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May 15, 2007
World Bank Wolfowitz Report with Wolfowitz's Response
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.
- 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
- 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
- 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.
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
- This matter was discussed during the Development Committee meeting held in Washington on April 15 and its Communiqué read in relevant part as follows:
- 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.
- 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.
- 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.
- 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:
- whether the facts show the violation of any staff rule;9
- whether the facts show a violation of the terms of the contract of the President of the World Bank;10
- 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."
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.
- 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.
II. Legal Framework
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.
- Article V, Section 5 of the Bank's Articles of Agreement states:
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.
- The President's contract of employment (Contract) states11:
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.
- The Code of Conduct for Board Officials (Code) states:
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.
- The Ethics Committee Rules of Procedure provide the following procedures for handling requests for guidance:
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.
- 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:
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:
- Principle 3 of the Principles of Staff Employment provides, in pertinent part:
* * *
- 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;
- 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
- 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.
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.
- Staff Rule 3.01, Standards of Professional Conduct, 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.
- Staff Rule 3.01, Section 4, Supervisory Relationships, 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:
- Staff Rule 3.01, Section 6, Instructions and Remuneration from Outside Sources, provides:
- the terms of an Executive Director's Assistant Appointment;
- an External Service Assignment;
- during Leave Without Pay; or
- the provisions of Staff Rule 3.04.
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.
- Staff Rule 4.01, Appointment, Section 5.02 Spouses and Domestic Partners, provides:
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;
- Staff Rule 5.02, paragraph 2.02 states:
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.
- they express, in writing to the External Service Sponsor, interest in the proposed assignment, or respond to an announced vacancy; and
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.
- Staff Rule 05.02 Reassignment
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.
- Staff Rule 5.02, paragraph 3.01 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.
- Staff Rule 5.02, paragraph 3.02(b) 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.
- Staff Rule 5.02, paragraph 3.03 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.
- Staff Rule 6.01, Compensation, Paragraph 3.04, Promotion Increase, states:
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.
- Staff Rule 6.01, Compensation, Paragraph 6.05, Leave without Pay and External Service, provides, in pertinent part:
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.
- The website maintained by the Bank's Office of Ethics and Business Conduct states:
III. Factual Chronology
"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
- 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:
"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
- 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:
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
- In another email on May 30, 2005 from Mr. Barnett to Mr. Danino, Mr. Barnett wrote:
- 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
- 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.
"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
- 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:
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
- After additional discussion and correspondence,24 on July 21, 2005, Mr. Wolfowitz responded to the Ethics Committee's June 6 letter:
- 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
- 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
- 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
- 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 situation disclosed by the Requestor [i.e. Mr. Wolfowitz] constitutes a de facto conflict of interest under Staff Rule 3.01, paragraph 4.02; (2) the recusal proposed by the Requestor would not be sufficient in light of the relocation and absence of professional contact standard applicable for spouses and declared partners; and (3) the qualifications and career perspectives of the staff member concerned should be fully taken into account. The Committee therefore decided that the best possible option to be conveyed to the Requestor would be one in which the staff member concerned is reassigned on external service or to a position beyond the potential supervision of the Requestor and, at the same time, due to the potential disruption of the staff member's concerned career, and in situ promotion should be considered. This advice would be communicated by the Requestor to the Vice President, MNA and the Vice President, Human Resources. The Committee believed this was an appropriate course of action, especially since this matter could be potentially damaging to the interests of the World Bank Group."32
- 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:
- It was agreed that the Chairman would continue informal discussions with the President with the view to finding an appropriate solution to the matter.33
1) The situation as described constitutes a de facto conflict of interest. 2) The EC has noted the proposed recusal. At this point in time the EC does not consider recusal sufficient and would most likely at least propose relocation/absence of professional contact which is the standard for spouses/declared partners. Before entering into any further in dept[h] consideration the EC is of the opinion that the approach below should prevail. 3) The EC subscribes to the need that the qualifications and career perspectives of the staff member should be taken fully into account. 4) Having considered different options the EC advises: a) That the staff member be relocated to a position beyond (potential) supervising influence by the President and therefore will withdraw from the current selection procedure for job promotion within the MENA department; b) That at the same time 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 as confirmed by her shortlisting for the current job process and as consistent with the practice of the Bank; c) That the President, with the General Counsel, communicates this advice to VPMENA and VPHR so as to implement a) and b) with immediate effect.
- The Ethics Committee then shared with Mr. Wolfowitz an informal draft of the Ethics Committee advice, dated July 27, 2005, stating34:
As agreed by phone last week I have, following your suggestion, approached Xavier Coll and, assisted by Roberto Danino, have shared with him the considerations and preliminary conclusion by the Ethics Committee that I have presented to you in the July 27 informal draft. This briefing has prepared Xavier to meet - upon your request - the staff member concerned in order to inform her of the EC's considerations and preliminary conclusions in preparing the advice that you had requested in June. I have underscored to Xavier that the following facts should be well understood: 1) The EC cannot interact directly with staff member situations, hence Xavier should act upon your instruction. (emphasis added.)36 2) The interaction with the staff member at this stage is only for information purposes, by way of courtesy, as both you and the EC have been preoccupied from the outset to have a procedure in place and an outcome reached that would duly recognize the record and career perspectives of the staff member, taking into account the scope of the EC which is limited to Board officials. 3) Once the EC will have formalized its advice it will be up to you and the VPMENA and VPHR respectively to take the appropriate steps, also for that reason Xavier's meeting could not be considered part of formal decision-making. Assuming that all of this is in the spirit of our previous conversations I would like to suggest that you take the following steps: A) request Xavier to meet the staff member on the basis of the above B) to do so as early as possible this week C) to ask Xavier to report back to you so as to enable you and me to conclude our deliberations on the EC's informal draft, upon which I will report back to the EC in view of its formal advice. I would highly appreciate if we could be in touch by the end of this week. (emphasis added).37
- Thereafter, the Committee Chair continued informal discussions with the President. On August 8, 2005, the Chair sent a letter to him35 addressing issues relating to the possible implementation of the informal draft advice which read:
- In his appearance before the Ad Hoc Group Mr. Octaviano Canuto, a member of the Ethics Committee at the time, was asked what this guidance to Mr. Wolfowitz to instruct Xavier Coll was intended to convey. He responded: "the basic meaning is the following: Get it out of the way. Do it!"38 According to Mr. Wolfowitz, he understood the August 8 letter as follows: "Look, my understanding of that language was you're in charge of this. Get it done. Report back to us by the end of the week. You give Mr. Coll his instructions. We've given him some general guidelines, but you're the one who has to take responsibility for the negotiations."39 Mr. Wolfowitz has stated that he believed the Ethics Committee Chairman, in stating that "Xavier should act upon your instruction," did not provide any discretion or latitude for him to delegate or supervise someone else managing the situation.40
It would have been perfectly appropriate for [Mr. Wolfowitz] to instruct his relevant Vice Presidents to resolve the issue in accordance with the advice he had received from the Ethics Committee and with the Bank's rules and practices and then to otherwise recuse himself from the negotiation and approval of the terms and conditions...As an Ethics Committee and I can say as the Board, there was no way around that the President is responsible, as I quoted from the Articles, for dealing with staff matters. But obviously the President is also bound by the Code of Conduct in terms of avoiding a conflict of interest in the way that you deal with your formal responsibility, and it was really not that difficult to separate those two elements.
- Mr. Wolfowitz objected to being thrust into the role of instructing Mr. Coll, because he preferred to recuse himself completely from the matter, but Mr. Melkert insisted that the President was responsible for dealing with the situation. Mr. Melkert indeed told the Group that he advised Mr. Wolfowitz to instruct Mr. Coll because "it was Mr. Wolfowitz's responsibility to deal with the advice [of the Committee] and certainly also his responsibility . . . to implement all relevant aspects of the staff member's position."41 It is Mr. Melkert's view that under the Articles of Agreement, "there is no way around that the President is responsible . . . for dealing with staff matters."42 Nonetheless, Mr. Melkert also claimed that :43
Mr. Coll presented the Ad Hoc Group with a detailed recollecton of the chronology of events. Others who were interviewed stated they had no clear recollection of the sequence of events. According to Mr. Coll he met with Mr. Wolfowitz and Ms. Robin Cleveland, Counselor to the President, on August 10, in preparation for a meeting on August 11 with Ms. Riza. 44 During that meeting, Mr. Coll was told to stop consulting with the Bank's General Counsel on this matter. 45 [THIS SHOULD BE DELETED BECAUSE IT INCORRECTLY STATES THAT WITNESSES OTHER THAN MR. COLL HAD "NO CLEAR RECOLLECTION OF THE SEQUENCE OF EVENTS." IN FACT, AS IS APPARENT FROM THE TESTIMONY INSERTED BELOW, MS. RIZA, MS. CLEVELAND AND OTHERS HAVE RECOLLECTIONS REGARDING THE SEQUENCE AND OF EVENTS AND OF THEIR CONVERSATIONS WITH MR. COLL. THE STATEMENTS CONCERNING MR. DANINO AND THE AUGUST 10, 2005 COLL EMAIL ARE ADDRESSED IN NEW PARAGRAPHS BELOW.]
