News Analysis: Gloves Come Off in Paul Wolfowitz Saga

With the countdown approaching on the fate of World Bank President Paul Wolfowitz, the key players in the saga over his girlfriend's compensation package have taken off the gloves. A decision by a bank committee could come as soon as Thursday on whether to clear, sanction or demand the resignation of Wolfowitz.

But while accusations fly in all directions, key questions remain unanswered about the saga involving Wolfowitz's role in ordering a promotion and hefty pay hikes for his longtime partner, who worked at the bank.

The seemingly endless soap opera of scandal inside the World Bank — the world's largest and most influential anti-poverty agency — has now morphed into a full-blown battle of prepared statements between Wolfowitz, on the one side, who claims that other bank officials knew all along what he was doing, and a variety of officials who claim that he ignored their opinions or kept them in the dark.

Unfortunately, no player is allowing follow-up questions from reporters that could shed light on whether Wolfowitz bent or broke bank rules in 2005 by helping his companion, longtime bank staffer Shaha Riza, get a lavish compensation package.

In September 2005, Riza was moved temporarily to the State Department in order to resolve the conflict of interest at the bank that the board's ethics committee and general counsel concluded existed after Wolfowitz took over the presidency in July of that year. Her salary, which the bank continued to pay, was bumped from $132,660 to $193,590 net by 2006 — far more than what Secretary of State Condoleezza Rice earns. And she was granted 8 percent annual raises, as well as almost-automatic promotions in the years to come.

The issue at hand is whether Wolfowitz was directed by the ethics committee to decide the package details as he saw fit, or whether he was obligated to follow bank precedents that would likely have gotten Riza less money and fewer perks.

The mystery has deepened with the public silence of one key player, Xavier Coll, the bank's chief of human resources, and a former chief of staff to former bank president, James Wolfensohn. A well-placed bank manager who spoke to Coll today tells FOX News that Coll was preparing to provide a written statement by Wednesday night to the committee that is probing the matter, and that he has appeared three times before that committee — more than any other witness — since it began deliberating on April 12.

In previously released memos from 2005, Coll declared that Wolfowitz had been the one instructing him on Riza's compensation terms.

"Xavier is a skilled bureaucrat who wisely made sure that Wolfowitz's fingerprints were on documents in 2005," says the bank source, who says he speaks to Coll regularly.

In recent days, every key player in the scandal except Coll has issued prepared statements about their role in the case. An analysis of those public statements, as well as interviews by Fox and reviews of the 100-plus pages of documents released by the bank two weeks ago, shows that each player — from Wolfowitz to Coll, from former general counsel Roberto Danino to the former chairman of the bank's ethics committee, Ad Melkert — still has plenty of explaining to do.

Wolfowitz and Riza separately appeared before the board committee on Monday to defend their actions of two years ago. Wolfowitz also released a statement, which claimed that he was the victim of a "smear campaign" and a "circus-like process" — and attacked the idea that he had had a conflict of interest in Riza's case as "plainly bogus." He refused to resign, and issued what amounted to a dare to his critics inside the bank — demanding that every key player "steps up and admits his role and responsibility for it, and acknowledges that we all tried to act in good faith."

Wolfowitz's tough approach — fueled perhaps by his hiring of Robert Bennett, a combative attorney who represented President Bill Clinton in the Paula Jones affair — was somewhat of a turnaround from his attitude three weeks earlier. At that time, Wolfowitz admitted making a "mistake," asked for forgiveness, and said he would abide by whatever remedies the board deemed appropriate. But his new defiance this week has led Melkert and Danino to fire off their own statements — and it apparently led the committee to concentrate further on Coll today.

Neither Wolfowitz, Melkert, Danino or Coll will answer specific questions that their actions or public statements raise. But here are some of those questions.

The Curious Role of Ad Melkert

As the then-chairman of the World Bank board's ethics committee, the role of Ad Melkert — a former Dutch politician who is now the No. 2 official at the United Nations Development Program — is critical in determining whether Wolfowitz behaved unethically or violated bank rules.

