Contractor says was told to hire Wolfowitz friend

WASHINGTON (Reuters) - The U.S. Defense Department ordered a contractor to hire a World Bank employee and girlfriend of then-Pentagon No. 2 Paul Wolfowitz in 2003 for work related to Iraq, the contractor said on Tuesday.

A spokeswoman for Science Applications International Corp., or SAIC, said the Defense Department's policy office directed the company to enter a subcontract with Shaha Riza, under which she spent a month studying ways to form a government in Iraq.

Wolfowitz, a key Iraq war architect who left the Pentagon in 2005 to become president of the World Bank, is already under fire for overseeing a high-paying promotion for Riza after he took the helm of the poverty-fighting global lender.

Senior Democratic congressmen and other critics have pressed demands for his resignation, saying his actions have undermined the campaign against corruption in the developing world that has been a hallmark of his World Bank tenure.

SAIC said Riza's subcontract lasted from April 25 to May 31, 2003. She was paid expenses but no salary during her trip to Iraq, at her request, according to the contractor.

Melissa Koskovich, a spokeswoman for SAIC, said the contractor "had no role in the selection of the personnel who comprised the Iraq Governance Group under this contract."

Defense sources said the Pentagon was reviewing the matter.

The World Bank's board is examining Wolfowitz's role in helping to arrange Riza's promotion and the bank's staff association has called for his resignation.

The controversy hung over spring meetings of the World Bank and International Monetary Fund last weekend, attended by top finance and development officials from around the globe.

The bank's member governments said on Sunday they were troubled by the matter and that it was crucial the bank's credibility not be tarnished. Wolfowitz said he intended to stay in his job.

Democrats who criticize Wolfowitz for his role at the Pentagon in the run-up to the Iraqi war stepped up calls for him to quit.

Democratic Sen. John Kerry, who ran against President George W. Bush for president in 2004, said in a statement that Wolfowitz's problems at the bank were "entirely self-inflicted" and jeopardized its role as a champion of anti-corruption.

Last week, Sen. John Edwards, a contender for the 2008 Democratic presidential nomination, said Wolfowitz's World Bank leadership was characterized by "some of the same failures as his term managing the war in Iraq -- cronyism and rhetoric that does not match reality." He added: "He should resign."

In an e-mail to bank staff on Tuesday, Wolfowitz sought to ease concerns the episode might derail bank business.

"I want to reassure you that we conducted a full agenda of bank business with the governors, heads of delegation and various groups who attend the spring meetings," he said, referring to the weekend gathering.