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World Bank President Paul Wolfowitz is waging a vigorous fight to keep running the institution amid findings that he broke bank rules in arranging a hefty pay package for his girlfriend.
Wolfowitz, who maintains that he acted in good faith, will try to defend himself before the bank's 24-member board late Tuesday. The board, whose proceedings are carried out behind closed doors, ultimately will decide what actions to take against him.
Board members have discussed a range of disciplinary options. It could fire Wolfowitz, ask him to resign, signal that it lacks confidence in his leadership or reprimand him. Board members have been leaning toward an expression of no confidence or other tough language that would make it difficult - if not impossible - for Wolfowitz to stay on.
Treasury Secretary Henry Paulson, however, does not think the facts merit dismissal, according to department spokeswoman Brookly McLaughlin.
The controversy that has put Wolfowitz's job in jeopardy involves his handling of the 2005 compensation package for his girlfriend, Shaha Riza, a bank employee.
A special bank panel, in a report released late Monday, concluded that Wolfowitz broke bank rules in his handling of the pay package. It said the board must consider whether Wolfowitz "will be able to provide the leadership" to ensure that the bank achieves its mission of fighting poverty around the world.
In a response, Wolfowitz said, "It is highly unfair and unwarranted to now find that I engaged in a conflict of interest because I relied on the advice of the ethics committee as best I understood it."
The special panel acknowledged that the informal advice provided by the bank's ethics committee "was not a model of clarity."
But it also said that Wolfowitz's involvement in the details of Riza's salary "went beyond the informal advice" given by the ethics committee and that he "engaged in a de facto conflict of interest."
Under Wolfowitz' contract as well as the code of conduct for board officials, he was required to avoid any conflict of interest, the report said.
Riza worked for the bank before Wolfowitz took over as president in June 2005. She was moved to the State Department to avoid a conflict of interest, but stayed on the bank's payroll. Her salary went from close to $133,000 (â‚¬98,162) to $180,000 (â‚¬132,851). With subsequent raises, it eventually rose to $193,590 (â‚¬142,881).
Before he took the bank's helm, Wolfowitz was the No. 2 official at the Pentagon and a key architect of the US-led war in Iraq.
European members are pushing for Wolfowitz to resign. The Bush administration says Wolfowitz should stay. The United States is the bank's largest shareholder.
"A clear reading of the facts in this report demonstrates that this was a unique situation, missteps occurred on all sides and communication may not have been clear enough," said Treasury's McLaughlin.
"The facts reveal that President Wolfowitz acted to find a pragmatic solution and to carry out the direction he received from the ethics committee," she added.