World Bank Launches Internal Probe to Root Out Leakers

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Published February 08, 2007

| FoxNews.com

The World Bank is on a global crusade to instill “transparency” in governments that receive its poverty aid. But when it comes to its own internal affairs, the agency prefers as little transparency as possible.

On Jan. 30, FOX News posted confidential minutes of a meeting of a bank board committee, and published unflattering descriptions about some directors in an article entitled “Wolfowitz vs. the World Bank Board: It’s Trench Warfare.” (Click here to read the story.) In response, the bank launched an internal probe to identify any insiders who spoke with or leaked documents to the news organization.

The investigation was jointly announced by bank president Paul Wolfowitz and Eckhard Deutscher, a senior member of the bank’s 24-member executive board, two days after the article’s publication. Fox has also learned that Wolfowitz is personally doing some of the investigating.

“Today a website carried a story based on the disclosure of confidential board documents,” Wolfowitz and Deutscher wrote in a Feb. 1 internal memo to the bank’s global staff. “The story contained an attack on the Board, the President, and, most importantly, on the institution, which undermines the work of the Bank. Disclosure of such documents is a violation of Bank rules and we have jointly decided to have the matter investigated.

• Click Here to read the Feb. 1 Memo (pdf)

“The Board and the President disassociate themselves in the strongest terms from the personal attacks contained in the story. We believe deeply in this institution and its mission of helping the poorest people in the world to escape poverty.”

Among other things, the FOX story quoted a bank insider who said that the board at times has included a director “widely regarded as a buffoon,” and said another took orders from his government to “shovel loans out the door and minimize the conditions on them.”

Hours after FOX posted its story, Wolfowitz and Deutscher held a telephone press conference with reporters from six news organizations, who were asked to refer to the event as an “interview or conversation.” FOX was not invited, but a full transcript was immediately sent to Fox by a Wolfowitz spokesman, Carl Hanlon. One day later, the bank posted an edited version of the transcript on its website.

In the “conversation” with journalists, Wolfowitz and Deutscher attempted to portray a board in harmony with top management — at least on the bank’s anti-corruption strategy. Nonetheless, an Agence France-Presse reporter at the session published a story yesterday that states, “last week, he [Wolfowitz] told reporters that he had altered his drive to root out graft ... after a chorus of criticism."

Wolfowitz also attacked the FOX article in an 11-minute video address to the World Bank’s global staff last Wednesday, a transcript of which has been obtained by FOX. “I hope staff don't take every story too seriously,” stated Wolfowitz. “This is a misleading one …The story doesn’t reflect [the board’s] view of me or my view of them, or most importantly, it doesn't reflect our collective view of this great Institution … It's ironic. This story actually came out the day we had a very successful Board meeting on the difficult issue of governance and anti-corruption.”

Wolfowitz tried to calm a staff that was alarmed over possible bank cutbacks that were first revealed in the board minutes that FOX had posted. “Nothing has been decided,” Wolfowitz told the bank’s estimated 10,000 employees. “We’ve got to do a lot of very hard scrubbing of those proposals.”

Wolfowitz's strong reaction to the Fox story -- it's "causing him major heartburn," said one insider -- is a result of the delicate situation inside the bank, where, according to a longtime staffer: "This whole issue of cuts and the threat of people losing their jobs has paralyzed the institution."

And Wolfowitz’s relations with the board have clearly been strained.

At the heart of the world’s largest and most influential anti-poverty agency, which spends about $20 billion a year on aid, lies a deep-rooted problem of transparency -- a concept that Wolfowitz is aggressively trying to sell to the World Bank’s borrowers, who are mainly the world’s developing nations. Ironically, the bank recently issued its annual report on “development effectiveness,” which asserts that, “Transparent institutions earn the trust and acceptance of the public.” But the bank has trouble applying that message to its own internal processes and deliberations.

“The World Bank has an important opportunity to walk the talk,” points out the Bank Information Center, a Washington watchdog that monitors the bank. “As a public institution, it has not only an interest but an obligation to make its operations transparent and accountable to the people on whose behalf it ostensibly operates…. In the absence of reforms to the governance structure of the Bank itself, its efforts to champion governance elsewhere will be hampered.”

That view is echoed by Robert Holland, who represented the U.S. on the bank’s board for five years. “Some critics accuse the bank of having a culture of secrecy,” he told FOX after he left the board in 2006. “I wouldn’t disagree. In fact, the bank tends to be its own worst enemy when it comes to making the development community aware of its activities. Unfortunately, the board is the leading culprit.” Holland says that board rules prevent him -- even as a former director -- from disclosing details of meetings.

Despite the hunt for leakers, there are some signs of openness at the bank. Two days after the FOX article’s appearance last week, the bank’s management launched a feedback system that allowed staffers to post anonymous comments to an internal announcement that had attacked the story.

• Click Here to read Wolfowitz's Comments (pdf)
• Click Here to read the anonymous responses (pdf)

The feedback was unprecedented and extensive. “At least we are talking,” one staffer wrote. “That’s the best thing that’s happened this (awful) week… Why does the World Bank persist in thinking that its governance should be shielded from scrutiny, and that the world will come to an end if someone knows what is said in the Board room? It would do all of us -- President, Board, staff and shareholders -- so much good if we were as transparent as we keep telling our client countries to be.”

Another staffer wrote: “The most interesting insight from Fox was the attribution of names to comments in the board minutes. It is interesting to see who commented on what aspect of the budget priorities. That is something staff rarely see.”

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