By Steven R. Weisman
Mr. Wolfowitz was said to be adamant that he be cleared of wrongdoing before he resigned, according to people familiar with his thinking.
The negotiations were still under way on Wednesday evening, and bank officials said they were increasingly hopeful that a solution was in sight, ending what had become a bitter ordeal at the bank, within the Bush administration and at economic ministries around the world.
The World Bank’s board of directors met Wednesday afternoon to discuss the conclusion of its special committee that Mr. Wolfowitz was guilty of ethical and governance violations. Many were firm about not dismissing the findings that Mr. Wolfowitz violated the bank’s trust by arranging for a pay and promotion package for Shaha Ali Riza, his companion and a bank employee, when he became president in 2005.
At the same time, talks took place between emissaries of Mr. Wolfowitz and bank officials with backing from board members who favored easing him out without provoking a confrontation with the Bush administration. Bank officials said the negotiations were aimed at finding a way for the board to accept the findings of the bank committee, while also declaring that Mr. Wolfowitz had acted in good faith and that mistakes were made by all sides.
The new discussions about Mr. Wolfowitz were prompted by a signal from the White House on Tuesday that if the bank board cleared him of ethics charges, the administration would be willing to talk about his possible resignation down the road. That offer became more of a quid pro quo on Wednesday, with the talks focusing on his exoneration in return for an actual resignation, as opposed to a promise to talk about a resignation in the future.
People close to the negotiations said that the threat to oust Mr. Wolfowitz had, in the previous 24 hours, taken a bizarre U-turn, with Mr. Wolfowitz challenging the bank’s directors to vote him out, knowing that the United States would oppose that move. Previously, Mr. Wolfowitz had been doing everything in his power to prevent such a vote.
In effect, bank officials said, he was using the fear among European leaders at the bank of a possible rupture with the Bush administration at a time when the United States and Europe are struggling to cooperate on Iran sanctions, trade and other economic issues. While the United States cannot prevent the ousting of Mr. Wolfowitz, it has by tradition picked the president of the bank and has such influence that its consensus-driven members want to avoid an open break with Washington.
“The bank board is ready to vote Wolfowitz out of office, and Wolfowitz is calling their bluff,” said a bank official briefed on the negotiations. “It’s going to be difficult for the board to drop its charges against him, but they’re going to have to do it if they want to resolve this. They’re staring each other down, but the bank side is blinking furiously.”
Bank officials said they did not know the precise wording of what the bank might agree to and that Mr. Wolfowitz and his lawyer, Robert S. Bennett, would also accept.
They said it appeared that both the White House and the Treasury Department were involved in guiding Mr. Wolfowitz’s strategy, and that the interests of the United States were being represented at the bank by the American director on the board, Eli Whitney Debevoise II.
Mr. Debevoise, a Washington lawyer, arrived at his job at the bank in early April, the precise moment when the furor over Mr. Wolfowitz erupted.
The negotiations over Mr. Wolfowitz’s possible exit unfolded quickly on Wednesday, officials said. As recently as late on Tuesday night, they said that a last-minute appeal by Mr. Wolfowitz to deny the charges against him and to demand a fair process in which he could stay on the job seemed to backfire. Especially galling to bank board members, officials said, was Mr. Wolfowitz’s request that the 24-member board reject the conclusions of its seven-member subcommittee charging him with violating several codes of conduct and trying to cover up his involvement in Ms. Riza’s salary and promotion.
By the next morning, a flurry of second thoughts and back-channel conversations spread through the bank, officials said, in large part because of the signal from the White House on Tuesday. Previously the administration had rebuffed suggestions that he could not lead the bank, as both President Bush and Vice President Dick Cheney declared their confidence in his abilities.
In the morning, some bank officials said they were worried that the White House signal was a feint aimed at getting Mr. Wolfowitz to stay. They said they wanted Mr. Wolfowitz to put in writing his promise to resign under the right circumstances.
The events of the day added up, in any case, to a hairpin turn in the fortunes of the beleaguered bank president, who over his two-year tenure has alienated virtually all segments of the bank, and a fair number of economic ministries around the world. In the last few weeks, he has reinforced their anger by dismissing the charges of misconduct against him as a “smear campaign.”
The saga seemed to be playing out according to a time-honored Washington formula: confrontation, impasse and crisis, followed by sudden negotiations to avert a possible breakdown of the institution.
Bank officials said that one of the lead negotiators in trying to salvage a compromise was Thomas Scholar, the British director on the board, who is close to Prime Minister Tony Blair and his presumed successor, Gordon Brown, the chancellor of the Exchequer.
Speculation about Mr. Wolfowitz’s successor ranged from Paul A. Volcker, the former chairman of the Federal Reserve, to Mr. Blair and Stanley Fischer, the governor of the Bank of Israel. Also mentioned have been various prominent figures on Wall Street, including Douglas A. Warner III, a former chairman of JPMorgan Chase and chairman of the Memorial Sloan-Kettering Cancer Center. In addition, speculation has centered on two officials close to Mr. Bush: Deputy Treasury Secretary Robert M. Kimmitt and Robert B. Zoellick, a former deputy secretary of state.
The most critical element to the negotiations was the overwhelming sentiment among bank board members in favor of endorsing the committee’s criticism of Mr. Wolfowitz in its 52-page report, released Monday evening.
But officials said that leaders of Britain, France and Germany and smaller countries in Europe also saw the advantage of resolving the Wolfowitz matter without a trans-Atlantic rupture, especially in advance of the summit meeting of leading industrial nations in Germany in June.
That meeting will be the last for Mr. Blair and the first for the new president of France, Nicolas Sarkozy.
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