- While the Committee's deliberations were in process, on the evening of the farewell party for former President Wolfensohn, Mr. Coll and Ms. Riza discussed Mr. Wolfowitz's appointment and the effect it might have on Ms. Riza. Ms. Riza had heard rumors that the Ethics Committee was going to ask her to leave. She told Mr. Coll that it was "absolutely unacceptable that something like this was taking place without him informing me." She also told him that she "was not going to leave this place [the Bank], and there is nothing that you can do about it because there are no Staff Rules that force me to go, at least that I am aware of. As far as I'm concerned, this is a decision that was taken arbitrarily . . . ." During another discussion, likely in early August, Mr. Coll came to Ms. Riza's office and began by saying "Shaha, I did not come here to f___ you," but explained that the Ethics committee had come to a conclusion that she would need to out-placed. Ms. Riza was "very, very upset." Mr. Coll told her she would be promoted to an "H" Level. She expressed the view that this was not compensation for being forced out in her view, because she would have gotten the promotion anyway and had already been short-listed for the H Level position. When Mr. Coll told her that they needed to discuss the matter further, Ms. Riza made it clear that she would "be coming in with [her] lawyer" for that meeting.46 Ms. Riza told the Ad Hoc Group that she felt that she "was being banished from the Bank without regard to the quality of my work performance or my commitment to the mission of the Bank." "Confronted with the prospects of being banished from the World Bank for at least five years," she said, "I fought for my rights over several meetings. I negotiated directly with Mr. Xavier Coll, Human Resources Vice President."47
- Mr. Wolfowitz, joined by Robin Cleveland, met as instructed with Mr. Coll on August 10.48 According to a personal note Mr. Coll wrote to himself shortly thereafter, Mr. Wolfowitz asked Mr. Coll to contact Ms. Riza "and listen to [her] proposed terms and conditions of her leaving the WBG in the context of the decision of the Ethics Committee of the Board."49
- Mr. Coll met with Ms. Riza on August 11, where she was accompanied by a friend who is also a lawyer. She proposed the following terms, as recounted by Mr. Coll:
- she would leave the Bank as part of one of the secondment programs to an institution "of her choice"
- she would be promoted to level H before leaving the institution - given the nature and in recognition of the job that she had been doing over the past few years
- the secondment program would maintain her current employment with the Bank, including salary and benefits (for as long as she is in the program)
- as part of the promotion to level H, she would be placed at the mid-point (or a bit higher) of the level H salary range. She mentioned a figure of $180,000
- her annual merit increases during her secondment period would reflect a mid-5 merit increase category
- after 5 years in the program, Mr. Riza would come back to the Bank at level G-I
- after 10 years in the program, Ms. Riza would come back to the Bank at level G-J50
- Legal action against the Bank by Ms. Riza was also a possibility at the time. Ms. Riza told the Ad Hoc Group that she understood there was "no Bank regulation or Staff Rule that required [her] to leave the Bank in order to resolve the situation."51 She also knew that she was receiving disparate treatment compared to the spouses of two very senior managers at the Bank - the wives of Managing Director Shengman Zhang and former Managing Director Caio Koch-Weser - who were permitted to remain at the Bank notwithstanding their husband's broad supervisory responsibilities.52 She told the Ad Hoc Group: "I was ready to pursue legal remedies. I would have preferred to fight the unfair situation."53 In his recent interview, Mr. Danino acknowledged that "this is certainly a unique case," because the President was involved in a conflict and "[b]ecause, through no fault of her own, Ms. Riza's career was going to be disrupted by applying the general [conflict of interest] standard of the Bank."54 Mr. Danino stated that in this situation, "it was indicated that Ms. Riza would end up suing the Bank and that we should try to avert - that it was in the interest of the Bank to avoid that type of situation. I fully agree. . . . I thought that also it was a good idea to avoid that possibility just for the efficient use of the resources of the Bank."55
- Ms. Riza, when asked whether she "consult[ed] with the President, either directly or indirectly, concerning the . . . terms you proposed to Mr. Coll during this August 11th meeting," told the Ad Hoc Group: "If you think I'm angry now, you should see me angry there. No, of course not, because I thought he should have fought the decision by the Ethics Committee. He became them, you, the Bank, and I had to fend for myself in the same way I'm now fending for myself." 56
"feasible . . . . They were things that clearly represented departures from what would happen if you stayed at the Bank, but she wasn't being allowed to do that. . . . [T]he way I . . . understood it from him [Mr. Coll] - was this was a very unusual situation. . . . I think he said something to the effect of, on various occasions, that he didn't see that there were policies to apply. We are having to deal with this on ad hoc basis. And that while - he said at one point to me that we need to make sure that the Rules aren't broken but there don't seem to be any that pertain to this situation. So . . . my sense - my take - away, and I think that the agreement reflects it, was that we were kind of charting a course here for which there was no custom, practice, rules, or appropriate policy. . . . If you are asking me if Xavier Coll said the Rules are being broken, he did not. He did not . . . He made no representation that this was anything other than an unusual circumstance that we were trying to manage."59
- Mr. Coll reported this conversation to Ms. Cleveland and characterized Ms. Riza's demands as "final and non-negotiable."57 In her interview, Ms. Cleveland stated that Mr. Coll described her demands as58
(a) being asked to leave the Bank (with the negative implications on her career); (b) not having been promoted earlier to level H; and (c) the effect of the situation (the "relation" with the President as discussed in the Press and by Bank staff) on her health and family.62 Mr. Coll's preferred plan was to implement the relocation and promotion recommended by the Ethics Committee, and to consider separately a grievances procedure or a lump sum financial statement with Ms. Riza to address and mitigate the grievances she had raised, which he noted "would be more consistent with past practice."63 Mr. Coll noted that Mr. Wolfowitz agreed that he should raise this alternative with her. "I felt comfortable that I had raised points of concern with the President and that he had taken these seriously and given due consideration." Mr. Wolfowitz thus authorized Mr. Coll to attempt to negotiate an agreement with Ms. Riza, whereby she would seek compensation for damage to her prospective career though separate grievance procedures.64 Mr. Wolfowitz corroborates this view, and stated to the Group, "I would have been happy with that, although I'm not sure if we were sitting here talking about a large lump sum payment that we'd be in any different situation. The fact is he tried to get that with her. He was unsuccessful. And I knew about his discomfort, but as I say, he didn't offer us a solution that got us to an agreement."65
- Mr. Coll then met with Mr. Wolfowitz and Ms. Cleveland on August 12 to discuss Ms. Riza's proposed terms. According to Mr. Wolfowitz, he knew of Mr. Coll's "discomfort" with some of the terms Ms. Riza was proposing.60 He stated that Mr. Coll did not tell him the proposals were outside the Bank's rules, but that Mr. Coll told him "there were no established Bank practices for a situation like this."61 In a memo to himself about this meeting, which he wrote shortly after it occurred, Mr. Coll indicated that Ms. Riza had grievances that included:
- At his recent interview, Mr. Coll said that at this meeting, he told Mr. Wolfowitz and Ms. Cleveland that the terms proposed by Ms. Riza, regarding her promotion increase, her annual increases and guaranteed promotion to Levels I and J, were "outside the Staff Rules" and that moving forward with them was a reputational risk to the Bank.66 In Mr. Coll's view, there is "no doubt that the President knew or had been made aware of by me that this was outside the rules." In Mr. Coll's private memo to himself written at the time of the events, however, he wrote: "I also felt that we were in a very difficult situation - with no precedent at the Bank - and that it had enormous potential to damage the Bank's reputation. In balance, I thought that the situation required more flexibility than in other past cases and that there was great risk to the Bank if we could not come to a workable agreement in a few days."67 Moreover, the Ad Hoc Group notes, it has been provided with a draft of the agreement between Mr. Coll and Ms. Riza that includes Mr. Coll's handwritten edits. [NOTE TO AD HOC GROUP: THE FOOTNOTE AND TEXT OF THE DRAFT REPORT ERRONEOUSLY STATE THE EDITS WERE PREPARED BY MR. WOLFOWITZ; THESE EDITS ARE IN MR. COLL'S HANDWRITING.]68 On the draft agreement, Mr. Coll noted, "There is no precedent to this kind of situation and no policy that could clearly apply to resolve it. Therefore this is a proposal that defines a set of actions and conditions to help resolve this [sic]unusual circumstances."69
[DELETED BECAUSE THE EVIDENCE SHOWS THAT MR. COLL SPOKE TO DAVID RIVERO AND ALSO TOLD MR. DANINO THAT MR. WOLFOWITZ HAD INSTRUCTED HIM TO KEEP THE MATTER CONFIDENTIAL, AND MR. DANINO DID NOT OBJECT TO MR. WOLFOWITZ AT THE TIME.] Mr. Coll states that during his August 10 meeting with Mr. Wolfowitz and Ms. Cleveland, they told him he "could not talk to anybody," including the General Counsel, about his conversation with Ms. Riza.74
- During her interview before the Ad Hoc Group, Ms. Riza explained that the package for which she negotiated was the "minimum" appropriate compensation for being forced to leave the Bank. She said that she knew "what other compensations were in this place, including people who have harassed women and what compensation they got."70 Ms. Riza explained that she arrived at her compensation package proposal first by reasoning that she should have gotten the H level years ago, and asked "Where would I be had they given me my H level when they should have given it to me?" She said that she would have been "at midpoint" now had she gotten the level H when they said they were going to give it to her. Then, because she would have been removed from the framework for granting promotions, she believed that she would have been entitled to an automatic promotion to J level after the appropriate time. 71 Ms. Riza stated that despite her supervisor's glowing reviews and his recommending that she be promoted, she had not yet received the promotion to level H. Ms. Riza attributed this to "discrimination, not because I'm a woman but because I'm a Muslim Arab woman who dares to question the status quo both in the work of the Institution and within the Institution itself."72 But she stated that she "kept on wondering if I had been a man, would it have happened to me? . . . [W]hy is it the woman is always the one to leave?"73
From the time Ms. Riza presented her terms to Mr. Coll until Mr. Wolfowitz instructed Mr. Coll to accept those terms, neither Mr. Wolfowitz nor Mr. Coll consulted with Bank counsel concerning whether the terms were in the Bank's interest.
- At his meeting with them on August 12, 2005, Mr. Coll again asked whether he could consult with the General Counsel about the negotiations.75 According to a memo Mr. Coll drafted to himself shortly thereafter, Mr. Wolfowitz told Mr. Coll not to discuss the matter with anyone "without his explicit approval."76 Mr. Wolfowitz and Ms. Cleveland also told him they did not want Mr. Danino involved "at this stage."77 While Mr. Coll was uncomfortable with this, he "understood that the issue of trust with Mr. Danino was . . . long-standing."78 Mr. Wolfowitz, according to Mr. Coll, asked Ms. Cleveland to consult outside counsel. Mr. Coll also told the Ad Hoc Committee that notwithstanding Mr. Wolfowtiz's request, that evening he contacted David Rivero, Chief Counsel, Corporate Administration, to discuss the situation.79
- Mr. Wolfowitz has not denied that the General Counsel was excluded from the negotiations. In his interview, Mr. Wolfowitz explained that he fully expected that as a legal advisor to the Ethics Committee, the General Counsel would review the arrangements in due course, but to complete the agreement on a timely basis, and to avoid any conflict with regard to the role Counsel would play in advising the Ethics Committee, he asked that the discussions be limited to the VPHR.80
- Both Mr. Danino and Mr. Melkert were aware that Mr. Wolfowitz had asked Mr. Coll not to involve the General Counsel in the negotiations. Mr. Danino reported to the Group that Mr. Coll told him this at the time that Mr. Wolfowitz made the request. He also reported that he raised his objection to being excluded directly with Mr. Melkert, Mr. Coll, and with his deputies in the Legal Department. 81 Also, on August 10, Mr. Coll sent an email to Mr. Melkert and Mr. Danino informing them that he had met with the President, and "[a]s I discussed earlier with Ad Melkert, the follow-up will remain confidential between he and I. The President will decide how to proceed from there."82 There is no evidence that Mr. Melkert or Mr. Danino expressed any concern to Mr. Wolfowitz about this.
- Ms. Riza's intitial proposal that her promotion Levels I and J be automatic was not accepted. According to Mr. Coll, he viewed the provision for guaranteed promotions to Levels I and J as "more outrageous than everything else," and told Mr. Wolfowitz and Ms. Cleveland that some form of peer review for the promotions to Levels I and J should be included in the agreement, even though he did not believe that would bring the proposal within the Staff Rules.83
The Ad Hoc Group notes in the record an undated memo with Mr. Wolfowitz's handwritten edits, in which Mr. Wolfowitz directs Mr. Coll to accept all of Ms. Riza's terms. [THIS REFERENCE IS DELETED BECAUSE IT IS HIGHLY UNFAIR. THE DRAFT REPORT FAILS TO NOTE THAT THIS EARLY DRAFT OF THE INSTRUCTIONS WAS DISCARDED, AS EVIDENCED BY A LARGE "X" STRIKING OUT THE MEMO IN ITS ENTIRETY. AS THE AD HOC GROUP IS WELL AWARE, MR. WOLFOWITZ DID NOT INSTRUCT MR. COLL TO ACCEPT ALL OF MS. RIZA'S PROPOSALS.]
