World Bank Wolfowitz Report with Wolfowitz's Response

1. On April 6, 2007, the Executive Directors decided to establish an Ad Hoc Group "to acquire information" related to a matter "concerning a possible violation of Staff Rules in favor of a staff member closely associated with the President."¹

1. The Ad Hoc Group ("Group") held meetings with current and former officials of the Bank² and obtained and reviewed the relevant files of the Ethics Committee³ and documents from the President. The Group prepared a "Report of the Ad Hoc Group" dated April 11, 2007, which was presented to the Executive Directors on April 12, 2007.⁴

1. The April 11, 2007 report stated that the Ethics Committee, including its Chairman, has not been involved in the discussions with the concerned staff member. It also did not find that the terms and conditions of the agreement had been commented on, reviewed or approved by the Ethics Committee, its Chairman or the Board. The Ad Hoc Group was informed by the former Senior Vice President and General Counsel that he was not involved in any way in the implementation of the Ethics Committee's advice to the President. The April 11 report took note of the fact that the Ethics Committee Chairman had provided written advice on a number of occasions to the President and specifically, on July 27, 2005, advised Mr. Wolfowitz "that the staff member will be relocated to a position beyond (potential) supervising influence by the President and therefore will withdraw from the current selection procedure for job promotion" and that "at the same time the potential disruption of the staff member's career prospect will be recognized by an in situ promotion . . . with immediate effect." The April 11 Report further noted that on October 24, 2005, the Ethics Committee Chairman told Mr. Wolfowitz that "the outcome [of the conflict issue] is consistent with the Commitee's [July 27, 2005] findings and advice," and that on October 25, 2005, the Chairman reported to the Executive Directors that "the conflict of interest has been dealt with appropriately" and the matter was therefore closed.⁵ After consideration of the Report of the Ad Hoc Group, the Executive Directors issued a communication, including a release of the report and the documents obtained by the Group.

1. This matter was discussed during the Development Committee meeting held in Washington on April 15 and its Communiqué read in relevant part as follows:

1. On April 20, 2007, nearly 18 months after the Ethics Committee advised the President the matter was closed, the Executive Directors issued a communication requesting the Ad Hoc Group to consider immediately the arrangements made for the secondment of the staff member. The Executive Directors stated that the Ad Hoc Group would consider such other information as it deemed appropriate with reference to, inter alia, the Staff Rules, the Code of Conduct applicable to Board officials and the President, and the contract of the President,⁷ as well as to conflict of interest, ethical, reputational and other relevant standards. The Executive Directors also stated that, on this basis, the Ad Hoc Group would make early recommendations for decision by the Executive Directors.

1. Taking all of the above into account, the Ad Hoc Group decided that it should engage in additional fact finding and that its work should result in a report to the Executive Directors presenting the findings, conclusions and recommendations of the Ad Hoc Group regarding the matter under review. The Ad Hoc Group believed that additional review of pertinent information, including the Staff Rules, the Code of Conduct for Board Officials, the President's contract, as well as any applicable standards relating to conflict of interest, ethical or reputational considerations, is warranted. It also believed that follow-up meetings, on the record and recorded by a stenographer, should be conducted with persons who may shed further light on the information already collected.

1. The Ad Hoc Group therefore met on the record and recorded by a stenographer with current and former officials of the World Bank⁸ to gather relevant information on the issues identified in the course of its initial meetings, as well as on issues identified through review of the documents collected to date.

1. Upon completion of its meetings with persons having relevant information on the matter and obtaining further documentary information, the Group engaged in deliberations of the issues dealt with in the mandate given to it by the Executive Directors. The Group examined the following questions in light of the information it has collected:

1. whether the facts show the violation of any staff rule;⁹

1. whether the facts show a violation of the terms of the contract of the President of the World Bank;¹⁰

1. whether the facts show a violation by the President of the obligation imposed by his contract, to "avoid any conflict of interest, real or apparent."

