Battle For The World Bank, Round Two

Robert Zoellick is entering a war zone. The forces of corruption at the World Bank have won their first battle, with Paul Wolfowitz as a high-profile casualty, and they are pressing forward.

Victory, which they define as the complete removal of Bush and Wolfowitz fellow travellers who have reform on their mind, is near, so they have shifted their focus to Wolfowitz-ite Suzanne Rich Folsom, who heads the bank's Department on Institutional Integrity.

(What better place for the forces of corruption to attack?)

We pick up the story in today's WSJ op/ed:

Mr. Zoellick's first test will come early. As we go to press, sources inside and outside the bank tell us that a follow-up to the putsch against Mr. Wolfowitz is being engineered by Managing Director Graeme Wheeler and Staff Association Chair Alison Cave against Suzanne Rich Folsom, who runs the bank's Department of Institutional Integrity, or INT. Ms. Folsom, an ethics lawyer brought in by former president Jim Wolfensohn and promoted to her current job by Mr. Wolfowitz, has been aggressively pursuing corruption investigations, much to the alarm of some at the bank.

Prominent among those investigations is one concerning an Indian health project. Irregularities in the project, including indications of bid-rigging and bribery, led Mr. Wolfowitz to veto further loans to India in 2005 while the investigation unfolded, despite fierce protests from the project's managers. Now that the INT is about to issue a report about the project, Mr. Wheeler has been lobbying the bank's executive directors to place Ms. Folsom on administrative leave, and for the INT's oversight responsibilities to be radically diminished.

If Zoellick stops Wheeler and Cave in their tracks and supports a strong and independent INT, he will be signaling the World Bank community that the name on the door might have changed, but the direction of management has not.

If Folsom falls, Zoellick will be telling us he either lacks the will or the power to fight the corruption that is at the core of the world bank.

Bush Plays It Safe: Zoellick To World Bank

Yes, John Bolton would have been the more fun nominee, but W. picked a safe and solid candidate in Robert Zoellick, who will be officially announced tomorrow as Paul Wolfowitz' replacement at the World Bank.

Here's a fine summary of the man from WSJ:

Robert B. Zoellick served as U.S. trade representative -- a cabinet-rank post -- during Mr. Bush's first term. The 53-year-old was considered for the World Bank job the last go-round, before moving to the State Department, where he served as deputy secretary, at the start of Mr. Bush's second term. Mr. Zoellick is regarded as a tough-minded but nonideological advocate for U.S. power. As U.S. trade representative, Mr. Zoellick often acted as an international healer in the wake of tumultuous events and has pushed trade liberalization in the Arab world.

The perennial candidate for many high-profile Washington jobs, his name was floated as successor to World Bank President James Wolfensohn in 2005. In his resignation letter as the No. 2 person at the State Department, Mr. Zoellick said he was particularly proud of having "reframed" the administration's approach toward China. He joined Goldman Sachs in 2006 as a managing director and chairman of the firm's international advisers and was expected to play a central role in advising Goldman's global strategy.

Democracy Arsenal has a more succinct summary:

Googling readers will already know, or I can save you the trouble, that he's a realist's realist...

Experience in the Arab world is a plus, as is the assurance that he'll stand for America's interests. Also a great relief is that there's no apparent connection between the man and George Soros.

What's missing from all the summaries I've read so far is what cred he's got in the area of his most important task: Rooting out corruption and streamlining the bank. We know such stuff can get you fired from the World Bank (forget all the girlfriend smoke and mirrors!), so hopefully Zoellick has the stamina and smarts to take on the World Bank staff and its more corrupt participating states.

Run That By Us Again

I take the headline of this post from today's take the headline of this post from today's WSJ editorial on the Paul Wolfowitz resignation because I am as confused as they on the whole matter.

Take this, for example, from the World Bank's statement following the hearing that lead to Wolfowitz' resignation:

Our deliberations were greatly assisted by our discussion with Mr Wolfowitz. He assured us that he acted ethically and in good faith in what he believed were the best interests of the institution, and we accept that.

Help me understand how that constitutes a basis for forcing a guy out of his job. Perhaps it wasn't about this ethics skirmish at all; perhaps it was about poor performance. Then why this:

We are grateful to Mr. Wolfowitz for his service at the Bank. Much has been achieved in the last two years, including the Multilateral Debt Relief Initiative, the Clean Energy Investment Framework, the Africa Action Plan, and the Avian Flu Initiative. 2006 was a record year for IDA lending, especially in Africa. The Bank has launched emergency action programmes in Liberia, the Democratic Republic of the Congo and the Central African Republic, and played a key role in the Lebanon and Afghanistan donors conference. In March, after an unprecedented global consultation process, we adopted a new strategy for the Bank's work on Governance and Anti-Corruption.