"As you know, I recused myself from any personnel action or decision related to Shaha Riza, a proposal which would have afforded her the opportunity to continue on her professional career course at the Bank while avoiding any appearance of conflict of interest. The Ethics Committee advised me that my proposal was unacceptable. In addition, they stated that it was not appropriate for them to "interact with staff member situations", therefore, I was directed to instruct you to inform her of their conclusions and develop a plan which "duly recognizes (her) record and career perspectives," and that I should complete the action by the end of this week. In accordance with this directive from the Ethics Committee, I provided instruction for you to meet with her to discuss options. I appreciate your effort to carry out this assignment promptly and in a fair, professional manner. After hearing your report of her desire to pursue the option you outlined as preferable, that is to be detailed outside the Bank Group, I now direct you to agree to a proposal which includes the following terms and conditions. You should accept immediately her offer to be detailed to an outside institution of her choosing while retaining Bank salary and benefits. After being shortlisted for consideration as the Director of EXT for MENA, she has qualified for and should receive a promotion to H level at a mid-point salary level of $180,000 net income with mid-point, zone 5, annual increases which will approximate 8%. Further, because she is being compelled to leave the Bank Group and will not be able to go through regular reviews as the basis for future promotions, she is being forced into a situation with no precedent under Bank rules, practice or policy. Given the opportunity to continue on a regular career path, you have indicated that she normally would have been eligible for promotion to an I level within four to six years. Therefore, it seems reasonable to grant her request to be guaranteed the right to return at an I level should I depart at the end of a five year term. Should I stay on to serve a second term, she should return at a J level, which she notes would be one year from retirement. Since we have created a situation that precludes normal Human Resources (HR) review of her performance, you should propose the promotion to I (or J) level would be contingent upon a review of her work outside the Bank by a Committee of her peers to be appointed by mutual agreement between Ms. Riza and HR at the time. I understand your preference would be to offer her a financial settlement that would compensate her for both the lost opportunities related to promotion and the pain, suffering, and damage to her professional reputation that has been involved in her forced departure. Based on your advice, I direct you to provide her a choice between her proposal and your alternative of financial compensation in lieu of promotion to I or J level. The H promotion should be included in either alternative. You reported that a non-disclosure agreement was a standard Bank procedure in financial compensation settlements. If you believe it is appropriate in this circumstance, you should propose it to Ms. Riza as a way to protect both her privacy and the institution. Finally, I wish to reiterate my deep unhappiness with the whole way of dealing with a situation that I still believe, and have been advised by experienced labor legal counsel, should have been resolved by my recusal."
- In order to proceed with his negotiations with Ms. Riza, Mr. Coll specifically requested that he receive written instructions from Mr. Wolfowitz.84 He told the Ad Hoc Group that Mr. Wolfowitz "would have preferred to be recused."85 Mr. Wolfowitz provided instructions to Mr. Coll, dated August 11, 2005. The full text of the August 11, 2005 Memorandum is as follow:
- Mr. Coll assisted in drafting an agreement86 that Mr. Coll and Ms. Riza signed on September 1, 2005.87 Mr. Coll made handwritten edits to the draft agreement, including the fact that the annual increases would in 2005 be about 8% and that performance reviews would be "consistent with promotion criteria within the Bank."88 Mr. Wolfowitz asserts that based on Mr. Coll's edits and this written record, he had reason to believe that any questions or concerns about policies or rules had been appropriately clarified and addressed. At the time that Mr. Coll signed the final agreement, he did not object or express any concern to members of the Ethics Committee, members of the Conflict Resolution System, the Department of Institutional Integrity, the General Counsel, or the Managing Director.
- Significantly, although Ms. Riza had requested automatic promotions as part of her out-placement arrangement, Mr. Coll and Mr. Wolfowitz ultimately rejected that request.89 As a result, Ms. Riza's agreement does not provide for "automatic" promotions, but states that Ms. Riza will be eligible to be "considered" for promotion in five years, and that her eligibility will be subject to evaluation and review by a panel of Bank staff independent of the President's office.90 The opportunity to be considered for promotion is similar to what she would have enjoyed had she remained at the Bank, as she would have been eligible to be considered for a promotion in four to six years.
On August 8, I received a memo from you stating that the Ethics Committee had rejected my proposed recusal as the appropriate means to avoid any conflict of interest bearing on the professional circumstances of Shaha Riza. Your memo noted that it would not be appropriate for the Committee to "interact with staff situations", nevertheless you provided the opinion that she could not be permitted to stay in her current position or serve in the Bank. While I believe any potential conflict is due to my position, not hers, the Committee explicitly directed me to resolve the matter by providing instruction to Xavier Coll, Vice President, Human Resources to meet with her to discuss options. Further you requested I report back this week. Mr. Coll and Ms. Riza have reached an agreement. Since she has agreed to his recommendation92 to be detailed outside the Bank Group, there is no further potential conflict of interest. I hereby withdraw my request for consideration of my proposal for recusal and view this matter as closed.
- On August 12, the President wrote to the Chair of the Ethics Committee, indicating that because Mr. Coll and Ms. Riza had reached an agreement, he was withdrawing his proposed recusal and he considered the matter closed.91 The August 12 memorandum reads as follows:
- In his August 12 memorandum, Mr. Wolfowitz did not provide the Ethics Committee with a copy of his August 11 memorandum to Xavier Coll. He did not describe to the Ethics Committee the specific terms and conditions of the agreement reached with Ms. Riza. He did not tell them that he had been directly involved in the determination of those terms and conditions or that he had directed Xavier Coll to carry out the discussions with Ms Riza, although Messrs. Melkert and Danino were aware of this from Mr. Coll.93 Mr. Wolfowitz stated that he assumed the Committee had any and all information available to them and could review it to the extent they thought it appropriate.94 The Ethics Committee did not seek further clarification or subsequently request any information from Mr. Wolfowitz or anyone else. Mr. Melkert told the Group that had Mr. Wolfowitz come to him with hypothetical proposals, he would have listened to him, but Mr. Melkert also said that: "I have consistently maintained that I didn't want to know what exactly the terms and conditions would be because it was not my business to know that."95 He further explained that the Ethics Committee assumed the details of the arrangements between the Bank and Ms. Riza would be in accordance with the Bank's rules and practices and it was not the role of the Ethics Committee to delve further once it was reported to them that Ms. Riza was assigned outside Mr. Wolfowitz's influence.96
- The President's August 12 memorandum was hand delivered, but due to the Chair's absence on leave, he did not receive it until August 22, 2005.97
"it agreed that the outcome is consistent with the Committee's findings and advice as noted above." In particular, the Committee noted its views on various misstatements in the Requestor's memorandum:
- The Ethics Committee met on August 29, 2005. The Record of Deliberations, which Mr. Wolfowitz did not have access to, in relevant part read as follows:
Members of the Committee "cannot interact directly with staff member situations". Therefore, the Chairman appropriately declined to meet with the staff member concerned as the Requestor had suggested. Indeed, it was proposed that, the VP HR be instructed by the Requestor to do so.
- The Committee had not made a final determination. The communications of the Chairman with the Requestor were expressly characterized as informal and aimed at finding a constructive solution to the situation prior to the Committee making a final determination.
- The Committee had indicated that the staff member could continue to work at the Bank provided that the position she holds is outside the direct or indirect supervision of the Requestor and there is no routine professional contract between them.
- The Committee was also of the view that the de facto conflict of interest which had been created was not the result of any action by the staff member concerned. The conflict of interest was created by the appointment of the Requestor and could not be resolved without affecting the staff member's position. Indeed, in recognition of this situation, the Committee took the extraordinary step of recommending the consideration of an in situ promotion."