Melkert insists that the ethics committee "was not consulted, nor did it approve" the specific terms of Riza's raise-and-promotion package. Melkert's position is that the ethics committee never had jurisdiction to know or even inquire about those terms — or even to deal directly with Riza, or any staffer. Melkert says the ethics committee simply presented Wolfowitz with options and "which option he chose, and how he chose to implement it, was completely up to Mr. Wolfowitz."

That might be true when the original issue arose in 2005. But in January 2006 the ethics committee received anonymous emails from a man named "John Smith" — clearly a bank insider — who laid out Riza's compensation package in detail and said it was "egregious." Melkert's committee launched an immediate probe and after a "careful review," as he wrote to Wolfowitz a month later, decided the allegation did not pose new issues "warranting any further review."

In other words, it may have warranted further review. Only not by "the committee." What Melkert has not addressed are the following questions: If the case in 2006 did not warrant the board's attention — after his "careful review" — then why does it merit that attention now?

Moreover, if the board and its ethics committee did not have the jurisdiction to examine Riza's pay package in 2005 or 2006, did Melkert alert anyone who did have jurisdiction to investigate it? If not, why not?

Yesterday, Melkert attacked Wolfowitz for handling the deal making over Riza's package himself, instead of getting a neutral person on his staff to do it. What Melkert doesn't say is why he didn't suggest that to Wolfowitz in 2005.

The Fade-Away by Roberto Danino

In an exclusive interview with FOX News two weeks ago, the World Bank's former general counsel, Roberto Danino, said that Wolfowitz froze him out of the loop on the Riza negotiations in mid-2005 because he "didn't like my advice."

As a result, Danino — a former prime minister of Peru from 2001-2002 — says he never saw the final terms of the deal. He added that his relationship with the bank president never recovered, and that it led him to quit the bank in January 2006.

More recently, Danino released a statement saying that he only recently learned that Wolfowitz had brought in an outside law firm in 2005 to render an opinion about Riza's package. And he has publicly called on Wolfowitz to resign - saying that he "acted incorrectly" with his "extraordinary salary increase" for Riza.

Danino declines to answer FOX's questions today. Here are some important ones:

— As the bank's general counsel, did Danino protest to anyone (perhaps the
board) that Wolfowitz had cut him out of the loop? If not, why not?

— And if frozen out, did that not make him suspicious and give him the impetus to find out the final terms?

In short, did Danino fail to perform his duties as general counsel simply because he felt Wolfowitz mistreated him?

The third player at the heart of the alleged scandal is Xavier Coll, the human resources chief, who — FOX has confirmed — plans to leave the bank in a few months for a job at the European Bank for Reconstruction and Development. Reached by phone at his Maryland home, Coll denied a rumor that he had been pressured by anyone in Wolfowitz's circle to look for a new job, and said he's leaving on his own accord for a new opportunity. But he declined to answer any questions about the pay saga. Here are some questions that might matter:

— When Wolfowitz and Riza laid out the terms of her compensation package, did Coll feel he was being strong-armed by them?

— If so, did he tell them that the terms of the deal, or even Wolfowitz's direct involvement in those terms, were inappropriate?

— Did Coll lodge a protest with anybody about it? If not, why not?

Finally there is Paul Wolfowitz himself. He complained on Monday that Ad Melkert, the former ethics committee chairman, gave him no choice in dealing with Riza by instructing him - and not a neutral person - to handle the pay package details. But since Wolfowitz says he continued to feel strongly that this was inappropriate, why did he comply?

Moreover, Wolfowitz said this week that Riza's compensation terms "seemed reasonable" to him, and that "hundreds" of World Bank staffers earn more than the Secretary of State.

But why hasn't Wolfowitz or his lawyer provided documentation to prove that her salary details were reasonable, based on bank precedents and Riza's specific and detailed history at the bank?

Wolfowitz might also address why he apparently did not bother to let the bank's general counsel know that he was freezing him out of the loop — and bringing in an outside law firm instead. Bringing in such outside counsel in a potential conflict-of-interest situation is commonplace; not letting the major players know about it is not customary.

Absent the answers to those questions, there is only one thing that is crystal clear: Everybody involved in the saga still has things to reveal.