Wolfowitz says won't resign

World Bank President Paul Wolfowitz during a news conference in Washington, April 15, 2007.

WASHINGTON (Reuters) - World Bank President Paul Wolfowitz lashed back at critics on Monday who he said were conducting a "smear campaign" against him and vowed he would not resign over what he called unfair charges.

In a statement to an investigating bank panel looking into whether he broke ethical and other rules in a pay-and-promotion deal he directed for his girlfriend, Wolfowitz said the treatment of the issue has become "circus like."

"The goal of this smear campaign, I believe, is to create a self-fulfilling prophecy that I am an ineffective leader and must step down for that reason alone, even if the ethics charges are unwarranted," Wolfowitz said.

"And, I will not resign in the face of a plainly bogus charge of conflict of interest," he said in a statement obtained by Reuters.

The former deputy U.S. defense secretary, whose legacy as an architect of the Iraq war has haunted his bank tenure since 2005, did not totally rule out the possibility he may eventually step down, but made clear he would not be forced.

"Only when the cloud of these unfair and untrue charges is removed, will it truly be possible to determine objectively whether I can be an effective leader of the World Bank," Wolfowitz said.

Sources said the meeting with the panel, led by Dutch government representative Herman Wijffels, lasted about two hours, and focused mainly on possible conflict of interest issues over the promotion for Shaha Riza, an Oxford-educated Middle East specialist.

BUSH REPEATS SUPPORT

Riza was expected to meet with members of the panel later on Monday. Her lawyer, Victoria Toensing, would not comment.

At a news conference in the White House Rose Garden, U.S. President George W. Bush reiterated his support for Wolfowitz when asked whether he and German Chancellor Angela Merkel had discussed the issue.

"I think he ought to stay. He ought to be given a fair hearing," Bush said.

The controversy has prompted calls by bank staff for Wolfowitz's resignation. Staff who implement the bank's strategy for good governance and against corruption last week complained their work had been undermined by the crisis.

Wolfowitz said he regretted the "tumult" the controversy had caused the bank. But he added: "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 it also "would be harmful" to the bank.

In a report to the panel, Wolfowitz's lawyers presented details that had led to Riza's transfer to the State Department, a move they said she did not want but accepted because of their relationship.

The report said he had repeatedly asked to be recused from dealing with issue, but a bank ethics committee told him to work with the bank's human resources manager to relocate Riza.

"The committee members did not want to implement his plan themselves, however, because they said they could not interact directly with a staff member situation," the document said.

The lawyers argued that the agreement reached with Riza was in line with other World Bank settlement deals and was consistent with what the ethics committee had advised.

"It would therefore be unjust, to now find that he acted improperly, to find that he breached his contract, or to take any action against him in connection with this matter," the report said.