And we have new strategies for Rapid Response in Fragile States, for the Health Sector and for the Financial Sector. We thank Mr Wolfowitz for his leadership and for championing the Bank's work across so many areas.

The World Bank is an archaic institution, left behind technologically and operationally by the private sector banks. It is bloated and corrupt; Wolfowitz was perhaps guilty of one thing: being too deliberate in his reform efforts. The bank's staff could see what was coming: Tougher ethics rules, performance reviews, firings and layoffs.

That is why the staff's statement is the only straightforward one of the bunch:

While Mr. Wolfowitz has finally done the necessary thing by resigning, he has damaged the institution and continues to damage it every day that he remains as its President. He cannot continue to be the face of the World Bank. He has demeaned the Bank, insulted the staff, diminished its clients, and dragged this institution through the mud. He put his own interests before those of the institution. In making a statement of gratitude to Mr. Wolfowitz, the Board has done the same. They have attempted to save his face and in so doing have destroyed that of the institution that they are entrusted to protect.

The World Bank Group needs to rebuild its credibility immediately, regain its focus and devote its full attention to its clients. This cannot be done while Mr. Wolfowitz remains in his position as President.

Run that by us again. It sounds an awful lot like a triumphant bully; a chorus of spoiled brats who need another slap upside the head; a pot calling the kettle black. Their attack on the Board for its handling of the matter is a marker, a challenge that the next president best not tangle with them.

Well. Now it's up to President Bush to nominate a new World Bank president. May I humbly suggest that he name someone who will insult the staff and continue the organization's well-deserved dragging through the mud?

As Wolfowitz Resigns, A Lie Of The Day

"I regret that it has come to this. I believe all parties in this matter have acted in good faith."
-- George W. Bush

In the tale of George Soro's takedown of the World Bank, nothing could be further from the truth than the president's claim that all parties acted in good faith.

For starters, Soros never showed his head, even though he was clearly manipulating the crisis in a teapot, which in my book does not constitute good faith.

Staffers of the World Bank, many of them quite adept at corruption on a grand scale, were not acting in good faith when they leaked mis-cast news of alleged financial favoratism directed at Wolfowitz's girlfriend, a matter of possible corruption on a very small scale.

And European World Bank directors, who a decade ago scoffed at Americans as bumpkins because we got so upset over a simple presidential sexual liaison with a hottie, were hardly exhibiting good faith when they skewered Wolfowitz on a lesser indiscretion.

It's times like this that my disappointment in George Bush runs pretty deep. The man is from Texas, for cryin' out loud, where they lead the nation as America's most colorful practitioners of American English. What the heck is, "I regret that it has come to this. I believe all parties in this matter have acted in good faith."

Some fire, passion and wit was called for here, like:

I regret that a good man with good intentions to heal a sick institution fell victim to that institution's sickness today. This is not the end of the fight. Corruption, mismanagement and inefficiency must be routed out of the World Bank -- you could say it needs to be more like an American bank than a World bank -- and I will continue to do all I can to see to it. The poor of the world deserve nothing less.

There's still the opportunity for redemption. Bush could push to the front of line a new president who could keep up the pressure. The WSJ suggested Paul Volker, who did a pretty decent job of investigating the UN's Oil-for-Food scandal, and a reader suggested a much more fun nominee: John Bolton.

Kangaroo Kourt Konvenes

Today's the day for Paul Wolfowitz, and the question really won't boil down to whether or not Shaha Riza got preferred treatment at the hands of her boss (I'm speaking monetarily here), but rather, will the anti-reform legions within the World Bank succeed with their snowballing of Wolfowitz.

The WSJ outlined today some evidence that is not in the monstrous, 600-page investigative report on the matter. It comes from the personal files of Xavier Coll, the VP/HR of the bank: Memos he wrote to himself documenting the Riza salary negotiations. Here's an excerpt with key elements highlighted:

In an August 22 memo, Mr. Coll reports that "I also felt that we were in a very difficult situation -- with no precedent at the Bank -- and that it had enormous potential to damage the Bank's reputation. In balance, I thought that the situation required more flexibility than in other past cases and that there was great risk to the Bank if we could not come to a workable agreement in a few days." Yet the investigating panel now asserts that the situation wasn't all that unusual and that Mr. Wolfowitz should have been allowed no such "flexibility" in how he tried to settle the matter.

