had requested, whether the outcome reached with Ms. Riza was a reasonable settlement in light of the circumstances surrounding her involuntary relocation and the potential claims she might have had against the Bank. This report sets out the legal framework relevant to this matter, a statement of the facts, and the Group's discussion and recommendations to the Executive Directors.

II. Legal Framework
  1. Article V, Section 5 of the Bank's Articles of Agreement states:
President and Staff (a) The Executive Directors shall select a President who shall not be a governor or an executive director or an alternate for either. The President shall be Chairman of the Executive Directors, but shall have no vote except a deciding vote in case of an equal division. He may participate in meetings of the Board of Governors, but shall not vote at such meetings. The President shall cease to hold office when the Executive Directors so decide. (b) The President shall be chief of the operating staff of the Bank and shall conduct, under the direction of the Executive Directors, the ordinary business of the Bank. Subject to the general control of the Executive Directors, he shall be responsible for the organization, appointment and dismissal of the officers and staff. (c) The President, officers and staff of the Bank, in the discharge of their offices, owe their duty entirely to the Bank and to no other authority. Each member of the Bank shall respect the international character of this duty and shall refrain from all attempts to influence any of them in the discharge of their duties.
  1. The President's contract of employment (Contract) states11:
3. You will adhere to the standards set forth in the Code of Conduct for Board Officials (the Code). You will also be expected to observe the standards of ethical conduct applicable to staff members of the Bank, where these reflect a stricter standard. Notwithstanding any provisions to the contrary in the Code or the staff standards, the following provisions will apply to you as president: * * * (d) Conflict of interest. It is understood further that you will avoid any conflict of interest, real or apparent. * * * (f) where clarification is required with respect to ethical standards, you may seek the guidance of the ethics committee, established by the executive directors pursuant to paragraph 10 of the Code.
  1. The Code of Conduct for Board Officials (Code) states:
3. Basic Standard of Conduct 3(a) . . .shall maintain the highest standards of integrity in their personal and professional conduct and observer principles of good governance. * * * 4. Conflicts of Interest 4(a) In performing their duties, Board Officials shall carry out their responsibilities to the exclusion of any personal advantage. 4(b) Board Officials shall endeavor to avoid any situation involving an actual conflict, or the appearance of a conflict, between their personal interests and the performance of their official duties. If an actual conflict arises, the Board Official concerned shall promptly refer the matter to the Ethics Committee described in paragraph 10 below and shall withdraw from attendance or participation in deliberations or decision-making connected with that matter. If an appearance of conflict arises, or if there is doubt whether a conflict, actual or apparent, exists, the Board Official concerned shall promptly refer the matter to the Ethics Committee for guidance. * * * 7. Disclosure of Information 7(a) Board Officials shall at all times observe the applicable policies of the organizations regarding disclosure of information. 7(b) Board Officials shall protect the security of any information obtained in the performance of their duties as Board Officials that is not otherwise available to the public and, except as required to perform their duties as Board Officials, shall not use such information or disclose it to others.
  1. The Ethics Committee Rules of Procedure provide the following procedures for handling requests for guidance:
7(a) A Board Official or the President may submit a request for guidance concerning his or her annual disclosures, conflicts of interest, or other ethical aspects of conduct in respect of his or her personal situation to any Committee Member for consideration by the Ethics Committee in accordance with the procedures set forth in this paragraph 7. 7(b) The Ethics Committee shall review the request. Counsel to the Ethics Committee shall assist with this review. The Ethics Committee may also consult with one or more of the Ethics Advisors. The Ethics Committee may at any time request further information from the individual who submitted the request for guidance. 7(c) The Ethics Committee shall provide in writing its advice in response to each individual who has submitted a request for guidance. The Ethics Committee may communicate such advice to other Board Officials and the President, subject to consultation with the individual and in a manner that ensures the privacy of the individual concerned. (d) An individual who is not satisfied with the advice received from the Ethics Committee in response to a request for guidance may request reconsideration by the Ethics Committee or review by the Executive Directors.
  1. The standards of ethical conduct applicable to staff members of the Bank are set forth in the Principles of Staff Employment and the Staff Rules. Section 1.01 of the Preamble of the Principles of Staff Employment states:
1.01 The Articles of Agreement of the International Bank for Reconstruction and Development and of the International Development Association (together referred to as The World Bank), and the Articles of Agreement of the International Finance Corporation (IFC) provide respectively that, subject to the general control of the Executive Directors of the Bank and the Association and of the Directors of the Corporation (all referred to as the Executive Directors), the President is responsible for the organization, appointment and dismissal of officers and staff. Moreover, the fact that The World Bank and the IFC (the Organizations) are not subject to the employment legislation of any of their member countries imposes a special obligation on the Organizations in the relationship between them and their staff. Therefore, and without enlarging or restricting the constitutional or delegated authority of the President, the Executive Directors, upon the recommendation of the President, have adopted the following Principles of Staff Employment, which may be amended from time to time. These Principles of Staff Employment embody the general conditions and terms of employment with the Organizations and the duties and obligations of the Organizations and of staff members. They set forth the broad policies in accordance with which the President shall organize and manage the staff of The World Bank and the IFC.
  1. Principle 3 of the Principles of Staff Employment provides, in pertinent part:
3.1. The sensitive and confidential nature of much of their work requires of staff a high degree of integrity and concern for the interests of the Organizations. Moreover as employees of international organizations, staff members have a special responsibility to avoid situations and activities that might reflect adversely on the Organizations, compromise their operations, or lead to real or apparent conflicts of interest. Therefore, staff members shall:
    1. discharge their duties solely with the interest and objectives of the Organizations in view and in so doing shall be subject to the authority of the President and responsible to him;
* * *
    1. conduct themselves at all times in a manner befitting their status as employees of an international organization. They shall not engage in any activity that is incompatible with the proper discharge of their duties with the Organizations. They shall avoid any action and, in particular, any public pronouncement or personal gainful activity that would adversely or unfavorably reflect on their status or on the integrity, independence and impartiality that are required by that status; and
    1. observe the utmost discretion in regard to all matters relating to the Organizations both while they are staff members and after their service with the Organizations has ended. In particular they shall refrain from the improper disclosure, whether direct or indirect, of information related to the business of The World Bank or the IFC.