- According to Mr. Melkert, because the solution reported by Mr. Wolfowitz to the Ethics Committee was that Ms. Riza would "no longer be under his supervision, which was the heart of the matter" the Ethics Committee determined not to engage in a further exchange with Mr. Wolfowitz's about "interpretations of the roles of the different actors".98
You have asked us to review a contract that provides for a detail of a Bank employee to the State Department. As you know, our review has been limited: the key elements of the contract had been accepted and agreed to by all parties to the contract before we were retained. In addition, we understand that the State Department is separately reviewing the contract and will conclusively opine that the detail described therein is consistent with all applicable laws, including any appropriation law restrictions on the State Department's ability to accept the detail. Within this limited review, we believe that the contract is a reasonable resolution of the underlying perceived conflict of interest and reflects a reasonable compromise between the interests of the Bank and the detailee that avoids, among other things, the risks of protracted legal proceedings.99
- On August 31, 2005, Mr. Douglas Cox, an attorney with the law firm of Gibson Dunn and Crutcher, wrote a letter to the President advising him:
"When the President accepted his responsibility, he did so with the view that Bank Counsel could not provide legal advice to both parties (i.e., the Committee and the President). In order to assure the Bank's interests were appropriately protected, the President believed a legal evaluation of any agreement was essential so he asked me to look at outside law firms with strong labor and personnel practices."100 Billing records from Gibson, Dunn indicate that the Bank was billed for a total of two hours for the law firm's work on this matter.101
- According to Ms. Cleveland, Gibson, Dunn & Crutcher was retained because of the expertise of Eugene Scalia, former solicitor at the Department of Labor. She also said:
- As noted, on September 1, 2005, Mr. Coll signed a letter of agreement with Ms. Riza on the terms and conditions of her external service.102
- By letter dated September 21, 2005, to Mr. J. Scott Carpenter, Deputy Assistant Secretary Bureau of Near Eastern Affairs, US Department of State, Mr. Coll confirmed that Ms. Riza would be assigned to External Service at the U.S. Department of State, to serve as Senior Adviser in charge of establishing a foundation that will focus on reform of the MENA region.103
Thank you for your memo dated 12 August 2005, received by hand on August 22, 2005, regarding your request to the Ethics Committee for guidance. I am writing on behalf of the Ethics Committee to acknowledge the resolution of the conflict of interest in line with the guidance provided by the Committee, as conveyed through my informal draft of July 27, 2005. Your memo confirms that the staff member has agreed to be detailed outside the Bank Group, and that you withdraw your proposal for recusal. Because the outcome is consistent with the Committee's findings and advice above, the Committee concurs with your view that this matter can be treated as closed.104
- On October 24, 2005 the Chair of the Ethics Committee wrote to the President indicating that the matter was closed:
On May 31, 2005 in the course of the negotiations of the contract of the President, the Ethics Committee was requested to provide guidance on a potential conflict of interest with regard to Staff Rule 3.01, paragraph 4.02. The Ethics Committee considered the request and is pleased to confirm to the Executive Directors that the conflict of interest has been dealt with appropriately.105
- On October 25, 2005, at an informal meeting of the Board of Executive Directors, the Chair of the Ethics Committee delivered the following statement:
"This is (formally needed for the records) just to confirm the outcome regarding this extraordinarily difficult issue. I would like to thank you for the very open and constructive spirit of our discussions, knowing in particular the sensitivity to Shaha, who I hope will be happy in her new assignment".106 The Ethics Committee Discussion of the "John Smith" Email
- On November 25, 2005 the Chairman of the Ethics Committee wrote to the President:
- On January 21, 2006, one "John Smith" sent an e-mail to the World Bank investigations hotline with a copy to the members of the Board of Executive Directors of the Bank107 asking for an investigation of the salary increase provided to Ms. Riza and the contracts of Robin Cleveland, Kevin Kellems and Mr. Karl Jackson. The January 21 email raised detailed concerns that Ms. Riza "received a promotion and a permanent salary increase of around US$50,000 (net of income tax), with a commensurate increase in pension entitlements. Her salary went from around US$130,000 (net) to US$180,000 (net)." The email characterized the salary increase as "egregious." It went on to allege that "Mr. Wolfowitz did not submit the salary increase to the Board, which under the circumstances, is the only body capable of passing independent judgment on this extraordinary decision."108
- In a similar vein, the email characterized Robin Cleveland and Kevin Kellems as "political appointees" who were hired on terms that showed "wanton disregard for the World Bank's fiduciary duties and HR policies more generally." Specifically, the email claimed that "[b]oth received open-ended contracts from the outset, in contradiction with the political nature of their appointment. . . . Both were given Grades GJ [which] does not correspond to [their] duties and abilities . . . . Both were given outlandish salaries. Robin Cleveland was given a salary around US$250,000 . . . . Kevin Kellems . . . around US$240,000." Karl Jackson's contract was questioned because his concurrent teaching responsibilities appeared to breach ETC rules regarding full-time work requirements. The email argued that because he was a part-time employee, his $210,000 salary was unjustified.109
- On February 13, 2006, the Ethics Committee met and discussed, among other things, whether the allegations made in Mr. Smith's January 21, 2006 email warranted further review by the Ethics Committee. The Committee members agreed that the allegations concerning Ms. Cleveland and Messrs. Kellems and Jackson had been satisfactorily addressed by management during the meetings on February 1110 and 3 with the Personnel Committee on a presentation on the general principles of employment and succession planning and governance processes for senior appointments. Regarding the Ms. Riza matter, the Ethics Committee determined that the facts alleged by Mr. Smith were "consistent with the Committee's resolution of Case No. 2" and therefore no further action was required.111
- On February 15, 2006, Mr. Smith sent a second e-mail to the Bank's investigations hotline and the Board complaining that his previous request for an investigation was being ignored, and taking issue with defenses to the claims he perceived in the media or other unidentified correspondence.112
On the basis of a careful review of the above-mentioned documents and the information provided by the President at the informal meeting with Executive Directors on February 3, 2006, the Ethics Committee decided that the allegations regarding appointments of Bank staff do not appear to pose ethical issues appropriate for further consideration by the Committee. The Committee also decided that the allegation relating to a matter which had been previously considered by the Committee did not contain new information warranting any further review by the Committee.113
- On February 28, 2006, the Ethics Committee Chair wrote to the President informing him that the Ethics Committee had considered both Mr. Smith's email, along with other documents and concluded the matters raised in the emails did not require further action by the Ethics Committee:
- Mr. Melkert explained that from the standpoint of the Ethics Committee, the John Smith emails did not raise new information concerning Ms. Riza because the Ethics Committee knew she had received a promotion, and the amount of the promotion "was an aspect which we deliberately had not engaged ourselves with in the summer of 2005 [because] the levels of salary and all these kinds of things should not be part of or are not part of the responsibility of Board members and the Ethics Committee."114 Citing the detailed information included in the anonymous emails and the assurance that the Committee had conducted a "careful review" of the matter, Mr. Wolfowitz states that he understood that the Board had fully considered and addressed any matters of potential concern.115 The Board members who received the email were also reassured by guidance they received from the Ethics Committee.116 No member of the Board pursued the matter further with Mr. Wolfowitz.
- The Ad Hoc Group has been informed by the Human Resources Department, that staff on External Service for more than three months received an increase of 3.45% because that is the amount calculated by operation of the staff rule. Ms. Riza's actual increase, effective July 1, 2006, was 7.55% ($180,000 x .0755 + $13,590). The September 1 agreement with Ms. Riza provides that she will receive additional annual increase that are not related to the formula in the Staff Rule. However, the Group notes that, when the Ethics Committee advised that Ms. Riza should be relocated or externally placed to resolve the conflict of interest, it recognized that the external placement would last for as long as Mr. Wolfowitz was President of the Bank, which would be five to ten years. The Committee's advice immediately took the matter outside the normal process of external placement, which under the Staff rules cannot exceed four years. Ms. Riza's external placement, moreover, was not voluntary. Therefore the agreement compensated her for her grievances, and this compensation took the form of salary increases that would occur over the time span she was externally placed.
- This matter has received considerable attention in the media and has become an issue impinging on the Bank's reputation. On March 28, 2007 the Washington Post published an article titled "Where the Money Is" in which Mr. Kevin Kellems, Director, Strategy and Senior Advisor to the President, was quoted as saying: "All arrangements concerning Shaha Riza were made at the direction of the Bank's Board of Directors."117 On April 9, 2007, the President issued a statement to all Bank staff stating that he had sought the advice of the Board of Executive Directors and "acted on the advice of the Board's Ethics Committee." At a press conference on April 12, 2007, Mr. Wolfowitz stated "In hindsight, I wish I had trusted my original instincts and kept myself out of the negotiations. I made a mistake for which I am sorry." I take full responsibility for the details of the agreement, and I did not attempt to hide my actions or to make anyone else responsible. I met with the Board this morning, and I proposed to them that they establish some mechanism to judge whether the agreement reached was a reasonable outcome. I will accept any remedies they propose." On April 14, 2007 the President issued a statement indicating his concern that the documents released by the Board "are quite lengthy; it's a lot to wade through looking for significant facts, so I'd like to call your attention to a number of them" and he provided a link to documents that had been underlined for emphasis. On April 30, 2007 Mr. Wolfowitz's statement to the Ad Hoc Group appeared in the media. In that statement he claimed there was a "plainly bogus charge of conflict of interest" a "smear campaign" and that "for the Directors now to declare my actions to be improper and to criticize me would be unjust and frankly hypocritical."
- Statements made to the Ad Hoc Group by Mr. Melkert, Mr. Danino and Mr. Wolfowitz have also appeared in the media. In addition, statements attributed to Bank officials and Board members regarding the deliberations and decisions of the Ad Hoc Group have appeared in the news and in on-line postings.
- At the outset, the Ad Hoc Group (the "Group") would like to underscore that it does not regard the work it was asked by the Executive Directors to undertake as an adversarial process in which one party is pitted against another. The Group is of the strong view that everyone involved must approach this work with the same common objective: to do that which is in the best interest of the institution. We must not lose sight of the fact that we each and all of us have a fiduciary obligation to the organization.
- The Ad Hoc Group regards its work as primarily involving matters of institutional governance. In the view of the Group, the question that must be kept uppermost in mind is whether principles of good governance and the highest standards of integrity have been observed by all parties, or whether some fell short. Looking forward, the question that must be addressed is whether the events that have unfolded have implications for how the institution is best served in terms of its leadership as well as its governance structure.
- The Ad Hoc Group benefited from an extensive documentary record as well as from meetings with several current and former staff members and Board officials. The Group is grateful to the persons who made themselves available to meet with the Group, in particular Mr. Wolfowitz who met with the Group on three separate occasions and who, directly and later through his lawyers, provided an extensive compilation of documents.
- The Group finds that the documentary record in this matter is by and large undisputed. Although different persons may have drawn differing conclusions from the words written in these documents, there is little dispute over which documents are central to the matter under review. Where differences have emerged, it is in the recollections of persons as described in their meetings with the Ad Hoc Group.
Because of the strong and largely undisputed documentary record, the Ad Hoc Group has decided to base its conclusions primarily on the documents it has before it as they reflect a contemporaneous record and provide a comprehensive picture of the events. [Deleted. The Ad Hoc Group draft draws heavily on retrospective recollections by witnesses and it does so in a highly selective manner, as the additions and deletions in the AMENDMENTS ABOVE make clear.] These differences are significant. In a number of cases, particularly that of Mr. Coll, his retrospective testimony is contradicted by his own written notes at the time, including memos written to himself for the record which presumably contained his uncensored private views.
- The starting point for the Ad Hoc Group's review is found in Mr. Wolfowitz's contract with the Bank. The contract articulates the obligations Mr. Wolfowitz undertook upon becoming President of the World Bank. Among other things, the contract states that Mr. Wolfowitz "will adhere to the standards set forth in the Code of Conduct for Board Officials (the Code)." It goes on to provide that Mr. Wolfowitz "will also be expected to observe the standards of ethical conduct applicable to staff members of the Bank, where these reflect a stricter standard." Finally, the contract explicitly states that "[i]t is understood further that you will avoid any conflict of interest, real or apparent."
- The Ad Hoc Group has construed "ethical standards applicable to staff members of the Bank" to include those standards enunciated in various Bank policies and rules, including the Principles of Staff Employment adopted by the Executive Directors in 1983, which set forth the "broad policies in accordance with which the President shall organize and manage the staff of the The World Bank and the IFC." The Group has also reviewed pertinent staff rules, as well as the World Bank Policy on Disclosure of Information (the "Disclosure Policy"). The salient provisions of the Code of Conduct for Board Officials, the Principles of Staff Employment, the Staff Rules and the Disclosure Policy are set out in detail above, in the section outlining the legal framework.
- The Ad Hoc Group has identified three specific areas of concern in connection with Mr. Wolfowitz's involvement in the events under review. One involves Mr. Wolfowitz's involvement in the terms of Ms. Riza's external assignment and the issue of conflict of interest. Another involves important governance issues and relates to the decision taken by Mr. Wolfowitz not to consult the World Bank General Counsel, or any other staff of the World Bank Legal Vice Presidency, regarding the legal issues, including potential liabilities to the World Bank as well as compliance with internal World Bank rules and policies, surrounding Ms. Riza's external assignment. The final area of concern relates to the manner in which this matter has become a topic of public debate through issuance of statements to the press. In addition, the Ad Hoc Group has identified areas of concern relating to potential shortcomings related to governance of the Bank.