In the same memo, Mr. Coll also reports that he had urged a lump-sum settlement with Ms. Riza as she left the bank, and concedes that Mr. Wolfowitz "agreed that I should raise this alternative with Ms. Riza. . . . I felt comfortable that I raised my points of concern with the President and that he has taken these seriously and given due consideration."

And regarding a later conversation Mr. Coll had with Ms. Riza, Mr. Coll wrote, "I indicated that while the President wanted to come to an agreement quickly (he was leaving that afternoon for an overseas trip) he also wanted to make sure that we came to the right solution, both for the institution and the staff." Mr. Coll added that Ms. Riza rejected his proposed "financial settlement."

Only then did Mr. Wolfowitz decide to settle the matter by dictating its terms to Mr. Coll. After Mr. Coll recommended that any future raises for Ms. Riza should be contingent on a review of her work outside the bank by "a committee of her peers," Mr. Coll wrote that "This addition brought the process for potential promotions more in line with current practice at the Bank. I felt that, on balance, this was a reasonable way to move forward and find a solution given the very complex and difficult set of circumstances."

WSJ says to their knowledge, these memos are not cited in the investigative report -- but at 600 pages and so few days to review (whether you're a journalist or the Wolfowitz team), they could have missed them. But I'll bet they're not because we can't slow this particular locomotive with mere facts; this baby runs on innuendo, fabrication and misinterpretation.

Wolfowitz faces a steep challenge, both from the European board members who, with the backing of George Soros, want to punish Wolfowitz to get to Bush over the Iraq war, and from the many corrupt states and staffers who don't like the way Wolfowitz has been rocking their lucrative boat.

A suggestion that makes sense for resolution comes from the WSJ editorial: Prez Bush should say, "OK, if you want Wolfowitz, then I'll just appoint Paul Volker the next World Bank prez."

That'll make 'em squirm, as the former Fed chair made quite a name for himself uncovering corruption and scandal at the U.N.

Will Corruption Rule At World Bank?

WaPo reports today that Paul Wolfowitz' days at the helm of the World Bank are numbered. I say let's wait before reporting this particular death because Wolfowitz has enough support to qualify him as "only partly dead," at a minimum. Nevertheless, here's WaPo:

The World Bank executive board has concluded that the bank's president, Paul D. Wolfowitz, broke ethics rules in engineering a hefty pay raise for his girlfriend, and plans to try to end his tenure next week, senior bank officials said yesterday.

Board members do not want to vote to fire Wolfowitz, the officials said, since that might provoke a rupture with the bank's largest shareholder, the United States. Instead, they are inclined to adopt a resolution saying they have lost confidence in him, hoping that will persuade him to resign.

Were I Wolfowitz in that case, I would simply vote my one vote as president and adopt a resolution of no confidence in the board and tell them that if they don't want to screw themselves, then he, Wolfowitz, will be happy to do the screwing for them.

That is, after all, what this most of this whole thing is about. Wolfowitz is trying to purge the World Bank of its rampant corruption and his efforts are a grave risk to the countries represented on the board that wallow in corruption and benefit from it.

(The other part of the story line is Wolfowitz' commitment to trim the World Bank staff and payroll, which, while necessary for the bank's survival, has made him the blood enemy of the staff, which leaked the news on his hi jinx with his squeeze.)

Reader Charlie suggested I read about the China connection to all this, linking to a story by Patricia Adams in Canada's Financial Post. It's quite a story. Here's the China connection:

But [despite more competition from private banks] the bank has had one competitive advantage that no private-sector Western lender can match -- a willingness to lend large sums to corrupt Third World administrations with few governance strings attached. Wolfowitz' arrival in 2005, and the anti-corruption measures he has brought in, have jeopardized that advantage big time, as seen in a chilling memo the bank received on March 12 of this year.

The e-mail memo, entitled "Sanctions Reform Roll-Out in EAP [East Asia and Pacific Region] -- Your Feedback Needed," was from the manager of the bank's operation in China, Hsiao-Yun Elaine Sun, to James Adams, vice-president for East Asia and Pacific Region. It warned that the bank could lose its second-largest customer, the Chinese government, if it insisted on carrying through with its intention to hold borrowing countries to account for World Bank monies that were used inappropriately.

China's Ministry of Finance (MOF) "is very concerned about the implementation. They foresee potential disagreements as to the scope, level, and approach of the bank's involvement on specific cases. Our MOF counterpart is so worried and is considering to suspend the lending program discussions next year in order to avoid getting into a confrontational situation with the bank."