  1. Staff Rule 3.01, Standards of Professional Conduct, provides:
03. Duty of Care 3.01 Staff members must comply with the obligations embodied in the Principles of Staff Employment, the Staff Rules and all other policies and procedures of the Bank Group, as applicable.
  1. Staff Rule 3.01, Section 4, Supervisory Relationships, provides:
4.01 Supervisors shall at all times treat staff in a fair and unbiased manner. Treatment of staff shall not be influenced by personal ties between a supervisor in the staff member nor shall it be influenced by the race, nationality, sex, religion, political opinions, or sexual orientation of the supervisor or staff member... 4.02 A sexual relationship between a staff member and his/her direct report, or direct or indirect manager or supervisor is considered a de facto conflict of interest. The manager/supervisor shall be responsible for seeking a resolution of the conflict of interest, if need be in consultation with management, who will take measures to resolve the conflict of interest. Failure to promptly resolve the conflict of interest may result in a finding of misconduct.
  1. Staff Rule 3.01, Section 6, Instructions and Remuneration from Outside Sources, provides:
Except as otherwise required to perform Bank Group assignments involving service to other entities, staff members owe their duty entirely to the Bank Group and to no other authority. Accordingly, staff members may not accept instructions relating to the performance of their duties with the Bank Group from any governments or other external entities or persons except where performing duties for others pursuant to:
    1. the terms of an Executive Director's Assistant Appointment;
    1. an External Service Assignment;
    1. during Leave Without Pay; or
    1. the provisions of Staff Rule 3.04.
  1. Staff Rule 4.01, Appointment, Section 5.02 Spouses and Domestic Partners, provides:
5.02 The spouse or domestic partner of a staff member who meets the normal selection standards may be employed by the Bank Group. A husband and wife or domestic partners may be assigned to the same vice presidency or department, if neither supervises the other, directly or indirectly, and their duties are not likely to bring them into routine professional contact. They may not be assigned to the same division or equivalent unit. A spouse or a domestic partner of a staff member may be assigned to the same country office, provided that neither supervises the other, directly or indirectly, and provided that the Vice President responsible for the country office, in consultation with the Manager, Human Resources Service Center or the IFC Manager, Recruitment, approves the assignment.
  1. Staff Rule 5.02, paragraph 2.02 states:
2.02 Staff members are eligible for External Service if they meet all of the following criteria: their performance is fully satisfactory and they have been confirmed in their appointment; they are not currently on External Service;
    1. they express, in writing to the External Service Sponsor, interest in the proposed assignment, or respond to an announced vacancy; and
their appointment with the Bank Group will not terminate by mandatory retirement until at least one year after the conclusion of the External Service assignment.
  1. Staff Rule 05.02 Reassignment
The Director, Human Resources, shall reassign a staff member who marries or registers as a domestic partner of a staff member assigned to the same vice presidency, department, or other unit, if one spouse or domestic partner supervises the other directly, or indirectly, or their duties are likely to bring them into routine professional contact.
  1. Staff Rule 5.02, paragraph 3.01 states:
The Bank Group will consider applications from staff members for assignment to External Service if, in the opinion of the External Service Sponsor, the proposed assignment supports Bank Group objectives in one or more of the following ways: by providing technical assistance to Bank Group clientele; by enhancing the Bank Group's relations with member countries, the United Nations, other international organizations, or other agencies sharing the Bank Group's missions; or by enabling Bank Group staff to acquire skills and experience which the External Service Sponsor considers will contribute to the Bank Group's efficiency and effectiveness.
  1. Staff Rule 5.02, paragraph 3.02(b) states:
Appointments to Public Office with a Political or Policymaking Character. Appointments as minister, deputy minister, head or deputy head or equivalent of a central bank or other public agency having a political or policy-making character are not allowed as External Service. Staff members accepting such appointments shall resign. Appointments to other posts in public office, including senior or civil service posts, may be allowed as External Service unless otherwise determined by the Vice President, Human Resources. If required to do so by the Vice President, Human Resources, staff members accepting such appointments shall resign.
  1. Staff Rule 5.02, paragraph 3.03 states
Length of External Service. The maximum length of external service is two years, unless the External Service Sponsor, in consultation with the HR Manager or designated official decides to extend the duration of the External Service. The maximum extension shall be for two years. The maximum total duration of the External Service shall be four years.
  1. Staff Rule 6.01, Compensation, Paragraph 3.04, Promotion Increase, states:
Except as provided in paragraph 3.06, upon promotion to a higher grade pursuant to the provisions of Rule 5.05, a staff member will receive an increase equal to the greater of: 3 to 12 percent of the market reference point of the new grade up to the maximum of the salary range for the new grade; or the amount necessary to bring the net salary to the minimum of the new grade.
  1. Staff Rule 6.01, Compensation, Paragraph 6.05, Leave without Pay and External Service, provides, in pertinent part:
A staff member who has been on external service with pay for a period longer than three calendar months as of the date of the general salary review will receive a salary increase at the time of the general salary review equal to the average percentage applied to adjust the market reference points at grades A through I.
  1. The website maintained by the Bank's Office of Ethics and Business Conduct states:
A conflict of interest situation arises when a person or an institution in a position to exercise judgment on a matter, has divergent interests, as, for instance, when a staff member's personal interests are different from those of the World Bank Group. Staff members have a special responsibility to avoid situations and activities that might reflect adversely on the organization, compromise their operations, or lead to real, potential, or even apparent conflicts of interest. * * * What hasn't changed, however, is the WBG's commitment to the highest standards of ethical and professional conduct. This commitment has both personal and organizational implications. Moreover, because the WBG is judged by the collective performance and public perception of its staff, each of us has a responsibility to act in a manner that merits public trust and confidence. Staff must avoid conflicts between personal interest and the interests of the WBG or even the appearance of such conflicts. No staff member should act on behalf of the WBG in any transaction involving persons or organizations with which the staff member or a member of his or her family has a financial interest. The appearance of a conflict of interest can often be as detrimental as a conflict itself.