- The Ad Hoc Group's review in connection with each of these three areas will, in turn, shed light on the four questions identified by the Executive Directors and incorporated by the Ad Hoc Group in its April 27, 2007, Plan of Action. The four questions are: (i) whether the facts show the violation of any staff rule; (ii) whether the facts show a violation of the terms of Mr. Wolfowitz's contract with the Bank; (iii) whether the facts show a violation by Mr. Wolfowitz of the obligation to avoid any conflict of interest, real or apparent; and (iv) 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 of the World Bank. The Ad Hoc Group did not examine the question of whether the terms of the agreement with Ms. Riza constituted a reasonable settlement of employee grievances in a case that was unprecedented and which entailed significant damage to her career. In the absence of such examination, the Board should assume that this was an appropriate resolution of a situation which, in Mr. Coll's own words, was in fact "a very difficult situation - with no precedents at the Bank. "
By involving himself in the specific terms of Ms. Riza's external assignment, Mr. Wolfowitz acted in a manner that was inconsistent with his obligations to the Bank in two important respects. One relates to his obligation to avoid conflict of interest situations. The other relates to his obligations to act in a manner that is consistent with the Staff Rules and other obligations that pertain to staff.
[Deleted: As shown in Mr. Wolfowitz's Submission of May 11, 2007, and in the amendments to the text above, these conclusions do not reflect an accurate or balanced reading of the testimony and documentary evidence. These paragraphs should be replaced as follows:]
The ad hoc group concludes that the President placed himself in a conflict of interest situation when he became involved in the determination of the terms of the external service assignment. He should have withdrawn from any decision-making in the matter. Furthermore, the ad hoc group concludes that the President, going beyond the preliminary conclusions and informal advice of the Ethics committee, directed Xavier Coll to enter into an external service arrangement with Shaha Riza that was at variance with the applicable staff rules in three important respects: (i) the amount of the promotion increase related to the in situ promotion; (ii) the amount of subsequent year salary adjustments; and (iii) the potential for promotions in grade Ms. Riza was assured under the agreement. Each of these areas is discussed in detail below.
- The Ad Hoc Group concludes that all parties attempted in good faith to resolve an unprecedented situation. The Ethics Committee believed that recusal was insufficient and that it was necessary to advise the relocation of Ms. Riza. The Committee also believed in good faith that its jurisdiction to implement the relocation was constrained by the Articles of Agreement. By advising Mr. Wolfowitz that he had to instruct Mr. Coll in connection to the negotiations with Ms. Riza, however, the Committee's advice placed Mr. Wolfowitz in an exceptionally difficult position, and Mr. Wolfowitz objected to Mr. Melkert and Mr. Coll. The problem was compounded by the fact that the obvious logical other choice to oversee the negotiations with Ms. Riza, the then-Managing Director, was determined to be in a similar indirect supervisory relationship with his spouse, a fact that had neither been previously disclosed nor addressed.
- All parties were mindful that this was a difficult situation with no precedent at the Bank. All parties were also mindful of the reputational risks to the institution if the de facto conflict of interest which the Ethics Committee said existed was not resolved promptly, but also in a manner that recognized the harm that had been visited on Ms. Riza's career prospects. Accordingly, as Mr. Coll stated, "the situation required more flexibility than in other past cases and there was a great risk to the Bank" if a fair and workable agreement was not reached promptly with Ms. Riza.118
- Further, there is a factual dispute about what the Ethics Committee meant when it advised Mr. Wolfowitz that he must be the one to "instruct" Mr. Coll and that Mr. Coll should report to Mr. Wolfowitz. Mr. Wolfowitz states that he understood it to mean that he was responsible for resolving the matter and that he should instruct Mr. Coll in the negotiations, and not that he could or should delegate the matter to someone else. Mr. Melkert now states that he never intended to convey anything more than that Mr. Wolfowitz should have the formal role of asking Mr. Coll to meet with Ms. Riza, and then step out of the matter until the negotiations were completed. The Ad Hoc Group observes that the Committee's guidance was not a model of clarity. It also notes that although there is no evidence that Mr. Wolfowitz asked whether he could delegate the matter, he did object to Mr. Melkert about having any involvement, and there is no evidence that Mr. Melkert told Mr. Wolfowitz at that time that he could delegate the matter to someone else. Nor is there any evidence that the Committee attempted to make clear that Mr. Wolfowitz should not play any role in the negotiations.
The Conflict of Interest
- Mr. Wolfowitz told Mr. Melkert and Mr. Coll, orally and in writing, that he did not want to have any involvement in the matter, and that he questioned the Ethics Committee guidance that he had to be the one to instruct Mr. Coll. Nevertheless, he followed the Committee's advice as he understood it. The Ethics Procedures permitted Mr. Wolfowitz to take the matter up with the Executive Directors directly if he did not believe the advice he had been given was correct. The Ethics Procedures state that "[a]n 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." However, Mr. Wolfowitz, who was then new to the bank, states that he was not familiar with the Committee's own procedures at that time, and was not advised by anyone that the Committee's written guidance could be appealed. In particular, Mr. Melkert, even though he knew of Mr. Wolfowitz's objections, did not tell him he could appeal.
- Mr. Wolfowitz's contract with the Bank obliges him to "avoid any conflict of interest, real or apparent." The Code of Conduct for Board Officials obliges him and all Board Officials to "endeavor to avoid any situation involving an actual conflict, or the appearance of a conflict, between their personal interests and the performance of their duties." Mr. Wolfowitz's contract and the Code of Conduct also require that he submit conflict of interest questions to the Ethics Committee. Further if an actual conflict arises, the code states that a Board Official "shall withdraw from attendance or participation in deliberations or decision-making connected with that matter."
The ad hoc group acknowledges that the informal advice as provided by the Ethics Committee was not a model of clarity. It hould have been drafted in language that would not leave open the possibility of misinterpretation. Nonetheless, the Ad Hoc Group believes that the interpretation given by Mr. Wolfowitz, which is that the Ethics Committee instructed him to become involved in the determination of the specific terms of and conditions of the external assignment, turns logic on its head. The Ad Hoc Group does not believe that the Ethics Committee advised Mr. Wolfowitz to become directly involved in the details of the conflict of interest matter the Ethics Committee was attempting to keep him out of in the first place. From the outset the Ethics Committee established that Mr. Wolfowitz's proposal for recusal was not sufficient which mean recusal was a necessary element, but not enough to resolve the de facto conflict of interest.
[Deleted: As shown in Mr. Wolfowitz's Submission of May 11, 2007, and in the amendments to the text above, these conclusions do not reflect an accurate or balanced reading of the testimony and documentary evidence. These paragraphs should be replaced as follows:] The Ad Hoc Group finds that Mr. Wolfowitz "endeavor[ed] to avoid" a conflict in this instance by seeking advice and direction from the Ethics Committee and by attempting in good faith to follow what he understood at the time to be the Committee's advice.
Mr. Wolfowitz states that he had disquiet with his understanding of the advice, but that he nevertheless followed it. The Ethics Procedures make clear that Mr. Wolfowitz could have taken the matter up with the Executive Directors directly if he did not believe the advice he had been given was correct. The Ethics Procedures state that "[a]n 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." Mr. Wolfowitz did neither. This is particularly troubling given the paramount importance given to avoidance of conflict of interest in both his contract and in the Code of Conduct for Board Officials. Alternatively, Mr. Wolfowitz might have expressed his concerns to the General Counsel or to some other member of the Legal Vice Presidency. However, as discussed in greater detail in the following section of this report, Mr. Wolfowitz had cut off that important avenue of advice and legal counsel. Staff Rules and Bank Policies The Promotion Increase At the heart of the matter are two documents: the informal draft advice of the Ethics Committee to the President of July 27 and Mr. Melkert's letter to Mr. Wolfowitz of August 8. The informal draft does recognize the need that the qualifications and career perspectives of the staff member should be taken fully into account, and sets as advice the potential disruption of the staff member's career prospect be recognized by an in situ promotion, consistent with Bank practice. It is a fact that a salary increase goes hand in hand with a promotion, but it is also a fact that the salary increase granted to Ms. Riza far exceeded an increase that would have been granted in accordance with the applicable Staff Rule, Staff Rule 6.01, "Compensation," para 3.04. Rule 6.01 provides in pertinent part that upon promotion to a higher grade a staff member will receive an increase equal to the greater of: (i) 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 (ii) the amount necessary to bring the net salary to the minimum of the new grade. In Ms. Riza case, the terms that Mr. Wolfowitz directed Mr. Coll to agree to resulted in a promotion increase that placed Ms. Riza's salary at $180,000 which was well beyond the market reference point salary range midpoint of $167,890 and that amounted to an increase of 28.2% of the market reference point instead of the 3 to 12 percent envisaged by Staff Rule 6.01. According to HR, Ms. Riza's salary immediately preceding her promotion to Level H was $132,660. The minimum salary level for Grade H was $129,140 and the Market Reference Point for Grade H was $167,890. The 3 - 12% range of promotion increase available to Ms. Riza under the Rule was from $5036.70 (3% of $167,890) to $20,146.80 (12% of $167,890). Ms. Riza's actual promotion increase was $47,340, which is an increase of 28.2% of the MRP of Grade H, rather than the 12 % high end of the range stated in the Rule. b. Future Salary Adjustments Neither the informal draft advice nor Mr. Melkert's letter of August 8 recommended or made mention of any special arrangements for future salary increases. Nontheless, Mr. Wolfowitz directed Mr. Coll to agree to "mid point, zone 5, annual increases which will approximate 8%." Staff Rule 6.01, "Compensation" provides at para. 6.05 that "[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." The Human Resources Compensation Unit has advised that under this formula, in July 2006, staff on external service with pay for more than three months would have received an increase of 3.34%. This contrasts with the salary increase of 7.55% that Ms. Riza received under the external service agreement she entered with the Bank. c. Future Promotions Neither the informal draft nor Mr. Melkart's letter of August 8 to Mr. Wolfowitz recommended or made mention of future promotions for Ms. Riza. Staff Rule 5.02, "External Service," provides at para. 5.03 that "[s]kills and experience acquired during External Service will be taken into consideration in evaluating the staff member's eligibility for promotions in accordance with Rule 5.05, "Promotion," after the staff members returns to active service.
[Deleted: This discussion attempts to apply guidelines for a normal external assignment to a situation which was unprecedented and that involved, at the direction of the Ethics Committee, an involuntary assignment outside the Bank for a period which exceeded normal guidelines and which entailed significant damage to Ms. Riza's career. THIS WAS NOT A ROUTINE PERSONNEL MATTER, BUT AS MR. COLL NOTED, A GRIEVANCE SITUATION for which compensation was appropriate. The above text should be replaced as follows:]
Mr. Wolfowitz's direction to Mr. Coll, however, states that because Ms. Riza was being compelled to leave the Bank Group and will not be able to go through regular reviews as the basis for future promotions, "she is being forced into a situation with no precedent under Bank rules, practice or policy. Given the opportunity to continue on a regular career path, you [Mr. Coll] have indicated that she normally would have been eligible for promotion to an I level within four to six years. Therefore it seems reasonable to grant her request to be guaranteed the right to return to an I level should I depart at the end of a five year term. Should I stay on to serve a second term, she should return at a J level, which she notes would be one year from retirement." Promotion would, however, have been contingent upon a review of her work outside the Bank Group by a Committee of her peers to be appointed by mutual agreement between Ms. Riza and HR at the time." The ad hoc group notes nothing in Staff Rule 5.02, "External Service," provides to staff on external service with assured consideration to promotion upon return to the Bank. Furthermore, the ad hoc group could find nothing in Staff Rule 5.05, "Promotion," that affords staff the opportunity to be vetted for promotion by a panel the composition of which the staff member has a hand in deciding by mutual agreement with the Vice President of Human Resources.