1. whether, based on the totality of circumstances, including any reputational damage that may have been done to the institution as a result of the matters under review, any changes would appear to be necessary to the governance framework to enable the World Bank to continue to operate to the fullest extent possible in achieving its chartered objectives.

1. Article V, Section 5 of the Bank's Articles of Agreement states:

1. The President's contract of employment (Contract) states¹¹:

1. The Code of Conduct for Board Officials (Code) states:

1. The Ethics Committee Rules of Procedure provide the following procedures for handling requests for guidance:

1. The standards of ethical conduct applicable to staff members of the Bank are set forth in the Principles of Staff Employment and the Staff Rules. Section 1.01 of the Preamble of the Principles of Staff Employment states:

1. Principle 3 of the Principles of Staff Employment provides, in pertinent part:

1. discharge their duties solely with the interest and objectives of the Organizations in view and in so doing shall be subject to the authority of the President and responsible to him;

1. conduct themselves at all times in a manner befitting their status as employees of an international organization. They shall not engage in any activity that is incompatible with the proper discharge of their duties with the Organizations. They shall avoid any action and, in particular, any public pronouncement or personal gainful activity that would adversely or unfavorably reflect on their status or on the integrity, independence and impartiality that are required by that status; and

1. observe the utmost discretion in regard to all matters relating to the Organizations both while they are staff members and after their service with the Organizations has ended. In particular they shall refrain from the improper disclosure, whether direct or indirect, of information related to the business of The World Bank or the IFC.

1. Staff Rule 3.01, Standards of Professional Conduct, provides:

1. Staff Rule 3.01, Section 4, Supervisory Relationships, provides:

1. Staff Rule 3.01, Section 6, Instructions and Remuneration from Outside Sources, provides:

1. the terms of an Executive Director's Assistant Appointment;

1. an External Service Assignment;

1. during Leave Without Pay; or

1. the provisions of Staff Rule 3.04.

1. Staff Rule 4.01, Appointment, Section 5.02 Spouses and Domestic Partners, provides:

1. Staff Rule 5.02, paragraph 2.02 states:

1. they express, in writing to the External Service Sponsor, interest in the proposed assignment, or respond to an announced vacancy; and

1. Staff Rule 05.02 Reassignment

1. Staff Rule 5.02, paragraph 3.01 states:

1. Staff Rule 5.02, paragraph 3.02(b) states:

1. Staff Rule 5.02, paragraph 3.03 states

1. Staff Rule 6.01, Compensation, Paragraph 3.04, Promotion Increase, states:

1. Staff Rule 6.01, Compensation, Paragraph 6.05, Leave without Pay and External Service, provides, in pertinent part:

1. The website maintained by the Bank's Office of Ethics and Business Conduct states:

1. In May, 2005, in the context of the discussion of the proposed contract of employment for Mr. Paul Wolfowitz, as President of the World Bank, Mr. Wolfowitz disclosed to the Bank, through his then-counsel, Mr. Robert Barnett of the Washington law firm of Williams and Connolly, that he had a pre-existing relationship with a Bank staff member, and he proposed recusing himself from all personnel matters regarding her. This was confirmed in a May 2005 letter from then-Senior Vice President and General Counsel of the Bank, Roberto Danino, to Mr. Barnett:

1. At the time, Mr. Wolfowitz also understood that Bank rules required recusal not from "all . . . professional contact," but only from "routine professional contact." Also, Mr. Wolfowitz was aware that the World Bank's senior Managing Director, Shengman Zhang, worked in an indirect supervisory relationship with his wife.¹⁴ For these reasons, Mr. Wolfowitz questioned Mr. Danino's recusal proposal.¹⁵ As reflected in a May 30, 2005 email from Mr. Danino to Mr. Barnett, Mr. Wolfowitz asked that the issue be resolved by the Ethics Committee:

1. In another email on May 30, 2005 from Mr. Barnett to Mr. Danino, Mr. Barnett wrote:

1. Mr. Wolfowitz' request was considered by the Ethics Committee on June 2, 2005. The Ethics Committee framed the issue presented as a "request to consider and provide guidance on a potential conflict of interest with regard to Staff Rule 3.01, paragraph 4.02" which is the Staff Rule relating to Supervisory Relationships.¹⁸ 