III. Factual Chronology
  1. In May, 2005, in the context of the discussion of the proposed contract of employment for Mr. Paul Wolfowitz, as President of the World Bank, Mr. Wolfowitz disclosed to the Bank, through his then-counsel, Mr. Robert Barnett of the Washington law firm of Williams and Connolly, that he had a pre-existing relationship with a Bank staff member, and he proposed recusing himself from all personnel matters regarding her. This was confirmed in a May 2005 letter from then-Senior Vice President and General Counsel of the Bank, Roberto Danino, to Mr. Barnett:
"First, I would like to acknowledge that Mr. Wolfowitz has disclosed to the Board, through you, that he has a pre-existing relationship with a Bank staff member, and that he proposes to resolve the conflict of interest in relation to Staff Rule 3.01, Paragraph 4.02 by recusing himself from all personnel matters and professional contact related to the staff member. A determination on whether a recusal is sufficient to resolve the conflict would be made within the legal framework of the institution, namely the contract, the Code of Conduct and the Staff Rules. . . . I would be grateful if you could confirm our understanding on these two points."12 On May 29, 2005 Mr. Barnett replied to Mr. Danino as follows: MR. WOLFOWITZ UNDERSTANDS THE NEED TO DEAL WITH THE APPEARANCE OF CONFLICT OF INTEREST. HE HAS PROPOSED A FAIR AND APPROPRIATE RECUSAL PROCESS THROUGH CONSIDERATION BY THE ETHICS COMMITTEE. THAT RECUSAL PROCESS WOULD NOT - I REPEAT, NOT - INVOLVE RECUSAL FROM PROFESSIONAL CONTACT. GIVEN THE ATTITUDE THAT THE BANK HAS EXPRESSED WITH RESPECT TO THIS MATTER, WE BELIEVE THAT THIS MATTER MUST BE RESOLVED BEFORE A CONTRACT IS SIGNED.13
  1. At the time, Mr. Wolfowitz also understood that Bank rules required recusal not from "all . . . professional contact," but only from "routine professional contact." Also, Mr. Wolfowitz was aware that the World Bank's senior Managing Director, Shengman Zhang, worked in an indirect supervisory relationship with his wife.14 For these reasons, Mr. Wolfowitz questioned Mr. Danino's recusal proposal.15 As reflected in a May 30, 2005 email from Mr. Danino to Mr. Barnett, Mr. Wolfowitz asked that the issue be resolved by the Ethics Committee:
"Conflict of Interest. We understand from your response that Mr. Wolfowitz proposes now that the potential conflict arising from the disclosed pre- existing relationship would be resolved before a contract is signed. We can agree to this request. The mechanism he has proposed for resolution is consideration by the Ethics Committee, which is a mechanism within the legal framework of the Bank. Based on his request, we will arrange for the Ethics Committee to deal with this matter as soon as possible."16
  1. In another email on May 30, 2005 from Mr. Barnett to Mr. Danino, Mr. Barnett wrote:
There are reports that Mr. Wolfowitz has had a personal relationship with a long-time employee of the Bank. In order to avoid any appearance of a conflict of interest involving that individual, Mr. Wolfowitz will recuse himself from any personnel actions or decisions with respect to that individual. We ask confirmation from the Ethic Committee that this approach is consistent with the regulations and policies - and, most importantly, the practices - of the Bank. Thank you.17
  1. Mr. Wolfowitz' request was considered by the Ethics Committee on June 2, 2005. The Ethics Committee framed the issue presented as a "request to consider and provide guidance on a potential conflict of interest with regard to Staff Rule 3.01, paragraph 4.02" which is the Staff Rule relating to Supervisory Relationships.18 
  1. On June 6, 2005, the Ethics Committee requested from the President information on the name, position, and any other relevant facts to enable the Ethics Committee to fulfill its obligations to provide advice in response to the submitted request for guidance.19 On June 8, 2005, the Ethics Committee met with the VPHR, who told the Committee that there were "581 couples with 193 potential for supervision between spouses, 19 cases of potential conflict, and 4 who work in the same department where there is no supervisory relationship but all these cases are being reviewed to see whether any corrective action needs to be taken."20 It is not known whether Mr. Melkert ever followed-up to learn whether this review was completed.
  1. With the agreement of the other two members of the Committee, the Chairman of the Ethics Committee, Mr. Ad Melkert and Mr. Wolfowitz discussed and corresponded during the period of June 6 through July 21, 2005, on the nature of the conflict of interest issue and possible solutions. On June 22, 2005, the Chairman of the Ethics Committee wrote to the President pointing out that the key problem raised by Mr. Wolfowitz's relationship with Ms. Riza was "supervision, directly or indirectly and routine professional contact".21 The Chairman noted the President's concern "that there is a tendency to set different standards, particularly with reference to the situation of the MD and his spouse."22 This was an apparent reference to Managing Director Zhang, who was the second highest ranking official at the Bank. He concluded, however, "what has not been right could not be an example to follow." The Chairman also wrote that:
"All in all it would neither be exceptional nor inappropriate to consider reassignment options as this would be in line with the rules and a substantial number of practical cases. Moreover this would serve: - strengthening internal standard setting - sending a clear external message, thereby boosting the President's and institution's reputation - sending a signal about the type of (decisive and fair) leadership of the new President - inoculating against (anonymous) complaint procedures - keeping future options for joint representation at public functions open." Mr. Melkert also acknowledged that the interests of the professional employee in question, who had been at the Bank since 1997, should be protected:  7. However in this approach there is still a very vital part missing, i.e. the legitimate concern and interest of the "partner" (my terminology) that her career path would not be harmed as a consequence of any conclusion on the issue of a potential conflict or interest. It may even be considered to address this question before reaching any conclusion at all. This would require from her side understanding of the situation as described above and readiness to consider alternatives. I am quite convinced that there are ways to ensure full recognition of her (considerable) professional qualifications and achievement in any option for reassignment. From your own perspective this could be considered one of the possible alternatives to address the potential conflict of interest that was brought to the Board's attention. It would also make in unnecessary to draw any further conclusions. 8. So in summary these are the two scenarios for conclusion that I consider feasible.       - the "pragmatic approach" along the suggested lines       - formal guidance to you by the Ethics Committee.23
  1. After additional discussion and correspondence,24 on July 21, 2005, Mr. Wolfowitz responded to the Ethics Committee's June 6 letter:
As you know, during the negotiations of my contract, to avoid any appearance of a conflict of interest, I provided a statement to the Board recusing myself from any personnel actions or decisions with respect to a longstanding professional staff member of the Bank with whom it has been reported that I have a prior personal relationship. I asked at that time for the Ethics Committee to ensure that this approach was consistent with the regulations, policies and practices of the Bank. In order to complete your review, I understand that the Ethics Committee needs to be officially informed of the name and professional position of the Bank employee to ensure a recusal can be properly implemented. Ms. Shaha Riza currently works in MENA as Acting Director of EXT. It is important that my recusal uphold the highest standards of conduct which should be applied across the institution. Moreover, I appreciate the concern you reflected in your memo dated June 22 that my recusal and any related Board decisions not be punitive nor have an adverse impact on Ms. Riza's professional opportunities. The conflict, if there is one, is mine and not hers and the Board was fully informed of it before my contract was signed. The challenge for your Committee and for me, as President, is how to: 1) avoid a conflict of interest, real or apparent; and 2) treat a loyal professional employee with the respect and fairness that all employees deserve. I would appreciate the advice of the Ethics Committee on how this challenge can best be met.       In your consideration of these questions, I would ask the Committee to keep in mind two facts:       With respect to point 1 above, the recusal I propose goes beyond the current prohibition on direct or indirect supervision, by recusing myself from any influence over personnel decisions involving Ms. Riza. This sets a higher standard than I believe has been applied previously. In the future, the same standard should apply to all senior management of the Bank and to members of the Board who have a personal relationship with an employee of the Bank, regardless of the supervisory relationship.       With respect to point 2 above, the reasonable prohibition on direct or indirect supervision necessarily precludes Ms. Riza from many professional opportunities in the Bank. She is thus necessarily disadvantaged by a circumstance that is not of her own making. Thank you for your consideration.25  Mr. Wolfowitz requested that his views be shared with the Ethics Committee members if Mr. Melkert deemed that appropriate.26
  1. On July 22, 2005, the Ethics Committee met to review the President's July 21 letter. The Committee discussed matters raised during informal discussions between Mr. Wolfowitz and the Chair of the Committee and noted in the Chair's June 22 note to Mr. Wolfowitz. In addition, the Committee considered a memo prepared by the General Counsel27 which reviewed several areas of "proposed recommendations" including, among other things, (1) facilitating Ms. Riza's relocation; (2) "additional personnel benefits to offset the negative career impact on the staff member," and (3) mutually agreed separations. With regard to the first, facilitating relocation, the memo mentioned the options of external service outside the Bank and reassignment within the bank to a non-supervisory position. The memo noted that Bank Rules allowed for a maximum of four years of external service.28
  1. Second, the memo outlined an option to "provide some form of personnel benefit to offset the negative career impact of the staff member" including "(a) promotion; or (b) salary increase." Within the category of promotions the memo further described two courses available: an "in situ promotion" or a "competitive" promotion, in which a staff member is selected through competition. 29 
  1. In addition to promotions, the memo described benefits that could be provided by compensation. According to the memo, the Bank could provide compensation in three ways: (1) an overall pay increase; (2) a promotion increase "normally limited to 3 to 12 percent of the market reference point"; or (3) "as part of settlement . . . an ad hoc salary increase."30
  1. Finally, the third area addressed was mutually agreed separation. The memo noted that the customary practice was one month's salary for each year of service, which the memo noted in Ms. Riza's case would be $60,000 - $66,000. Alternatively, the memo stated, "outside the mutually agreed separation provisions a larger payment could be made at managerial discretion."31
  1. The Ethics Committee was unanimous in its view that Mr. Wolfowitz's proposal to recuse himself from influence over Ms. Riza's personnel decisions "would not cure the de facto conflict of interest that existed" under Staff Rule 3.01, paragraph 4.02. The Record of Ethics Committee Deliberations on Case No. 2 read as follows:
      "... (1) the situat
MAY 6, 2007 DRAFT REPORT OF THE AD HOC GROUP WITH PROPOSED AMENDMENTS SUBMITTED ON BEHALF OF PAUL WOLFOWITZ

The Ad Hoc Group's May 6, 2007 draft report omitted substantial evidence, and in some cases erroneously or incompletely described witness statements and documents. Paul Wolfowitz therefore submits this draft, amended to reflect the important omitted material and to correct erroneous statements and findings. The comments added on behalf of Mr. Wolfowitz appear in bold. Significant deletions appear crossed-through, with an explanation for the deletion. It should not be assumed that Mr. Wolfowitz adopts or endorses any portion of the May 6 draft that he did not propose to delete or amend.

I. Introduction
  1. On April 6, 2007, the Executive Directors decided to establish an Ad Hoc Group "to acquire information" related to a matter "concerning a possible violation of Staff Rules in favor of a staff member closely associated with the President."1
  1. The Ad Hoc Group ("Group") held meetings with current and former officials of the Bank2 and obtained and reviewed the relevant files of the Ethics Committee3 and documents from the President. The Group prepared a "Report of the Ad Hoc Group" dated April 11, 2007, which was presented to the Executive Directors on April 12, 2007.4
  1. The April 11, 2007 report stated that the Ethics Committee, including its Chairman, has not been involved in the discussions with the concerned staff member. It also did not find that the terms and conditions of the agreement had been commented on, reviewed or approved by the Ethics Committee, its Chairman or the Board. The Ad Hoc Group was informed by the former Senior Vice President and General Counsel that he was not involved in any way in the implementation of the Ethics Committee's advice to the President. The April 11 report took note of the fact that the Ethics Committee Chairman had provided written advice on a number of occasions to the President and specifically, on July 27, 2005, advised Mr. Wolfowitz "that the staff member will be relocated to a position beyond (potential) supervising influence by the President and therefore will withdraw from the current selection procedure for job promotion" and that "at the same time the potential disruption of the staff member's career prospect will be recognized by an in situ promotion . . . with immediate effect." The April 11 Report further noted that on October 24, 2005, the Ethics Committee Chairman told Mr. Wolfowitz that "the outcome [of the conflict issue] is consistent with the Commitee's [July 27, 2005] findings and advice," and that on October 25, 2005, the Chairman reported to the Executive Directors that "the conflict of interest has been dealt with appropriately" and the matter was therefore closed.5 After consideration of the Report of the Ad Hoc Group, the Executive Directors issued a communication, including a release of the report and the documents obtained by the Group.