- The Ad Hoc Group concludes that the initial guidance provided by the Ethics Committee to relocate and promote Ms. Riza, while given in good faith, launched a process outside of customary staff rules. The Group believes the Ethics Committee guidance and the subsequent steps taken by Mr. Wolfowitz, Mr. Coll, and Ms. Riza reflected the unique circumstances the parties were attempting to address. While there are clearly staff rules pertaining to (i) voluntary external service arrangements; (ii) the amount of promotion increases related to a grade or in situ promotion; (iii) the amount of subsequent year salary adjustments; and (iv) the potential for future grade level promotions, the rules did not govern or pertain in this instance due to the involuntary nature of the situation with which Ms. Riza was presented. The Ethics Committee deliberations and the General Counsel memo prepared for the Committee's review recognize that management has discretion to provide ad hoc salary increases or lump sum payments as compensation for employee grievances.119 The agreement with Ms. Riza is thus more appropriately compared to, and assessed under the policies that govern, other settlements the Bank has made to resolve employment grievances.
- While the terms of Ms. Riza's agreement may not have comported with policies and rules that would in a typical case govern an employment relationship with the Bank, the Group recognizes that, as Mr. Coll made clear to Mr. Wolfowitz at the time, there was no precedent or any policy that clearly applied to this situation. There is indeed no evidence that any of the parties involved considered this a matter to which customary promotion or compensation rules applied. Once the Ethics Committee advised that an in situ promotion should be granted and that an involuntary long-term relocation should be undertaken to resolve the issue, the matter was set on a pathway that took it outside the rules that govern routine terms of employment. In particular, external placement could last five to ten years. The Committee's guidance, which was to relocate Ms. Riza for a period that automatically took the matter outside Staff rules, which permitted external placement for a maximum of four years.
- Ms. Riza's concerns that her long-term career prospects would be substantially disrupted as a result of the Committee's actions were legitimate grievances that needed to be addressed. The Ad Hoc Group therefore finds that it was appropriate that any agreement with Ms. Riza include compensation for these grievances.
The Informal Advice and the August 8 Letter from Ad Melkert As for Mr. Wolfowitz's involvement in deciding the details of the arrangement with Ms. Riza, the August 8, 2005, advice of the Ethics Committee contains a sentence that reads: "The EC cannot interact directly with staff member situations, hence Xavier should act upon your instruction." Read in isolation, the above-mentioned sentence could be interpreted as the Ethics Committee advising that Mr. Wolfowitz should take an active role in the negotiation with Ms. Riza. However, when both the informal draft advice and the August 8 letter are considered in the overall context of the events, it is highly unlikely that such an interpretation would be the correct one. There are a number of important aspects to the August 8 letter that warrant emphasis. The letter makes clear that Mr. Coll is to meet with Ms. Riza "upon your [Mr. Wolfowitz] request" and that the purpose of the meeting would be "to inform her on the EC's considerations and preliminary conclusions." The letter states that "the interaction with the staff member at this stage is only for information purposes, by way of courtesy," and that the meeting "could not be considered part of formal decision-making." It explains that there would be a subsequent exchange between Mr. Melkert and Mr. Wolfowitz "to conclude [their] deliberations." Finally, the letter also states that "once the EC will have formalized its advice it will be up to [Mr. Wolfowitz] and the VPMENA and VPHR respectively to take the appropriate steps, also for this reason Xavier's meeting could not be considered part of the formal decision-making." Based on the above-described parts of the August 8 letter, the ad hoc group concludes that it is very clear that the "instruction" envisaged was for the President to instruct Mr. Coll to "meet - upon [Mr. Wolfowitz's] request - the staff member concerned in order to inform her on the ED's considerations and preliminary conclusions . . . for information purposes, by way of courtesy . . . .[and that the] meeting could not be considered part of formal decision-making." It is apparent that the Ethics Committee intended that the process would not go beyond that. The only reason for Mr. Melkert telling Mr. Coll that he should "act upon [the President's] instruction was to make it clear to him that he (Mr. Coll) could only act (i.e. arrange the meeting) if and when asked by the President to do so, since "the EC cannot act directly with staff member situations. It is clear that all decisions would come later, "once the EC will have formalized its advice" once the President and Mr. Melkart have "concluded [their] deliberations on the EC's informal draft" and that all this would follow a further discussion later in the week. It is not possible to conclude from this letter that Mr. Melkert was instructing the President to negotiate and decide personally the full terms and conditions of Ms. Riza's external assignment, without any further involvement by or reference to Mr. Melkert, Mr. Danino, or anyone else. It is simply not what the letter says. Furthermore, it is the ad hoc group's view that if Mr. Wolfowitz were in any doubt as to the precise meaning of the letter or the propriety of the advice it contained, he should have asked for clarification or raised his concerns with the Ethics Committee itself, with the Executive Directors, or with the General Counsel or another member of the Legal Vice Presidency. As notes above, Mr. Wolfowitz did not do so. The ad hoc group finds that Mr. Wolfowitz did not comply with the provision in his contract that required him to "avoid any conflict of interest, real or apparent" as well as the provision in the Code of Conduct requiring that he withdraw from "participation in deliberations or decision-making" when he involved himself in the specific terms of Ms. Riza's external assignment. The Ethics Committee is of the view that Mr. Wolfowitz went beyond the advice provided by the Ethics Committee both in becoming involved in the deliberations and decision-making as well as in determining the specific terms of the external assignment and direction Xavier Coll to implement them. Those terms, furthermore, went beyond the arrangement envisaged by the Ethics Committee as well as the provisions of the applicable staff rules. It is the view of the ad hoc group that these actions show that the relationship between Mr. Wolfowitz and Ms. Riza went beyond the appearance of conflict of interest (which Mr. Wolfowitz acknowledged from the earliest days of his contract negotiations) and constituted an actual conflict of interest situation. In this regard, the ad hoc group notes that Staff Rule 3.01, "Standards of Professional Conduct," provides that "[t]reatment of staff shall not be influenced by personal ties between the supervisor and the staff member." The Rule states that "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." The ad hoc group found Staff Rule 3.01 noteworthy for the following reasons. It makes clear that personal relationships between a direct or indirect manger and a subordinate constitute a de facto conflict of interest. It imposes on the manager the obligation of seeking a resolution to the conflict. Most importantly, it underscores the risk the rule seeks to avoid: that treatment of staff if influenced by personal ties. The ad hoc group found this rule to be particularly pertinent in connection with the matter under review because many of the problems the rule seeks to preclude actually occurred.
[Deleted: As shown in Mr. Wolfowitz's Submission of May 11, 2007, and in the amendments above, these findings are not supported by an accurate or balanced reading of the testimony and documentary evidence. These paragraphs should be replaced as follows:]
In addition to the previously-mentioned conclusion, the ad hoc group would note that the documents it has reviewed leave the group with the impression that Mr. Wolfowitz, from the outset, challenged the way in which the Bank's internal governance rules regarded personal relationships. Mr. Wolfowitz regarded the relationship as possibly giving rise to an "appearance" of a conflict of interest. In the view of the ad hoc group, the relationship he disclosed went beyond creating an "appearance" and gave rise to an "actual" conflict. By resisting the Bank's prohibition on "professional contact" and arguing that recusal only from personnel matters would suffice, Mr. Wolfowitz placed himself, in a matter in which he had a personal interest, in opposition to the established legal framework of the institution he had been selected to head and in a conflict of interest situation even in the domain where he had proposed to recuse himself. Instead of setting the example of adhering to the highest (and in this case well-established) standards, he initiated a negotiation with the institution he was to lead and then sought to dilute the standard the Bank had adopted for itself. The ad hoc group is troubled by these actions coming as they do from the person responsible for setting the "tone at the top" and the example that all staff should follow.
- It is undisputed that the Ethics Committee's memo to Mr. Wolfowitz stated that Mr. Coll was "to act upon [his] instruction," that he was to task Mr. Coll to meet with Ms. Riza, and that Mr. Coll was report back to Wolfowitz.120 The memo did not say, and no one told Mr. Wolfowitz at the time, that he should delegate the matter entirely to Mr. Coll and step out of it.121 The Committee also told Mr. Wolfowitz that he was to report back to Mr. Melkert within a matter of days.122 Octaviano Canuto, a member of the Committee at the time, acknowledged to the Group that he understood this to mean that Mr. Wolfowitz was to "Get it out of the way. Do it!"123 In Mr. Melkert's words, he told Mr. Wolfowitz that "it was his responsibility to deal with the advice [of the Committee] and it was certainly also his responsibility . . . to implement all relevant aspects of the Staff member's position."124 According to Mr. Melkert, under the Articles of Agreement, "there is no way around that the President is responsible . . . for dealing with staff matters."125 Mr. Melkert now asserts that he was referring simply to the "formal position of the President in the Articles of Agreement for dealing with Staff,"126 but there is no evidence that this is what he communicated to Mr. Wolfowitz at the time. There is also evidence that Mr. Melkert had been told by Mr. Coll at the time that Mr. Wolfowitz was supervising Mr. Coll in the negotiations, but Mr. Melkert did not advise Mr. Wolfowitz to cease doing that. The Ethics Committee's advice that he instruct Mr. Coll put Mr. Wolfowitz in an awkward position from the outset. The Group finds that, but for that advice, Mr. Wolfowitz made clear he would have recused himself entirely from the matter.
Legal Safeguards The documents reviewed by the Ad Hoc Group, as well as the statements made in the course of its interviews with some of the persons the Group met with, confirm that a decisions was taken by the Mr. Wolfowitz not to consult the World Bank General Counsel or any other member of the World Bank Legal Vice Presidency, regarding the legal issues and potential liabilities arising from the external assignment of Ms. Shaha Riza. The Group also finds that Mr. Wolfowitz not only took this decision, but that he directed his Vice President for Human Resources, Mr. Coll, not consult with Mr. Danino or anyone else in the Legal Vice Presidency despite Mr. Coll's expressed desire to do so. The Group finds that this action effectively deprived the institution of any acceptable legal safeguard. It resulted in the established governance structure of the Bank, which the Executive Directors and the staff count on as part of the overall governance framework and control environment in which the Bank operates, being subverted. The fact that this was done without being disclosed to the Executive Directors, or to any appropriate Bank officials outside the small circle dealing with this sensitive matter, further compounded the problem. The Ad Hoc Group finds that these actions manifest a lack of understanding for and a disregard for the interests of the institution as a public international organization. From the standpoint of internal governance, the actions disturbed the system of checks and balances that are in place and act as safeguards. It removed a central element of the World Bank's governance safety net. It left only the Vice President for Human Resources to safeguard the interests of the institution, but he accommodated the wishes of the President. The Group found the rationale provided for these actions particularly troubling. The Vice President and General Counsel traditionally has acted as legal advisor both to Management and to the Executive Directors. This is a role that General Counsel over the years managed to execute with professionalism and effectiveness. For Management to cut the General Counsel entirely out of the picture without informing the Executive Directors further undermined the carefully constructed governance framework that has been in place and worked well at the Bank for many years. Furthermore, the idea that the General Counsel could not advise both the Ethics Committee and the President defies logic, as the Ethics Committee and the President share the same interest which is to protect the institution from legal and reputational harm. The Group does not see that anyone is better placed to do that than the General Counsel who is the most senior legal officer in the Bank.
