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Paul Wolfowitz Scandal
Background – 2006
In August 2006, the World Bank President’s office and the General Counsel of the World Bank were working quickly and quietly on a new whistleblower protection policy for the staff. Together, they intended to push a weak policy through the Bank Staff Association, with the intention of unveiling it at the annual meetings of the Bank’s Board of Governors the following month. GAP received an urgent phone call from the Staff Committee. A Committee member reported that s/he was ‘under pressure’ to sign off on the policy on behalf of the Association, and asked if GAP could review it quickly. GAP reviewed the policy over the weekend and reported that it was not in the staff’s interest to approve it, making detailed recommendations about how it could be improved. The move to hustle a weak policy through the Staff Association to the Board stopped there, but in the ensuing months GAP remained in contact with the Association and came to understand a deepening concern about the dismantling of the oversight mechanisms in place at the Bank by President Paul Wolfowitz and his team.
In the fall and winter of 2006, GAP worked with the Staff Association and other allies at the Bank to improve the review process of the Conflict Resolution System (CRS) that Wolfowitz initiated. This review was also cosmetic and neglected the underlying weakness of the entire justice system in the institution. Strengthening the CRS had become a fundamental concern of GAP’s and of the Staff Association, as even a strong whistleblower protection policy lacked enforcement without an impartial justice system.
Background – Early 2007
In mid-February 2007, GAP learned from inside sources that Bank President Wolfowitz was negotiating a contract with a new resident Country Director in Iraq. That step strongly suggested that Wolfowitz intended to expand Bank-funded projects in Iraq dramatically in the near future, despite the deteriorating security situation. This was precisely what Bank staff and Board members had feared when Wolfowitz was appointed by the Bush administration in June 2005. In fact, three months after Wolfowitz’ arrival, the Bank’s Board explicitly restrained his management of World Bank operations, issuing an unprecedented directive to his office to “keep the Board regularly updated on developments in the country (Iraq).”
The bylaws of the World Bank prohibit the institution from financing projects in countries at war. While the Bank did have a Country Director for Iraq in 2007, he operated from Washington D.C. and had little authority to make major decisions on expanding operations. The Bank was permitted to employ Iraqi nationals as to work inside Iraq, and by our count in 2007, there were less than 10 of these consultants.
In late February 2007, GAP received an anonymous e-mail from a Bank staffer that included a report from the Bank’s office in Amman, Jordan. According to the report, one of the few Iraqi Bank consultants had been shot and nearly killed in Baghdad.
The Bank has a protocol for informing the staff about injuries in the line of duty, and the protocol had not been followed in that case. Bank staff receive a daily email alerting them about various Bank news. If Bank personnel are wounded, this is the place where other staff would learn about it. In this way the Bank reassures employees that the organization is concerned about their welfare. According to the email sent to GAP, and validated by other sources, six days had elapsed without any report about the shooting in Baghdad. GAP provided the email to a reporter, who wrote a story immediately. That story was the first time many staffers had heard about the incident.
Later that day, the World Bank sent out an email making it appear that the Bank had addressed the problem previously. The Bank also then told follow-up reporters that Wolfowitz had informed Bank staff of the injury to the Iraqi consultant days earlier in a “town hall” meeting. But multiple sources inside the Bank and present at the meeting stated that this was not so. In checking the text of Wolfowitz’ remarks, no mention of the issue was addressed. A World Bank spokesman then clarified the statement, claiming that Wolfowitz had made the remarks before beginning his actual speech, while some Bank staff were still arriving for the meeting. Finally, the story changed again. Senior officials told a media outlet that the shooting had been reported by the Vice President for the Middle East/North Africa region prior to a different “town hall,” held only for staff working on the region. Once again, however, those present at the meeting claimed that no such announcement had been made. More media, including the Washington Post, began writing about the story. Reports reached GAP that the Wolfowitz team was furious and had tried to conceal the fact that the shooting had not been officially reported. The resulting media attention, however, according to GAP sources, made Bank officials scale back the Iraq program plans and delay negotiations with a new Country Director.
Shortly after this, in early March 2007, GAP began to receive communications from an anonymous whistleblower about malfeasance involving Wolfowitz and his top lieutenants. GAP used its Web site on a regular basis to publicize these reports after verification. All were credible and our whistleblowers often gave us tips on how to verify the reports. We used different press connections to publicize these reports.
One of the first allegations involved the collapse of lending to Africa from the International Development Association (IDA), the low/no-interest loan window at the Bank. Next we received information about a conflict of interest involving the Department of Institutional Integrity (INT), the investigative unit at the Bank that pursues allegations of corruption. This report was especially troubling and we contacted the media about it. In response, we received an angry phone call from INT, informing us that our report was “full of factual errors.” We reviewed the report with the caller and realized that there were no errors; the caller, who represented the INT Director, wished to dispute the conclusions drawn, but could not dispute the facts. GAP continues to pursue related allegations when they are credible and serious.