  1. This matter was discussed during the Development Committee meeting held in Washington on April 15 and its Communiqué read in relevant part as follows:
We have to ensure that the Bank can effectively carry out its mandate and maintain its credibility and reputation as well as the motivation of its staff. The current situation is of great concern to all of us. We endorse the Board's actions in looking into this matter and we asked it to complete its work. We expect the Bank to adhere to a high standard of internal governance.6
  1. On April 20, 2007, nearly 18 months after the Ethics Committee advised the President the matter was closed, the Executive Directors issued a communication requesting the Ad Hoc Group to consider immediately the arrangements made for the secondment of the staff member. The Executive Directors stated that the Ad Hoc Group would consider such other information as it deemed appropriate with reference to, inter alia, the Staff Rules, the Code of Conduct applicable to Board officials and the President, and the contract of the President,7 as well as to conflict of interest, ethical, reputational and other relevant standards. The Executive Directors also stated that, on this basis, the Ad Hoc Group would make early recommendations for decision by the Executive Directors.
  1. Taking all of the above into account, the Ad Hoc Group decided that it should engage in additional fact finding and that its work should result in a report to the Executive Directors presenting the findings, conclusions and recommendations of the Ad Hoc Group regarding the matter under review. The Ad Hoc Group believed that additional review of pertinent information, including the Staff Rules, the Code of Conduct for Board Officials, the President's contract, as well as any applicable standards relating to conflict of interest, ethical or reputational considerations, is warranted. It also believed that follow-up meetings, on the record and recorded by a stenographer, should be conducted with persons who may shed further light on the information already collected.
  1. The Ad Hoc Group therefore met on the record and recorded by a stenographer with current and former officials of the World Bank8 to gather relevant information on the issues identified in the course of its initial meetings, as well as on issues identified through review of the documents collected to date.
  1. Upon completion of its meetings with persons having relevant information on the matter and obtaining further documentary information, the Group engaged in deliberations of the issues dealt with in the mandate given to it by the Executive Directors. The Group examined the following questions in light of the information it has collected:
      1. whether the facts show the violation of any staff rule;9
      1. whether the facts show a violation of the terms of the contract of the President of the World Bank;10
      1. whether the facts show a violation by the President of the obligation imposed by his contract, to "avoid any conflict of interest, real or apparent."
      1. whether, based on the totality of circumstances, including any reputational damage that may have been done to the institution as a result of the matters under review, any changes would appear to be necessary to the governance framework to enable the World Bank to continue to operate to the fullest extent possible in achieving its chartered objectives.
The Ad Hoc Group did not examine, as the President had requested, whether the outcome reached with Ms. Riza was a reasonable settlement in light of the circumstances surrounding her involuntary relocation and the potential claims she might have had against the Bank. This report sets out the legal framework relevant to this matter, a statement of the facts, and the Group's discussion and recommendations to the Executive Directors.

II. Legal Framework
  1. Article V, Section 5 of the Bank's Articles of Agreement states:
President and Staff (a) The Executive Directors shall select a President who shall not be a governor or an executive director or an alternate for either. The President shall be Chairman of the Executive Directors, but shall have no vote except a deciding vote in case of an equal division. He may participate in meetings of the Board of Governors, but shall not vote at such meetings. The President shall cease to hold office when the Executive Directors so decide. (b) The President shall be chief of the operating staff of the Bank and shall conduct, under the direction of the Executive Directors, the ordinary business of the Bank. Subject to the general control of the Executive Directors, he shall be responsible for the organization, appointment and dismissal of the officers and staff. (c) The President, officers and staff of the Bank, in the discharge of their offices, owe their duty entirely to the Bank and to no other authority. Each member of the Bank shall respect the international character of this duty and shall refrain from all attempts to influence any of them in the discharge of their duties.
  1. The President's contract of employment (Contract) states11:
3. You will adhere to the standards set forth in the Code of Conduct for Board Officials (the Code). You will also be expected to observe the standards of ethical conduct applicable to staff members of the Bank, where these reflect a stricter standard. Notwithstanding any provisions to the contrary in the Code or the staff standards, the following provisions will apply to you as president: * * * (d) Conflict of interest. It is understood further that you will avoid any conflict of interest, real or apparent. * * * (f) where clarification is required with respect to ethical standards, you may seek the guidance of the ethics committee, established by the executive directors pursuant to paragraph 10 of the Code.
  1. The Code of Conduct for Board Officials (Code) states:
3. Basic Standard of Conduct 3(a) . . .shall maintain the highest standards of integrity in their personal and professional conduct and observer principles of good governance. * * * 4. Conflicts of Interest 4(a) In performing their duties, Board Officials shall carry out their responsibilities to the exclusion of any personal advantage. 4(b) Board Officials shall endeavor to avoid any situation involving an actual conflict, or the appearance of a conflict, between their personal interests and the performance of their official duties. If an actual conflict arises, the Board Official concerned shall promptly refer the matter to the Ethics Committee described in paragraph 10 below and shall withdraw from attendance or participation in deliberations or decision-making connected with that matter. If an appearance of conflict arises, or if there is doubt whether a conflict, actual or apparent, exists, the Board Official concerned shall promptly refer the matter to the Ethics Committee for guidance. * * * 7. Disclosure of Information 7(a) Board Officials shall at all times observe the applicable policies of the organizations regarding disclosure of information. 7(b) Board Officials shall protect the security of any information obtained in the performance of their duties as Board Officials that is not otherwise available to the public and, except as required to perform their duties as Board Officials, shall not use such information or disclose it to others.
  1. The Ethics Committee Rules of Procedure provide the following procedures for handling requests for guidance:
7(a) A Board Official or the President may submit a request for guidance concerning his or her annual disclosures, conflicts of interest, or other ethical aspects of conduct in respect of his or her personal situation to any Committee Member for consideration by the Ethics Committee in accordance with the procedures set forth in this paragraph 7. 7(b) The Ethics Committee shall review the request. Counsel to the Ethics Committee shall assist with this review. The Ethics Committee may also consult with one or more of the Ethics Advisors. The Ethics Committee may at any time request further information from the individual who submitted the request for guidance. 7(c) The Ethics Committee shall provide in writing its advice in response to each individual who has submitted a request for guidance. The Ethics Committee may communicate such advice to other Board Officials and the President, subject to consultation with the individual and in a manner that ensures the privacy of the individual concerned. (d) An individual who is not satisfied with the advice received from the Ethics Committee in response to a request for guidance may request reconsideration by the Ethics Committee or review by the Executive Directors.