[DELETED: NO FINDING IS WARRANTED WITH RESPECT TO LEGAL SAFEGUARDS BECAUSE MR. WOLFOWITZ ACTED IN GOOD FAITH TO BALANCE THE BEST INTERESTS OF THE INSTITUTION WITH THE STAFF MEMBER'S INTERESTS. MR. WOLFOWITZ BELIEVED MR. DANINO'S ROLE AS ADVISOR TO THE ETHICS COMMITTEE ON THE CONFLICT-OF-INTEREST ISSUE PRECLUDED HIM FROM INVOLVING HIMSELF IN THE NEGOTIATIONS WITH MS. RIZA AT THE SAME TIME.127 THESE NEGOTIATIONS TOOK PLACE OVER THE SPAN OF A FEW DAYS. MR. WOLFOWITZ DID NOT FORECLOSE APPROPRIATE INSTITUTIONAL REVIEW OF THE AGREEMENT AND FULLY EXPECTED THAT THE ETHICS COMMITTEE AND MR. DANINO WOULD REVIEW THE AGREEMENT AT THE APPROPRIATE TIME AND TO WHATEVER EXTENT THEY CONSIDERED NECESSARY. MR. WOLFOWITZ ALSO SOUGHT THE VIEWS OF OUTSIDE LEGAL COUNSEL ABOUT THE AGREEMENT. THAT COUNSEL OPINED THAT "THE CONTRACT IS A REASONABLE RESOLUTION OF THE UNDERLYING PERCEIVED CONFLICT OF INTEREST AND REFLECTS A REASONABLE COMPROMISE BETWEEN THE INTERESTS OF THE BANK AND THE DETAILEE THAT AVOIDS, AMONG OTHER THINGS, THE RISKS OF PROTRACTED LEGAL PROCEEDINGS."]
The Ad Hoc Group also finds that the President's decision to resort to outside legal advice was flawed in several respects. First of all, it was done without the benefit of the Bank's internal legal counsel's guidance and direction, and should have been done through the Bank's General Counsel or through lawyers from the Bank's Legal Vice Presidency. Second, the external legal counsel did not review the adequacy of the proposed arrangement from the perspective of the Bank's internal law or the law of international civil service generally. Rather, it assessed the arrangement from the perspective of legal risk and practice in the United States. While this might have been useful, it was not adequate. Finally, the review by the firm of Gibson Dunn and Crutcher came at a time when, by the law firm's own letter, the "key elements of the contract had been accepted and agreed to by all the parties to the contract before we [Gibson Dunn & Crutcher] were retained." The Ad Hoc Group finds that this sort of legal review, in these circumstances, is squarely at odds with the "high degree of . . . concern for the interests of the Organizations" required by Principle 3 of the Principles of Staff Employment.
Public Debate and Disclosures
As stated earlier, the matter before the Ad Hoc Group is one of internal governance. It relates to issues that have arisen between the Board of Executive Directors and its Chairman. The process that is underway is a Board process in the exercise by the Executive Directors of their fiduciary responsibilities to the Bank. It has been initiated by the Executive Directors and endorsed by the Development Committee. The Ad Hoc Group views with profound regret the public pronouncements by some current and former Bank officials and staff members on this matter, and the disclosure of information, otherwise confidential, in manners inconsistent with the applicable staff rules and policies of the Bank. The Ad Hoc Group is strongly of the view that all officials and staff of the World Bank Group must adhere to the highest standards of conduct. The Group notes with dismay the misstatements to the press attributed to Mr. Kevin Kellems, on behalf of the President, that "all arrangements concerning Shaha Riza were made at the direction of the bank's board of directors." The Group determined in its report dated April 11 that it did not find that the terms and conditions of the agreement with the concerned staff member had been commented on, reviewed or approved by the Ethics Committee, its Chairman or the Board. Based on its further work, the Group reiterates this finding. The Group is troubled by Mr. Wolfowitz's own public statements as well as those of his lawyer made on his behalf, for a variety of reasons. First, they involve disclosure of information relating to a Board proceeding which under the Board's Rules of Procedure and referred to in the World Bank Policy on Disclosure of Information, adopted by the Executive Directors in 2001, are confidential and are not publicly available information. But of greater concern to the Group is the attitude it reveals about the nature of the process currently underway. It has turned an internal governance matter into an ugly public relations campaign in which Mr. Wolfowitz believes he is being publicly attacked and therefore has resorted to public attacks of his own which denigrates the very institution he was selected to lead. The statements ridicule the governance framework and process established by the 185 member countries of the Bank. The Ad Hoc Group believes that this is of concern for a variety of reasons: 1) it places Mr. Wolfowitz's personal interests ahead of institutional interests; 2) it casts Mr. Wolfowitz as an adversary of the World Bank when, as noted above, the process underway should not be regarded as adversarial; 3) it results in the institution being seen in a bad and unfair light in the public eye; and 4) it has produced an environment that, put mildly, is not conducive to maximum work efficiency or positive staff morale. The Group believes that the President's actions are inconsistent with his obligation to "maintain the highest standards of integrity in [his] personal and professional conduct and observe principles of good governance" as required by the Code of Conduct. His statements regarding matters that are the subject of Board proceedings and the release of statements he made to the Ad Hoc Group violate his obligation to "at all times observe the applicable policies of the Organizations regarding disclosure of information." The Ad Hoc Group also finds that the Principles of Staff Employment, applicable to the President through the terms of his contract, provide a useful standard against which to measure his actions. Principle 3 provides that staff shall "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. Principle 3 also provides that staff is to "observe 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." Staff is obliged to discharge their duties solely with the interest and objectives of the Organizations in view."
[Delete: These proposed findings are unfounded and hypocritical. The board should be concerned that all Bank staff and management adhere to the Bank's confidentially rules. The text should be amended as follows:]
The Ad Hoc Group finds that these standards have not been observed. The Group does not accept the view that just because others may have done, or are doing, something egregious, this provides a basis for similar actions by anyone else. As for Mr. Wolfowitz, he is the chief of the operating staff of the Bank and Chairman of its Executive Directors and, as such, he must uphold the high standards the institution has adopted.
- The Group notes the statements to the press attributed to Mr. Kevin Kellems, on behalf of the President, that "all arrangements concerning Shaha Riza were made at the direction of the bank's board of directors." The Group determined in its report dated April 11 that it did not find that the terms and conditions of the agreement with the concerned staff member had been commented on, reviewed or approved by the Ethics Committee, its Chairman or the Board. Nonetheless, the Group finds that at the time of Mr. Kellems' statements, Mr. Wolfowitz had reason to believe they were accurate. The Group notes that the Ethics Committee acts on behalf of the Board of Directors. The Group further notes that the Ethics Committee advised Mr. Wolfowitz on October 24, 2005, that the outcome reached in this matter was consistent with its findings and advice. Moreover, in response to an anonymous email sent to all members of the Board on January 21, 2006, which detailed Ms. Riza's salary arrangement, the Committee Chair informed Mr. Wolfowitz that the Committee had conducted a "careful review" of the email, and it "did not contain new information warranting any further review by the Committee."128 Mr. Wolfowitz understood this to mean that the email did not contain information that was new to the Committee and that it had carefully reviewed the allegations in the email. This was not an unreasonable reading.
Employment Contracts Made by the Office of the President
- The Group is concerned by the tenor of the public discussion about this matter and the nature and frequency of unauthorized disclosures of its own confidential internal process. It also deplores the improper public disclosures of confidential personnel and compensation information about Bank staff.
- In addition to its review of the matters outlined above, in the brief time available to it the Ad Hoc Group also looked into certain employment contracts made by the Office of the President. In addition to a review of pertinent documents, the Ad Hoc Group heard from Ms. Pauline Ramprasad who is the Human Resource Manager responsible for the office of the President and who, therefore, was senior human resource officer working with Mr. Wolfowitz on the appointments.
- The Group learned from Ms. Ramprasad that she provided Mr. Wolfowitz with grade and salary possibilities for Ms. Cleveland and Mr. Kellems. Ms. Ramprasad informed the Ad Hoc Group that it was Mr. Wolfowitz's wish to provide these staff members with grades commensurate with the significant responsibilities they had each held in their previous positions as well as over the course of their careers. Mr. Wolfowitz also made clear he wanted them each to have grades and titles that would command respect within the institution and signal to other staff that they worked closely with the President of the Bank. According to Ms. Ramprasad, Mr. Wolfowitz said to her that he envisaged these staff members as being primary interlocutors between him and the staff of the Bank.
Governance-Related Issues and Some Lessons
- The Ad Hoc Group determined, based on its review of the documents and the information received in the course of its interviews, that the grades and salaries offered both to Ms. Cleveland and Mr. Kellems though generous (as most Bank salaries generally are compared with comparable government service positions), they were within the broad Human Resources guidelines applicable given the role Mr. Wolfowitz identified for them. The Group decided that it would therefore not devote any additional time to looking into these matters.
- In the course of its work and its deliberations, the Group has found issues which are noteworthy and which may require further review by the Executive Directors. Although the Group was troubled by the manner in which some issues had been dealt with as discussed in its conclusions, it believes that these events highlight issues that will need to be addressed and also provide an opportunity to draw some lessons for application in the future.
- First, in connection with the selection process, the contract negotiations and the resolution of the potential conflict of interest issue, the Group believes that this matter may have been alleviated if the issue had been resolved before the execution of the contract of the President and before the President took office. The Group would like to suggest consideration by the Executive Directors of a practice under which contracts with incoming Bank Presidents in the future are not concluded before all outstanding issues are resolved, notwithstanding any pressures to the contrary.
- The Group's review of the external service assignment and this matter, have also given rise to issues related to some procedural aspects of the work of the Ethics Committee which may need review by the Executive Directors. In the documents and in the interviews, the Group observed that the former members of the Committee who were interviewed were constrained in the extent of their involvement in the details of the request for advice. Since the request was for advice, the present Ethics Committee Procedures restricted the Ethics Committee to providing advice on the matter in response to the President's request and accordingly, they felt unable to become sufficiently involved in the matter. This judgment, however, was misguided. The Group believes that it
might would have been appropriate for the Ethics Committee to respond to the mischaracterizations in the President's memorandum dated August 12 with which it had concerns. It might also would have been appropriate for it to have received requested details of the agreement with the concerned staff member. The Committee's constrained view of its jurisdiction and responsibilities laid the groundwork for the misunderstandings that followed. The Group noted in this connection that as the Procedures also had a provision giving the requestor the right to appeal to the Ethics Committee for reconsideration of its advice or to the Board, it appeared that the process was in the control of the requestor.