The Shaha Riza Scandal
In March, we received the payroll records of Shaha Riza, Wolfowitz’s romantic partner, together with an analysis of Bank rules regarding pay raises. The raise Riza received after Wolfowitz assumed the office of president represented a startling and explicit violation of World Bank rules. In 2005, just months after Wolfowitz arrived, she received a $47,300 (35.5%) raise (to $180,000). The highest raise she should have received was 12%. One year later, in 2006 Riza received a $13,590 (7.5%) raise (to $193,590), whereas she was not to receive a raise exceeding 3.7%. Her non-taxable salary of $193,590 exceeded the amount earned by Secretary of State Condoleezza Rice by approximately $40,000 annually.
When reporters called the Bank to ask questions about the Riza raises, one of Wolfowitz’s close aides, Kevin Kellems, stated: “All arrangements concerning Shaha Riza were made at the direction of the bank’s board of directors.”
Under increasing media scrutiny, the Bank’s Board of Directors took notice. The Board reacted angrily to Kellems’ statement. In fact, its members said, they had no knowledge of Riza’s salary increases until they read about them in the newspaper.
At the time, the Bank’s spring meetings were about to convene in Washington. To control a budding scandal, Wolfowitz himself sent an email to staff regarding his arrangement with the Shaha Riza deal in the days prior to the spring meetings.
But his message was misleading on two counts. First, he stated that his role in structuring Riza’s assignment to the U.S. State Department was based on “the advice of the Board’s Ethics Committee to work out an agreement that balanced the interests of the institution and the rights of the staff member…” However, Riza’s position at State was not in question. The salary increases she received when she moved there, along with a subsequent raise, were the issue. Wolfowitz made no mention of this, yet these decisions were his. They were not made by the Board, nor was the Bank’s Board consulted about them.
Secondly, although Wolfowitz indicated to the Board his intention “to cooperate fully in their review of the details of the case,” he also stated that he would not give the Board the documents necessary to verify the facts, citing his obligation to maintain Riza’s confidentiality. But Riza’s salary has already been published in media reports.
Confidential communications received by GAP at that point also showed that Wolfowitz and his senior advisers were actively pursuing the sources of the leaks about the Riza raises.
At that point, details emerged showing that Wolfowitz was, in fact, the sole architect of the Riza deal. It was during this week that other national newspapers and television outlets became involved. The specter of Paul Wolfowitz, who had presented himself as the World Bank’s new ‘anti-corruption crusader’, caught in a scandal involving the improper financing of his companion’s career, overshadowed the technical and the political agenda of the spring meetings. On April 12, 2007, Wolfowitz appeared at a press conference to admit fault and apologize. It was at this conference that a reporter asked him about family planning – specifically, the reporter asked if any policy changes to the Bank’s stance on the issue were being contemplated.
The Family Planning Scandal
Approximately two weeks before this press conference, GAP received an email obtained from World Bank sources showing that Managing Director (MD) Juan José Daboub instructed a team of Bank specialists to delete all references to family planning from the proposed Country Assistance Strategy (CAS) for Madagascar. Daboub was the top official in charge of setting African lending policy and health sector strategy, and was hand-picked by Wolfowitz. GAP had also obtained a draft from Daboub’s office of the pending Health, Nutrition, and Population Strategy (HNP), which mentioned family planning only once. In contrast, the previous HNP, approved ten years before, identified the lack of access to family planning services as a primary health challenge. In other words, not only was the Madagascar health policy devoid of guidelines for family planning funding, but the Bank’s overall health sector strategy, which all future country plans use as a guide, had also been stripped of family planning assistance.
GAP worked with the Financial Times about this issue in the weeks prior to Wolfowitz’s address at the press conference. There, when Wolfowitz was asked by NPR if there were “any changes in the Bank’s policies in reproductive health and family planning,” Wolfowitz responded “Absolutely not.” He went on to say, “Let me make it very clear. Our policy hasn’t changed.” He later added, “It is a development issue. The policy of this institution I think was very clear before I got here and it will remain very clear.”
Wolfowitz was caught in a deliberate falsehood, and the Financial Times story broke hours later.
Daboub was the former Finance Minister of El Salvador and a member of that country’s ARENA party. ARENA is closely identified with the hierarchy of the Catholic Church, which, in contrast to the more progressive pastoral clergy in Central America, opposes contraception and equal rights for women. Daboub was scheduled to speak at the Vatican less than one month later. It appeared that the changes to the Bank’s health strategy were effected as a result of his personal religious beliefs.
As the story exploded in the press, European governments became extremely upset about the change in the draft strategy. The Board of Directors rejected the draft (with Europe leading the charge), and demanded a new document with family planning included as a priority. Within three weeks, a new draft plan that included family planning was approved by the board.