  1. The standards of ethical conduct applicable to staff members of the Bank are set forth in the Principles of Staff Employment and the Staff Rules. Section 1.01 of the Preamble of the Principles of Staff Employment states:
1.01 The Articles of Agreement of the International Bank for Reconstruction and Development and of the International Development Association (together referred to as The World Bank), and the Articles of Agreement of the International Finance Corporation (IFC) provide respectively that, subject to the general control of the Executive Directors of the Bank and the Association and of the Directors of the Corporation (all referred to as the Executive Directors), the President is responsible for the organization, appointment and dismissal of officers and staff. Moreover, the fact that The World Bank and the IFC (the Organizations) are not subject to the employment legislation of any of their member countries imposes a special obligation on the Organizations in the relationship between them and their staff. Therefore, and without enlarging or restricting the constitutional or delegated authority of the President, the Executive Directors, upon the recommendation of the President, have adopted the following Principles of Staff Employment, which may be amended from time to time. These Principles of Staff Employment embody the general conditions and terms of employment with the Organizations and the duties and obligations of the Organizations and of staff members. They set forth the broad policies in accordance with which the President shall organize and manage the staff of The World Bank and the IFC.
  1. Principle 3 of the Principles of Staff Employment provides, in pertinent part:
3.1. The sensitive and confidential nature of much of their work requires of staff a high degree of integrity and concern for the interests of the Organizations. Moreover as employees of international organizations, staff members have a special responsibility to avoid situations and activities that might reflect adversely on the Organizations, compromise their operations, or lead to real or apparent conflicts of interest. Therefore, staff members shall:
    1. discharge their duties solely with the interest and objectives of the Organizations in view and in so doing shall be subject to the authority of the President and responsible to him;
* * *
    1. conduct themselves at all times in a manner befitting their status as employees of an international organization. They shall not engage in any activity that is incompatible with the proper discharge of their duties with the Organizations. They shall avoid any action and, in particular, any public pronouncement or personal gainful activity that would adversely or unfavorably reflect on their status or on the integrity, independence and impartiality that are required by that status; and
    1. observe the utmost discretion in regard to all matters relating to the Organizations both while they are staff members and after their service with the Organizations has ended. In particular they shall refrain from the improper disclosure, whether direct or indirect, of information related to the business of The World Bank or the IFC.
  1. Staff Rule 3.01, Standards of Professional Conduct, provides:
03. Duty of Care 3.01 Staff members must comply with the obligations embodied in the Principles of Staff Employment, the Staff Rules and all other policies and procedures of the Bank Group, as applicable.
  1. Staff Rule 3.01, Section 4, Supervisory Relationships, provides:
4.01 Supervisors shall at all times treat staff in a fair and unbiased manner. Treatment of staff shall not be influenced by personal ties between a supervisor in the staff member nor shall it be influenced by the race, nationality, sex, religion, political opinions, or sexual orientation of the supervisor or staff member... 4.02 A sexual relationship between a staff member and his/her direct report, or direct or indirect manager or supervisor is considered a de facto conflict of interest. The manager/supervisor shall be responsible for seeking a resolution of the conflict of interest, if need be in consultation with management, who will take measures to resolve the conflict of interest. Failure to promptly resolve the conflict of interest may result in a finding of misconduct.
  1. Staff Rule 3.01, Section 6, Instructions and Remuneration from Outside Sources, provides:
Except as otherwise required to perform Bank Group assignments involving service to other entities, staff members owe their duty entirely to the Bank Group and to no other authority. Accordingly, staff members may not accept instructions relating to the performance of their duties with the Bank Group from any governments or other external entities or persons except where performing duties for others pursuant to:
    1. the terms of an Executive Director's Assistant Appointment;
    1. an External Service Assignment;
    1. during Leave Without Pay; or
    1. the provisions of Staff Rule 3.04.
  1. Staff Rule 4.01, Appointment, Section 5.02 Spouses and Domestic Partners, provides:
5.02 The spouse or domestic partner of a staff member who meets the normal selection standards may be employed by the Bank Group. A husband and wife or domestic partners may be assigned to the same vice presidency or department, if neither supervises the other, directly or indirectly, and their duties are not likely to bring them into routine professional contact. They may not be assigned to the same division or equivalent unit. A spouse or a domestic partner of a staff member may be assigned to the same country office, provided that neither supervises the other, directly or indirectly, and provided that the Vice President responsible for the country office, in consultation with the Manager, Human Resources Service Center or the IFC Manager, Recruitment, approves the assignment.
  1. Staff Rule 5.02, paragraph 2.02 states:
2.02 Staff members are eligible for External Service if they meet all of the following criteria: their performance is fully satisfactory and they have been confirmed in their appointment; they are not currently on External Service;
    1. they express, in writing to the External Service Sponsor, interest in the proposed assignment, or respond to an announced vacancy; and
their appointment with the Bank Group will not terminate by mandatory retirement until at least one year after the conclusion of the External Service assignment.
  1. Staff Rule 05.02 Reassignment
The Director, Human Resources, shall reassign a staff member who marries or registers as a domestic partner of a staff member assigned to the same vice presidency, department, or other unit, if one spouse or domestic partner supervises the other directly, or indirectly, or their duties are likely to bring them into routine professional contact.
  1. Staff Rule 5.02, paragraph 3.01 states:
The Bank Group will consider applications from staff members for assignment to External Service if, in the opinion of the External Service Sponsor, the proposed assignment supports Bank Group objectives in one or more of the following ways: by providing technical assistance to Bank Group clientele; by enhancing the Bank Group's relations with member countries, the United Nations, other international organizations, or other agencies sharing the Bank Group's missions; or by enabling Bank Group staff to acquire skills and experience which the External Service Sponsor considers will contribute to the Bank Group's efficiency and effectiveness.
