World Bank President: J'accuse

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J'accuse The Washington Post's finance and business curmudgeon, Steven Pearlstein, lashes out at the hypocrisy of the World Bank's Board in his "l'Affaire Wolfowitz" squib Sunday morning. What he does not discuss is how this links back to Wolfowitz cronies, Suzanne Rich Folsom and Kevin Kellums.

Pearlstein's right, of course, that the Board reacted slowly nearly two years ago when they annointed George Bush's choice to head the Bank. After the unanimous confirmation on March 31, 2005, perhaps after waiting at Casualty for painkillers for their twisted arms, someone should have gone to Wolfowitz with some bad news to take home. "Look, we have rules about sexual relationships and Shaha can't work here once you come on board. We need that settled before June 1, and your own contract is signed, so there are no issues to get in the way of your taking over."

Now we don't know that someone didn't say that. Of course, lots might have been thinking it. Like Maria Borrero, former Ethics Officer, who read about it in the papers like everyone else and had a keen sense for conflicts of interest and the appearance thereof. Like staff telling the Staff Association that there were issues the Board needed to look into. Their notes, sanitized of authors, were delivered in big binders to the Board to aid in the due diligence on George W. Bush's sole nominee then into his charm offensive in Europe (see here and here) and with Board members, sort of like a US Senate confirmation hearing. Given the overwhelming opposition to his appointment, a quick glance through the staff views, pro and con, might have turned this up. It's not as if Shaha and Paul Wolfowitz being an item was a secret: the May 2004 New Yorker article, the UK press the week after he was nominated, and Shaha's colleagues who were imperiously reminded from time to time of just why she should be taken seriously.

What is clear is that the Board didn't act, leaving the messy issue open for Paul Wolfowitz to interfere in once he arrived. We now all know what happened next, leading to Shaha's unearned promotion, outside-the-rules raise and salary and promotion promises, and external service for Liz Cheney at State.

Now, let's say that in the two months between when he was selected and when he came on board there were attempts to resolve Shaha Riza's situation. She was apparently uncooperative, and unpleasantly so. She didn't want to leave the Bank, and hired her own lawyer. Wolfowitz feared she, his girlfriend, would sue the Bank.

"What a mess, how did this happen, what sorts of rules apply here!?"

So, what does Wolfowitz do once he is on board? On July 27, he announces that he's hired Robert Pozen, a $2000/day volunteer, to look into all aspects of the Bank's compliance and conflict resolution mechanisms. This would of course include Ethics (may have insisted on 'doing the right thing' on Shaha), the Mediation system and the Ombudsman, INT (where Suzanne Rich Folsom had not yet arrived), Internal Audit and various other compliance and internal controls units. The town meeting, his first, was where he also spoke of the G8 Gleneagles Summit outcome, including the multilateral debt relief initiative that he proudly brought back. MDRI was subsequently described as "if not the worst idea of how to fix this, it's hard to figure out what would be."

In an internal announcement the next day, Wolfowitz explained

Date: July 28, 2005 - 18:35

Sponsor: Office of the President

Over the last decade, the World Bank has invested substantial resources in developing mechanisms for ensuring transparency, accountability, ethics and integrity throughout Bank operations. These initiatives have greatly enhanced the Bank Group’s performance and contributed to its leadership role in supporting such reforms throughout the development community. However, the growth of mechanisms for oversight, compliance, investigation and conflict resolution has also led to the creation of many offices or departments within the World Bank Group that have some type of responsibility in this area.

I have asked Robert C. Pozen, currently Chairman of MFS Investment Management, to review how the Bank Group is organized in this area and to advise me whether he believes any changes are needed to improve effectiveness and ensure proper coordination. The purpose of the review is to clarify roles, ensure an efficient use of resources, and ascertain that there are no gaps.

Bob is a distinguished authority on corporate governance. He previously served in a number of positions at Fidelity Investments, including President of Fidelity Management Research Company from 1997 through 2001. Since February 2004, Bob has been serving as Chairman of MFS Investment Management.

I ask all Bank Group staff to assist Bob in any requests he may have for information or assistance. Suzanne Folsom in my office will be Bob’s point of contact in the Bank.

Paul Wolfowitz

For Information: Kevin Shaw Kellems

"Volunteer" Pozen, who was apparently sole-sourced, conducted his inquiries under the guidance of, you guessed it, Suzanne Rich Folsom. Brought on board by Jim Wolfensohn to help out with Republicans on the Hill, just two months earlier, she was managing the North American media relations in EXT. Having pushed her way into the inner circle, Suzanne subsequently made sure that Pozen didn't even talk to all the heads of all the compliance units.

So, what, exactly, did Robert Pozen find, and what did he advise?

We'll never know, because he never submitted a written report.

Deep Insider ~ May 06, 2007

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