The Shaha Riza – SAIC Deal
A March 2007 Vanity Fair article mentioned that Riza served as a “subject matter expert” for the Middle East during the run-up to the Iraq War at Science Applications International Corporation (SAIC), a defense consulting firm focused on defense capabilities and intelligence gathering. At that time, Paul Wolfowitz was the Deputy Secretary of Defense. GAP had many questions about the Riza-SAIC deal.
On April 6, GAP reported that Riza did not receive Bank approval for outside employment as a consultant in this capacity. Inside sources at the Bank had verified to GAP that Riza never applied for nor received permission to provide these services to SAIC. This was a gross violation of World Bank staff rules, which require Bank employees to request clearance for extracurricular professional activities in order to prevent conflicts of interest. Such undisclosed parallel employment would never have been tolerated by the Bank and are grounds for dismissal. World Bank staffers work as international civil servants and are expected to serve the interests of the institution rather than any national interest.
Two weeks later, GAP obtained a copy of the Riza-SAIC contract, along with a DoD Inspector General Report, which strongly indicated that Riza was paid for her services. Eventually, it emerged that Wolfowitz himself directed SAIC to hire Riza. Included in this process (a matter of six days), it appeared that Wolfowitz was able to secure a security clearance for her – a strange occurrence given that Riza was a foreign national.
Other Problems in the Midst of the Scandal
Other stories emerged that contributed to Wolfowitz’s downfall. These included:
- Watering Down ‘Climate Change’: After the Daboub incident involving family planning became public knowledge, reports surfaced linking Daboub to efforts to water down references to fighting “climate change” in Bank environmental strategy papers. Less than a week later, GAP obtained and revealed an internal document indicating that orders to tone down references to “climate change” in the paper originated in the office of Bank president Paul Wolfowitz.
- Investigating the Leaks: In the midst of the scandal, Bank General Counsel Ana Palacio (close to Wolfowitz) announced that a law firm had been retained by the World Bank to investigate leaks of confidential documents to FoxNews. Inside the Bank, many staff members interpreted the announcement as an effort to intimidate whistleblowers. In effect, the General Counsel was informing staff members that a “Plumbers Unit” was going to start plugging leaks.
- Riza Not Actually ‘Seconded’: Mixed in with documents released by the World Bank, the fact that Riza was never actually seconded to the State Department emerged. A memo released by the Board from J. Scott Carpenter, a State Department official to World Bank Human Resources, reads: “I would like to take this opportunity to note that we [State] do not view Ms. Riza as detailed or seconded to the U.S. Government.”
- Wolfowitz’ Two Top Aides Grossly Overpaid: GAP acquired documents showing that Wolfowitz’s top aides, Robin Cleveland and Kevin Kellems, both of whom he brought with him to the Bank, received salaries of about $250,000 annually. The salaries were grossly inflated with respect to each aide’s previous experience.
- Misrepresenting Riza’s ‘Shortlisting’: When Wolfowitz became Bank president and Riza, herself a Bank staffer, was assigned to work at the U.S. State Department to avoid a conflict of interest, they both claimed that she had been ‘shortlisted’ in the ongoing competition for an internal post. Consequently, they claimed that she deserved an immediate promotion as a component of her transfer package. Wolfowitz claimed that Riza should be compensated for having to withdraw from a competition for promotion in which she was a finalist. An inquiry into the competition, however, revealed that Riza lacked the necessary minimum qualifications for the position.
Tying in the Original Riza Scandal with SAIC
GAP received a copy (from a British news organization) of a preliminary inquiry issued by the Department of Defense IG office from April 2005 naming Paul Wolfowitz as the government official who directed contractor SAIC to hire Shaha Riza. The document also detailed the explicitly political role that Riza played in post-invasion Iraq (in 2003), while she was a World Bank employee, despite the fact that Bank staffers are prohibited from engaging in this type of work. Recognizing Riza’s position at the Bank, the report stated that Wolfowitz told investigators: “…strong opposition to the war was prevalent in the World Bank, so she (Riza) incurred some professional risk in taking time off from her World Bank duties to engage in activity supporting the war.” The statement showed that Wolfowitz himself saw Riza’s work as a problem for her at the Bank.
The document also illustrated that as early as 2003, Riza was cooperating with Wolfowitz at the U.S. Defense Department, and Elizabeth Cheney and J. Scott Carpenter at the U.S. State Department in her political work in Iraq. These are the same individuals who directed the State Department ‘secondment’ of Riza two years later.
On May 17, 2007, after numerous scandals had dominated Bank activities for two months, Paul Wolfowitz resigned as president of the World Bank.
In 2010, GAP released a report about the Foundation for the Future, the obscure State Department Funded Organization that Shaha Riza was seconded to. This report, which was based on documents obtained through nearly three years’ of U.S. Freedom of Information Act requests, exposes the highly irregular manner in which the Foundation for the Future was established and operated by Bush administration officials and appointees.