  1. Staff Rule 5.02, paragraph 3.02(b) states:
Appointments to Public Office with a Political or Policymaking Character. Appointments as minister, deputy minister, head or deputy head or equivalent of a central bank or other public agency having a political or policy-making character are not allowed as External Service. Staff members accepting such appointments shall resign. Appointments to other posts in public office, including senior or civil service posts, may be allowed as External Service unless otherwise determined by the Vice President, Human Resources. If required to do so by the Vice President, Human Resources, staff members accepting such appointments shall resign.
  1. Staff Rule 5.02, paragraph 3.03 states
Length of External Service. The maximum length of external service is two years, unless the External Service Sponsor, in consultation with the HR Manager or designated official decides to extend the duration of the External Service. The maximum extension shall be for two years. The maximum total duration of the External Service shall be four years.
  1. Staff Rule 6.01, Compensation, Paragraph 3.04, Promotion Increase, states:
Except as provided in paragraph 3.06, upon promotion to a higher grade pursuant to the provisions of Rule 5.05, a staff member will receive an increase equal to the greater of: 3 to 12 percent of the market reference point of the new grade up to the maximum of the salary range for the new grade; or the amount necessary to bring the net salary to the minimum of the new grade.
  1. Staff Rule 6.01, Compensation, Paragraph 6.05, Leave without Pay and External Service, provides, in pertinent part:
A staff member who has been on external service with pay for a period longer than three calendar months as of the date of the general salary review will receive a salary increase at the time of the general salary review equal to the average percentage applied to adjust the market reference points at grades A through I.
  1. The website maintained by the Bank's Office of Ethics and Business Conduct states:
A conflict of interest situation arises when a person or an institution in a position to exercise judgment on a matter, has divergent interests, as, for instance, when a staff member's personal interests are different from those of the World Bank Group. Staff members have a special responsibility to avoid situations and activities that might reflect adversely on the organization, compromise their operations, or lead to real, potential, or even apparent conflicts of interest. * * * What hasn't changed, however, is the WBG's commitment to the highest standards of ethical and professional conduct. This commitment has both personal and organizational implications. Moreover, because the WBG is judged by the collective performance and public perception of its staff, each of us has a responsibility to act in a manner that merits public trust and confidence. Staff must avoid conflicts between personal interest and the interests of the WBG or even the appearance of such conflicts. No staff member should act on behalf of the WBG in any transaction involving persons or organizations with which the staff member or a member of his or her family has a financial interest. The appearance of a conflict of interest can often be as detrimental as a conflict itself.

III. Factual Chronology
  1. In May, 2005, in the context of the discussion of the proposed contract of employment for Mr. Paul Wolfowitz, as President of the World Bank, Mr. Wolfowitz disclosed to the Bank, through his then-counsel, Mr. Robert Barnett of the Washington law firm of Williams and Connolly, that he had a pre-existing relationship with a Bank staff member, and he proposed recusing himself from all personnel matters regarding her. This was confirmed in a May 2005 letter from then-Senior Vice President and General Counsel of the Bank, Roberto Danino, to Mr. Barnett:
"First, I would like to acknowledge that Mr. Wolfowitz has disclosed to the Board, through you, that he has a pre-existing relationship with a Bank staff member, and that he proposes to resolve the conflict of interest in relation to Staff Rule 3.01, Paragraph 4.02 by recusing himself from all personnel matters and professional contact related to the staff member. A determination on whether a recusal is sufficient to resolve the conflict would be made within the legal framework of the institution, namely the contract, the Code of Conduct and the Staff Rules. . . . I would be grateful if you could confirm our understanding on these two points."12 On May 29, 2005 Mr. Barnett replied to Mr. Danino as follows: MR. WOLFOWITZ UNDERSTANDS THE NEED TO DEAL WITH THE APPEARANCE OF CONFLICT OF INTEREST. HE HAS PROPOSED A FAIR AND APPROPRIATE RECUSAL PROCESS THROUGH CONSIDERATION BY THE ETHICS COMMITTEE. THAT RECUSAL PROCESS WOULD NOT - I REPEAT, NOT - INVOLVE RECUSAL FROM PROFESSIONAL CONTACT. GIVEN THE ATTITUDE THAT THE BANK HAS EXPRESSED WITH RESPECT TO THIS MATTER, WE BELIEVE THAT THIS MATTER MUST BE RESOLVED BEFORE A CONTRACT IS SIGNED.13
  1. At the time, Mr. Wolfowitz also understood that Bank rules required recusal not from "all . . . professional contact," but only from "routine professional contact." Also, Mr. Wolfowitz was aware that the World Bank's senior Managing Director, Shengman Zhang, worked in an indirect supervisory relationship with his wife.14 For these reasons, Mr. Wolfowitz questioned Mr. Danino's recusal proposal.15 As reflected in a May 30, 2005 email from Mr. Danino to Mr. Barnett, Mr. Wolfowitz asked that the issue be resolved by the Ethics Committee:
"Conflict of Interest. We understand from your response that Mr. Wolfowitz proposes now that the potential conflict arising from the disclosed pre- existing relationship would be resolved before a contract is signed. We can agree to this request. The mechanism he has proposed for resolution is consideration by the Ethics Committee, which is a mechanism within the legal framework of the Bank. Based on his request, we will arrange for the Ethics Committee to deal with this matter as soon as possible."16
  1. In another email on May 30, 2005 from Mr. Barnett to Mr. Danino, Mr. Barnett wrote:
There are reports that Mr. Wolfowitz has had a personal relationship with a long-time employee of the Bank. In order to avoid any appearance of a conflict of interest involving that individual, Mr. Wolfowitz will recuse himself from any personnel actions or decisions with respect to that individual. We ask confirmation from the Ethic Committee that this approach is consistent with the regulations and policies - and, most importantly, the practices - of the Bank. Thank you.17
  1. Mr. Wolfowitz' request was considered by the Ethics Committee on June 2, 2005. The Ethics Committee framed the issue presented as a "request to consider and provide guidance on a potential conflict of interest with regard to Staff Rule 3.01, paragraph 4.02" which is the Staff Rule relating to Supervisory Relationships.18 
  1. On June 6, 2005, the Ethics Committee requested from the President information on the name, position, and any other relevant facts to enable the Ethics Committee to fulfill its obligations to provide advice in response to the submitted request for guidance.19 On June 8, 2005, the Ethics Committee met with the VPHR, who told the Committee that there were "581 couples with 193 potential for supervision between spouses, 19 cases of potential conflict, and 4 who work in the same department where there is no supervisory relationship but all these cases are being reviewed to see whether any corrective action needs to be taken."20 It is not known whether Mr. Melkert ever followed-up to learn whether this review was completed.