1. On June 6, 2005, the Ethics Committee requested from the President information on the name, position, and any other relevant facts to enable the Ethics Committee to fulfill its obligations to provide advice in response to the submitted request for guidance.¹⁹ On June 8, 2005, the Ethics Committee met with the VPHR, who told the Committee that there were "581 couples with 193 potential for supervision between spouses, 19 cases of potential conflict, and 4 who work in the same department where there is no supervisory relationship but all these cases are being reviewed to see whether any corrective action needs to be taken."²⁰ It is not known whether Mr. Melkert ever followed-up to learn whether this review was completed.

1. With the agreement of the other two members of the Committee, the Chairman of the Ethics Committee, Mr. Ad Melkert and Mr. Wolfowitz discussed and corresponded during the period of June 6 through July 21, 2005, on the nature of the conflict of interest issue and possible solutions. On June 22, 2005, the Chairman of the Ethics Committee wrote to the President pointing out that the key problem raised by Mr. Wolfowitz's relationship with Ms. Riza was "supervision, directly or indirectly and routine professional contact".²¹ The Chairman noted the President's concern "that there is a tendency to set different standards, particularly with reference to the situation of the MD and his spouse."²² This was an apparent reference to Managing Director Zhang, who was the second highest ranking official at the Bank. He concluded, however, "what has not been right could not be an example to follow." The Chairman also wrote that:

1. After additional discussion and correspondence,²⁴ on July 21, 2005, Mr. Wolfowitz responded to the Ethics Committee's June 6 letter:

1. On July 22, 2005, the Ethics Committee met to review the President's July 21 letter. The Committee discussed matters raised during informal discussions between Mr. Wolfowitz and the Chair of the Committee and noted in the Chair's June 22 note to Mr. Wolfowitz. In addition, the Committee considered a memo prepared by the General Counsel²⁷ which reviewed several areas of "proposed recommendations" including, among other things, (1) facilitating Ms. Riza's relocation; (2) "additional personnel benefits to offset the negative career impact on the staff member," and (3) mutually agreed separations. With regard to the first, facilitating relocation, the memo mentioned the options of external service outside the Bank and reassignment within the bank to a non-supervisory position. The memo noted that Bank Rules allowed for a maximum of four years of external service.²⁸

1. Second, the memo outlined an option to "provide some form of personnel benefit to offset the negative career impact of the staff member" including "(a) promotion; or (b) salary increase." Within the category of promotions the memo further described two courses available: an "in situ promotion" or a "competitive" promotion, in which a staff member is selected through competition. ²⁹ 

1. In addition to promotions, the memo described benefits that could be provided by compensation. According to the memo, the Bank could provide compensation in three ways: (1) an overall pay increase; (2) a promotion increase "normally limited to 3 to 12 percent of the market reference point"; or (3) "as part of settlement . . . an ad hoc salary increase."³⁰

1. Finally, the third area addressed was mutually agreed separation. The memo noted that the customary practice was one month's salary for each year of service, which the memo noted in Ms. Riza's case would be $60,000 - $66,000. Alternatively, the memo stated, "outside the mutually agreed separation provisions a larger payment could be made at managerial discretion."³¹

1. The Ethics Committee was unanimous in its view that Mr. Wolfowitz's proposal to recuse himself from influence over Ms. Riza's personnel decisions "would not cure the de facto conflict of interest that existed" under Staff Rule 3.01, paragraph 4.02. The Record of Ethics Committee Deliberations on Case No. 2 read as follows:

1. 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 Ethics Committee then shared with Mr. Wolfowitz an informal draft of the Ethics Committee advice, dated July 27, 2005, stating³⁴:

1. 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:

1. 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

1. 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

1. 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.]

1. 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

1. 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 

1. 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

1. 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 

1. 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 11^th 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

1. 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

1. 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: 

1. 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 

1. 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
2. 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. 

1. 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 

1. 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 

1. 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