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Embattled Wolfowitz Negotiating Future With World Bank

May 16, 2007 at 3:50 PM EDT
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JIM LEHRER: Now, the latest on World Bank President Paul Wolfowitz. Krishna Guha has been covering the story for the Financial Times. He joins us from the paper’s Washington bureau.

Krishna, where do things stand as we speak?

KRISHNA GUHA, Financial Times: Well, the situation is moving very quickly, Jim. We understand that Mr. Wolfowitz and his advisers are in negotiations with representatives of the World Bank board about terms and conditions around a possible resignation, the circumstances, in short, under which he would agree to leave the bank.

JIM LEHRER: And what is your understanding of the things he wants in exchange for resigning?

KRISHNA GUHA: Well, Jim, as you know, he’s under a tremendous cloud at the moment, following the publication of a report on Monday that found he broke the bank’s code of conduct, the bank’s rules, and his own employment contract when he arranged for a generous secondment package for Shaha Riza, a bank official with whom he had a romantic relationship.

Mr. Wolfowitz is determined he will not leave under a cloud. He wants the board to make a statement that recognizes both his service at the bank and, in some ways, shares responsibility for what happened in the Shaha Riza case.

JIM LEHRER: His claim being that there were some cloudy rules that he did or did not follow or whatever — in other words, the situation that caused him to do what brought this thing down against him, he’s claiming that the bank itself was responsible for some of it. Is that correct?

KRISHNA GUHA: He’s claiming that. The problem is that the panel that wrote the report published on Monday considered these issues and, frankly, rejected Mr. Wolfowitz’s arguments. They found that, while in some cases the instructions he received were not, in their words, “a model of clarity,” nonetheless, it was essentially quite clear what he was supposed to do. And he didn’t do it.

Negotiations continue

Krishna Guha
Financial Times
My best guess is that the haggling will continue into the night tonight. At any point, they could strike a deal termed satisfactory for Mr. Wolfowitz to walk. If not, the negotiations will continue.

JIM LEHRER: All right, now, where things stand now, is there going to resume negotiations, resume meeting tomorrow? Is that correct?

KRISHNA GUHA: My best guess is that the haggling will continue into the night tonight. At any point, they could strike a deal termed satisfactory for Mr. Wolfowitz to walk.

If not, the negotiations will continue. I expect the haggling will drag on through tomorrow, perhaps. And if that happens, there's always a chance that, in the end, these talks break down and it goes back to the threat of a vote to fire him on the board.

JIM LEHRER: And that would be the next step, if these negotiations don't work, right? and they do have the power to do that, the board does, correct?

KRISHNA GUHA: Yes, they do, although, probably, what you'd see first would be an interim step. The board would, perhaps, formally endorse the devastating findings in this report. That would be a clear signal that they were going to move next to censure him or fire him.

The board's role

Krishna Guha
Financial Times
Nobody wants this to end in a majority vote. The World Bank has always operated through a tradition of consensus.

JIM LEHRER: Remind us, Krishna, about the board. Who makes up the -- how many people on the board? And who are they?

KRISHNA GUHA: The board has 24 executive directors. These are representatives of the World Bank's shareholder governments. And if it came to a vote, the votes would be weighted according to the shareholdings of their countries and others that they represent on the board.

In broad-brush terms, obviously, the U.S. is the single biggest shareholder, but if you add all the European states together -- and they're determined to get Mr. Wolfowitz out -- they have many more votes than the U.S. The U.S. appears to have only one ally left on this, and that's Japan.

JIM LEHRER: Would a majority vote do it one way or another?

KRISHNA GUHA: Nobody wants this to end in a majority vote. The World Bank has always operated through a tradition of consensus. And at a time when the bank is already riven with strife, it would be further damaging to force this to a vote with Europe and its allies in Asia, and Latin America, and many other parts of the world voting down the U.S., but that remains a possibility at this juncture.

JIM LEHRER: So if I understand you correctly, the board is balking at the Wolfowitz demand that it accept some of the responsibility. They want all of this, or blame, whatever you want to call it, to go directly and fully to Wolfowitz, correct?

KRISHNA GUHA: I think how I would characterize it at the moment, Jim, is that there's a haggling process underway. I think it's likely that, in the end, they'll reach some kind of compromise formula, but as I said, I don't rule out the possibility that these talks fail and we go back to the prospect of a vote.

Terms of departure

Krishna Guha
Financial Times
There are some people on the board who privately will tell you they would give [Wolfowitz] whatever it took to get him out of the door, but there are a lot of others who feel...he should not be seen to be rewarded.

JIM LEHRER: Now, if he leaves, either by a board vote or by resignation, what are the terms of his departure? Does he get a package, a payoff, a severance of some kind?

KRISHNA GUHA: Well, even that is quite unclear and that, presumably, would form part of the discussions around his possible resignation terms. Would he be given one year's pay -- it's close to $400,000, tax-free -- possibly even the rest of his contract, three years.

There are some people on the board who privately will tell you they would give him whatever it took to get him out of the door, but there are a lot of others who feel very strongly that he should not be seen to be rewarded for what they view as a very serious ethical lapse.

JIM LEHRER: What does your reporting tell you now about what the position of the United States is now in this dispute?

KRISHNA GUHA: Well, the U.S. is still publicly standing by Mr. Wolfowitz. Tony Snow, the White House spokesman, said again today that the U.S. supports Mr. Wolfowitz. But while they support him, the administration seems largely to have come to the view, or at least be very close to coming to the view, that it can't do anything more to save him and all it can do is ensure that he leaves on the least-embarrassing terms possible.

However, there do seem to be divisions within the administration as to how this should be handled. And some people in the administration may well not have finally given up hope of saving his job.

The next World Bank president

Krishna Guha
Financial Times
There are already quite widespread calls for a much more fundamental rethink as to how the World Bank president is chosen.

JIM LEHRER: And if he does, in fact, leave, the custom of the president of the World Bank being an American, is there any sign that that would change, no matter what the reasons for Mr. Wolfowitz's departure?

KRISHNA GUHA: There are already quite widespread calls for a much more fundamental rethink as to how the World Bank president is chosen and really whether that person should be nominated by the U.S. and have to be a U.S. citizen.

In the short term, however, my sense is that the Europeans and others who have been leading the fight against Mr. Wolfowitz would be willing to settle for a U.S. citizen nominated by the Bush administration, provided -- and it's a big proviso -- that person was someone who commanded universal international respect.

JIM LEHRER: There was a report today that Tony Blair was on -- the outgoing prime minister of Britain -- was on the possible list. Have you heard that yourself?

KRISHNA GUHA: Well, look, I personally feel that Tony Blair might make a very good head of the World Bank, and there are certainly many people, including some within the administration, who share that view. But it's not obvious that Mr. Blair actually is keen to take the job himself. There's been no indication of that thus far.

JIM LEHRER: OK. Thank you, Krishna, again, for helping us out to understand what's going on. Thank you.

KRISHNA GUHA: My great pleasure. Good night.

JIM LEHRER: Good night.