  1. With the agreement of the other two members of the Committee, the Chairman of the Ethics Committee, Mr. Ad Melkert and Mr. Wolfowitz discussed and corresponded during the period of June 6 through July 21, 2005, on the nature of the conflict of interest issue and possible solutions. On June 22, 2005, the Chairman of the Ethics Committee wrote to the President pointing out that the key problem raised by Mr. Wolfowitz's relationship with Ms. Riza was "supervision, directly or indirectly and routine professional contact".21 The Chairman noted the President's concern "that there is a tendency to set different standards, particularly with reference to the situation of the MD and his spouse."22 This was an apparent reference to Managing Director Zhang, who was the second highest ranking official at the Bank. He concluded, however, "what has not been right could not be an example to follow." The Chairman also wrote that:
"All in all it would neither be exceptional nor inappropriate to consider reassignment options as this would be in line with the rules and a substantial number of practical cases. Moreover this would serve: - strengthening internal standard setting - sending a clear external message, thereby boosting the President's and institution's reputation - sending a signal about the type of (decisive and fair) leadership of the new President - inoculating against (anonymous) complaint procedures - keeping future options for joint representation at public functions open." Mr. Melkert also acknowledged that the interests of the professional employee in question, who had been at the Bank since 1997, should be protected:  7. However in this approach there is still a very vital part missing, i.e. the legitimate concern and interest of the "partner" (my terminology) that her career path would not be harmed as a consequence of any conclusion on the issue of a potential conflict or interest. It may even be considered to address this question before reaching any conclusion at all. This would require from her side understanding of the situation as described above and readiness to consider alternatives. I am quite convinced that there are ways to ensure full recognition of her (considerable) professional qualifications and achievement in any option for reassignment. From your own perspective this could be considered one of the possible alternatives to address the potential conflict of interest that was brought to the Board's attention. It would also make in unnecessary to draw any further conclusions. 8. So in summary these are the two scenarios for conclusion that I consider feasible.       - the "pragmatic approach" along the suggested lines       - formal guidance to you by the Ethics Committee.23
  1. After additional discussion and correspondence,24 on July 21, 2005, Mr. Wolfowitz responded to the Ethics Committee's June 6 letter:
As you know, during the negotiations of my contract, to avoid any appearance of a conflict of interest, I provided a statement to the Board recusing myself from any personnel actions or decisions with respect to a longstanding professional staff member of the Bank with whom it has been reported that I have a prior personal relationship. I asked at that time for the Ethics Committee to ensure that this approach was consistent with the regulations, policies and practices of the Bank. In order to complete your review, I understand that the Ethics Committee needs to be officially informed of the name and professional position of the Bank employee to ensure a recusal can be properly implemented. Ms. Shaha Riza currently works in MENA as Acting Director of EXT. It is important that my recusal uphold the highest standards of conduct which should be applied across the institution. Moreover, I appreciate the concern you reflected in your memo dated June 22 that my recusal and any related Board decisions not be punitive nor have an adverse impact on Ms. Riza's professional opportunities. The conflict, if there is one, is mine and not hers and the Board was fully informed of it before my contract was signed. The challenge for your Committee and for me, as President, is how to: 1) avoid a conflict of interest, real or apparent; and 2) treat a loyal professional employee with the respect and fairness that all employees deserve. I would appreciate the advice of the Ethics Committee on how this challenge can best be met.       In your consideration of these questions, I would ask the Committee to keep in mind two facts:       With respect to point 1 above, the recusal I propose goes beyond the current prohibition on direct or indirect supervision, by recusing myself from any influence over personnel decisions involving Ms. Riza. This sets a higher standard than I believe has been applied previously. In the future, the same standard should apply to all senior management of the Bank and to members of the Board who have a personal relationship with an employee of the Bank, regardless of the supervisory relationship.       With respect to point 2 above, the reasonable prohibition on direct or indirect supervision necessarily precludes Ms. Riza from many professional opportunities in the Bank. She is thus necessarily disadvantaged by a circumstance that is not of her own making. Thank you for your consideration.25  Mr. Wolfowitz requested that his views be shared with the Ethics Committee members if Mr. Melkert deemed that appropriate.26
  1. On July 22, 2005, the Ethics Committee met to review the President's July 21 letter. The Committee discussed matters raised during informal discussions between Mr. Wolfowitz and the Chair of the Committee and noted in the Chair's June 22 note to Mr. Wolfowitz. In addition, the Committee considered a memo prepared by the General Counsel27 which reviewed several areas of "proposed recommendations" including, among other things, (1) facilitating Ms. Riza's relocation; (2) "additional personnel benefits to offset the negative career impact on the staff member," and (3) mutually agreed separations. With regard to the first, facilitating relocation, the memo mentioned the options of external service outside the Bank and reassignment within the bank to a non-supervisory position. The memo noted that Bank Rules allowed for a maximum of four years of external service.28
  1. Second, the memo outlined an option to "provide some form of personnel benefit to offset the negative career impact of the staff member" including "(a) promotion; or (b) salary increase." Within the category of promotions the memo further described two courses available: an "in situ promotion" or a "competitive" promotion, in which a staff member is selected through competition. 29 
  1. In addition to promotions, the memo described benefits that could be provided by compensation. According to the memo, the Bank could provide compensation in three ways: (1) an overall pay increase; (2) a promotion increase "normally limited to 3 to 12 percent of the market reference point"; or (3) "as part of settlement . . . an ad hoc salary increase."30
  1. Finally, the third area addressed was mutually agreed separation. The memo noted that the customary practice was one month's salary for each year of service, which the memo noted in Ms. Riza's case would be $60,000 - $66,000. Alternatively, the memo stated, "outside the mutually agreed separation provisions a larger payment could be made at managerial discretion."31
  1. The Ethics Committee was unanimous in its view that Mr. Wolfowitz's proposal to recuse himself from influence over Ms. Riza's personnel decisions "would not cure the de facto conflict of interest that existed" under Staff Rule 3.01, paragraph 4.02. The Record of Ethics Committee Deliberations on Case No. 2 read as follows:
      "... (1) the situat