Losing a large borrower like China, which has some US$21-billion in outstanding loans and credits with the bank, and accounts for close to 10% of the bank's total portfolio, would lead to significant staff layoffs. Moreover, at least three other countries -- India, Mexico and Indonesia --have also expressed alarm at the bank's anti-corruption program, which would make their officials subject to investigation and exposure. These four countries alone, ranked first, second, third and fifth in size among bank customers, account for 30% of all World Bank business.

Adams points out that the leak of Wolfowitz' mini-indiscretion came just two weeks after Sun wrote the memo expressing concern about efforts to bring an end to the World Bank's maxi-indiscretions.

So is the rule that if you make the corruption big enough and pervasive enough, then you must pretend it's really not there at all? Even if, as is the case, 20 to 30 percent of the World Bank's total lending simply goes missing? Is Wolfowitz being fired because he slipped some money to his girlfriend, or because he's trying to stop millions of dollars going into the pockets of corrupt dictators and go-betweens?

The answer is obvious. The staff, which almost universally fears where Wolfowitz' investigations and efficiencies will lead, is teamed with the corrupt members of the board to keep their graft empire afloat.

The U.S., Canada, Japan and various non-corrupt states stand allied for Wolfowitz and what he stands for.

So the question boils down to this: Who will win, the masters of large-scale corruption or the good man who stupidly engaged in some small-scale dishonesty?

Photo: NYT

George Soros' World Bank Conquest

George Soros must be giddy in anticipation; his conquest of the World Bank is nearly complete, it is almost his.

All he has to do is see to the removal of Paul Wolfowitz, a man whose beliefs are the opposite of his, and install the man who he's lent one of his homes to, a man who believes, like Soros, in world government with plenty of opportunity for anti-Americanism and corruption.

The Wolfowitz part is going well. There's a 600-page "indictment," complete with its own violation of World Bank rules, since it only gives Wolfowitz 72 hours to respond instead of the five business days allowed. That was a bit of a defeat for Soros; he was going for a 48 hour response window.

Should it prove persuasive, it should be easy to get Soros' man in at the helm of the World Bank. Mark Malloch Brown, Kofi Annan's former cover-up man, is waiting in the wings, pulling strings, calling favors and twisting arms. The WSJ opinion page summarizes Brown nicely:

The bank presidency would be a neat coup for Sir Mark, and not just because the post has heretofore gone to an American. He also stands for everything Mr. Wolfowitz opposes, beginning with the issue of corruption. Consider Mr. Malloch Brown's defense of the U.N.'s procurement practices.

"Not a penny was lost from the organization," he insisted last year, following an audit of the U.N.'s peacekeeping procurement by its Office of Internal Oversight Services. In fact, the office found that $7 million had been lost from overpayment; $50 million worth of contracts showed indications of bid rigging; $61 million had bypassed U.N. rules; $82 million had been lost to mismanagement; and $110 million had "insufficient" justification. That's $310 million out of a budget of $1.6 billion, and who knows what the auditors missed.

Mr. Malloch Brown also made curious use of English by insisting that Paul Volcker's investigation into Oil for Food had "fully exonerated" Mr. Annan. In fact, Mr. Volcker's report made an "adverse finding" against the then-Secretary-General. Among other details, the final report noted that Mr. Annan was "aware of [Saddam's] kickback scheme at least as early as February 2001," yet never reported it to the U.N. Security Council, much less the public, a clear breach of his fiduciary responsibilities as the U.N.'s chief administrative officer. Mr. Malloch Brown described the idea that Mr. Annan might resign as "inappropriate political assassination" -- a standard he apparently doesn't apply to political enemies like Mr. Wolfowitz.

In this odd couple, Soros is the loudmouth and Brown the subdued, but you can be sure their views are not far apart. Brown was a moving force behind the farcical reform of the U.N.'s Human Rights Council which, WSJ reminds us, so far has done nothing but castigate Israel. And he's at his best when he's lecturing America about the way it ought to behave.

I wasn't following this affair closely, naively thinking that if Wolfowitz is just another guy who thinks he's above the rules, then I wasn't going to burn electrons defending him. But there's more at stake here than whether he idiotically gave his squeeze a job.

He was trying to turn a powerful organization in a new direction and the forces of evil now see their opportunity to grab it back and use it for their gain. The fact that they're using corruption -- a tool they wield exceptionally well themselves -- as their mark on Wolfowitz makes the play all the more interesting and repulsive.

WSJ concludes:

If the Bush Administration now abandons Mr. Wolfowitz as he faces a decision from the bank's board of governors, it will not only betray a friend but hand the biggest victory yet to its audacious enemies in the George Soros axis.