- Even more fundamental, however, was the constraint the Ethics Committee members believed existed due to the provisions of Article V, Section 5(b) of the Articles of Agreement, which gives the responsibility for the organization, appointment and dismissal of the officers and staff to the President, subject to the general control of the Executive Directors. Due to this demarcation between the respective roles of the President and the Board, the Ethics Committee felt unable to become involved in the details of the matter. These observations will also require reflection by the Executive Directors in the future.
1 The Group is composed of Mmes. Mulu Ketsela and Jiayi Zou and Messrs. Svein Aass, Pierre Duquesne, Jorge Familiar, Alexey Kvasov and Herman Wijffels. Mr. Wijffels was selected by the Group as its Chair.
- At an even higher level, the issues which have been uncovered and have unfolded in the course of the last few weeks may give rise to a careful examination of the Bank's overall governance framework, and in particular, the oversight function of the Executive Directors. In the course of this examination, consideration should be given to changes that may be required to bring the Bank's governance framework to the state of the art now existing in the twenty-first century. Experiences in corporate governance practices across the world should be taken into account.
2 During this first phase of its work, the Group met respectively with the President, Mr. Paul Wolfowitz, and with the Vice President, Human Resources, Mr. Xavier Coll, the Senior Vice President and Group General Counsel, Ms. Ana Palacio, the former Senior Vice President and General Counsel of the Bank, Mr. Roberto Danino, and Mr. Otaviano Canuto, Executive Director and former member of the Ethics Committee (EC), and by videoconference with Mr. Ad Melkert, former Chairman of the EC.
3 The Ethics Committee is a committee established by the Executive Directors to address ethics matters involving Board officials including the President. The Ethics Committee and its procedures are outlined in greater detail below in Section II.
4 Cited herein as "Report of the Ad Hoc Group".
5 4/11/2007 Report of the Ad Hoc Group, p. 2.
6 Development Committee Communiqué, April 15, 2007.
7 See footnotes 8 and 9.
8 The Ad Hoc Group met with the President of the World Bank, Mmes. Shaha Riza, Robin Cleveland, Aulikki Kuusela, and Pauline Ramprasad and Messrs. Ad Melkert, Otaviano Canuto, Roberto Danino and Xavier Coll.
9 The Ad Hoc Group has construed "staff rule" broadly to include all applicable standards including the Code of Conduct for Board officials; the Principles of Staff Employment, the Staff Rules, as well as other pertinent policies such as the World Bank Policy on Disclosure of Information.
10 Contract with Mr. Wolfowitz, SecM2005-0356, June 15, 2005.
12 Letter from Mr. Danino to Robert Barnett dated May 27, 2005, President's Submission on Behalf of Paul Wolfowitz, President of the World Bank Group to the Ad Hoc Committee of the World Bank Group, April 30, 2007 ("President's Submission"), Exhibit 2.
13 Email from Mr. Barnett to Mr. Danino dated May 29, 2005, President's Submission, Exhibit 2. The fact that this email response was typed in capital letters simply reflects the fact that this was one of a series of responses to questions from Mr. Danino. Mr. Barnett used uppercase text to distinguish the responses from the questions.
14 See 6/22/2005 Memorandum from Ad Melkert to Paul Wolfowitz; 4/30/2007 Interview with Robin Cleveland ("Cleveland Interview"), p. 21.
15 5/2/2007 Letter of Paul Wolfowitz to Ad Hoc Group.
16 5/30/2005 Email from Mr. Danino to Mr. Barnett, President's Submission, Exhibit 2.
17 5/30/2005 Email from Mr. Barnett to Mr. Danino, President's Submission, Exhibit 2.
18 Record of Ethics Committee on Case Number 2 ("EC Record"), p. 1.
19 Letter from Ad Melkert to Paul Wolfowitz, dated 6/6/05.
20 Summary of Ethics Committee Meetings, EC Record Annex 3.
21 Memorandum to Paul Wolfowitz from Ad Melkert dated June 22, 2005, President's Submission, Exhibit 4.
24 Letter from Ad Melkert to Paul Wolfowitz dated July 14, 2005 and Note from Ad Melkert to Paul Wolfowitz dated July 20, Report of the Ad Hoc Group, Documents 5 and 6.
25 Letter from Ad Melkert to Paul Wolfowitz dated July 21, 2005; Report of the Ad Hoc Group, Document 7.
27 Ethics Committee Discussion, EC Record, Annex 6.
32 Id, pp. 2-3.
33 Id, p. 3.
34 EC Record, Annex 5.
35 Letter to Paul Wolfowitz from Ad Melkert dated August 8, 2005, EC Record, Annex 8.
36 Article V of the Bank's Articles of Agreement provides that the President is the chief of the operating staff of the Bank. This precluded the Ethics Committee from itself directing Mr. Coll to act upon its instructions.
37 Letter to Paul Wolfowitz from Ad Melkert dated August 8, 2005, EC Record, Annex 8.
38 5/1/2007 Interview with Ad Melkert and Octaviano Canuto ("Melkert Interview"), p. 39.
39 5/1/2007 Interview of Paul Wolfowitz ("Wolfowitz Interview"), p. 37.
40 Id. at 12.
41 Melkert Interview, p. 41-42.
42 Id. at 36.
43 Id. at 9-10, 36.
44 Interview of Xavier Coll dated April 25, 2007 ("Coll Interview"), p. 28.
45 Id. See also, email dated August 10, 2005, 6:44 p.m. from Mr. Coll to Mr. Melkert and Mr. Danino stating that Mr. Coll had met with Mr. Wolfowitz, and that "the follow up will remain confidential" between Mr. Coll and the President, and that "the President will decide how to proceed from there." See letter from Xavier Coll to Herman WIjffels dated May 2, 2007 ("Coll Papers"), Annex 4.
46 5/1/2007 Interview of Shaha Riza ("Riza Interview"), p. 21-24.
47 Id. at p. 13-14.
48 4/25/2007 Interview of Xavier Coll ("Coll Interview"), p. 28.
49 8/12/2005 Email from Xavier Coll to himself.
50 Email to self dated August 12, 2005, Coll Papers, Annex 1.
51 Riza Interview, p. 4.
52 Id. at 10-11.
53 Id. at 14.
54 4/30/2007 Interview of Roberto Danino ("Danino Interview"), p. 28-29.
55 Id. at 39-40.
56 Riza Interview, p. 33.
57 8/12/2005 Email from Xavier Coll to himself.
58 Cleveland Interview, p. 10-11.
59 Cleveland Interview, p. 10-11.
60 Wolfowitz Interview, p. 41.
61 Id. at 47.
62 8/22/05 Email from Xavier Coll to himself.
65 Wolfowitz Interview, p. 40- 41.
66 Coll Interview, p. 40, 43. See Coll Papers, p. 3.
67 8/22/2005 Email from Xavier Coll to himself.
68 8/26/2005(pm) Xavier Coll's handwritten edits to September 1 Agreement.
70 Riza Interview, p. 30-31.
71 Id. at p. 29-30.
72 Id. at p. 9.
73 Id. at p. 30.
74 Coll Interview p. 28. [August 10, 2005 email is addressed below.]
75 Id. See also, email dated August 10, 2005, 6:44 p.m. from Mr. Coll to Mr. Melkert and Mr. Danino stating that Mr. Coll had met with Mr. Wolfowitz, and that "the follow up will remain confidential" between Mr. Coll and the President, and that "the President will decide how to proceed from there." See letter from Xavier Coll to Herman Wijffels dated May 2, 2007 ("Coll Papers"), Annex 4.
76 8/22/2005 Email from Xavier Coll to himself.
79 4/25/2007 Coll Interview, p. 29.
80 Wolfowitz Interview, p. 24-25.
81 4/30/2007 Danino Interview, p. 25.
82 8/10/2005 Email from Xavier Coll to himself.
83 Coll Tr. at 59.
84 4/25/2007 Coll Interview, p. 39.
85 Id. at p. 51.
86 Xavier Coll's handwritten edits to September 1 Agreement, President's Submission Exhibit 13.
87 9/1/2005 Agreement.
88 8/26/2005 (pm) Draft agreement with annotations.
89 Wolfowitz Interview, p. 17-18.
90 9/1/2005 Agreement.
91 EC Record, Annex 8.
92 Compare with reference in August 11 memorandum from the President to Mr. Coll, EC Record, Document 10.
93 8/10/2005 Email from Xavier Coll to Ad Melkert and Robert Danino.
94 Wolfowitz Interview, p. 8.
95 Melkert Interview, p. 37.
96 Id. at p 11, 27.
97 EC Record, p. 3.
98 Melkert Interview, p. 42.
99 Letter from Paul Wolfowitz to Douglas Cox of Gibson Dunn and Crutcher LLP, dated August 31, 2005, President's Submission, Exhibit 21.
100 Email (draft) from Robin Cleveland dated 9/9/05, President's Papers Delivered to the Ad Hoc Group, April 9, 2007 ("President's Papers"), Document 2.
101 Ms Cleveland provided EXC billing records to the Ad Hoc Group which reflected work carried out on August 24 and 31. She noted that the bill also included an entry for an unrelated item for October 26. The draft report's suggestion that the firm billed time to reviewing the agreement after the fact is therefore in error.
102 President's Papers, Exhibit 14.
103 Id., Exhibit 16. The Foundation for the Future describes its purpose is to "promote democracy and reform" in the MENA region.
104 President's Submission, Exhibit 14.
105 EC Record, Annex 10.
106 President's Submission, Exhibit 16.
107 EC Record, Annex 11.
108 1/21/2006 Email from "J. Smith."
110 Id. Report to the Board from the Personnel Committee dated February 27, 2006, PC2006-0002, paragraph 5, indication that management "assured the committee that the recent appointments made by the President were coherent and consistent with the Bank's existing rules and regulations as well as past precedents in the institution."
111 EC Record, Annex 11.
114 Melkert Interview, p. 71.
115 5/2/2007 Wolfowitz Letter to Ad Hoc Group, p. 2.
116 2/13/2006 Record of Ethics Committee Discussion, President's Submission, Exhibit 19.
117 Mr. Kellems' statement also appeared in article in the New Yorker magazine dated April 9, 2007 titled "The Next Crusade, Paul Wolfowitz at the World Bank".
118 8/22/2005 Email from Xaxier Coll to himself.
119 See 7/22/2005 Ethics Committee Discussion.
120 8/8/2005 Memo from Ad Melkert to Paul Wolfowitz.
123 Melkert Interview, p. 31.
124 Melkert Interview p. 41-42 (emphasis added).
125 Id. at 36.
126 Id. at 39.
127 8/8/2005 Memo from Ad Melkert to Paul Wolfowitz.
128 2/28/2006 Letter from Ad Melkert to Paul Wolfowitz.