Wolfowitz lashes out at 'smear campaign' (Roundup)

By Tony Czuczka May 1, 2007, 1:36 GMT

Washington - World Bank President Paul Wolfowitz went on the offensive Monday in an ethics probe that could cost him his job, denouncing a 'smear campaign' he said was designed to force his resignation over contrived conflict of interest charges.

Wolfowitz appeared Monday before a panel of seven World Bank directors and vowed not to quit, saying he acted on the advice of the bank's ethics committee when he arranged a promotion for his girlfriend, according to remarks released by his lawyer.

'To criticize me when I did nothing other than attempt in good faith to follow the guidance of the ethics committee would be unwarranted and grossly unfair,' he said. 'Moreover, it would be harmful to the institution.'

US President George W Bush renewed his support for the former Pentagon official, but Wolfowitz's backing among other governments has eroded and bank staffers are in open revolt against him.

The immediate issue is a 60,000-dollar salary hike and promotion for Wolfowitz's companion Shaha Riza, sealed three months after he became World Bank chief in June 2005.

She was loaned to the US State Department to avoid a potential conflict of interest, but kept on the bank's payroll.

Wolfowitz argued Monday that the ethics committee and the bank's board were aware of the arrangement - or could have known if they had wanted to.

He insisted that the promotion and Riza's raise to 193,000 dollars a year was in line with past World Bank practice and was partly meant to offset the setback to her career caused by her 'forced departure.'

The seven-member committee is investigating whether Wolfowitz broke ethics rules. Its report to the 24-member board could recommend action against Wolfowitz or leave it up the board.

European governments including Germany, France and the Netherlands have suggested that Wolfowitz is no longer a credible leaders, saying his conduct undermined a global anti-corruption drive he has made his signature theme.

The conflict has reopened a trans-Atlantic diplomatic split rooted in the Iraq war, which Wolfowitz helped organise in his previous job as US deputy defence secretary.

German Chancellor Angela Merkel declined to support Wolfowitz during a visit to Washington, calling only for 'a very transparent, very candid conversation' about his future.

Bush, standing next to Merkel after a US-European Union summit in Washington, said 'he ought to stay and he ought to be given a fair hearing.'

British charity Oxfam International urged Wolfowitz to quit, saying he was 'untenable.' The bank's role in fighting poverty has been 'deeply compromised,' Oxfam executive director Jeremy Hobbs said in an article Monday in the Guardian newspaper.

Wolfowitz complained that his foes had orchestrated media leaks 'of false, misleading, incomplete and personal information' about him and Riza to 'create a self- fulfilling prophecy that I am an ineffective leader and must step down.'

'I will not resign in the face of a plainly bogus charge of conflict of interest,' he said.