Decision over Wolfowitz delayed until next week

By Lesley Wroughton

WASHINGTON (Reuters) - The fate of World Bank President Paul Wolfowitz will be determined next week when a bank committee reports on whether a promotion he approved for his girlfriend was properly handled, sources said on Friday.

It remains unclear whether the controversial former Bush administration official will be forced to resign, face a stiff reprimand or win a last-minute reprieve that would let him finish the remaining three years of his tenure.

Board sources said the committee, appointed by the bank's 24-nation board late on Thursday, will concentrate on whether Wolfowitz abused his position or committed ethical lapses as it looks at the promotion for Shaha Riza, a bank employee moved to an outside job because of her relationship with Wolfowitz.

Wolfowitz, a former deputy defense secretary who helped plan the U.S.-led invasion in Iraq, apologized for his handling of Riza's high-paying promotion, saying he was in "uncharted waters" as he began the job. He also pledged to change his management style.

In an internal note to staff on Friday, Wolfowitz said he looked forward to implementing the board's recommendations.

"I expect the report early next week," one board source told Reuters, stressing that member countries were divided in their support for Wolfowitz.

"This has been a difficult issue but it seems to me that the conflict of interest was not handled in the right way," said the source, who expects that Wolfowitz will leave.

As the debate over Wolfowitz's future has increased in intensity over the past 10 days, the White House repeatedly said that President George W Bush has confidence in Wolfowitz, who he nominated for the World Bank job in early 2005.

The United States is the World Bank's biggest shareholder, holding 16.4 percent of total board votes, followed by ally Japan which has 7.9 percent. Major issues are usually decided by an 85 percent margin at the bank.

World Bank staff representatives are adamant that Wolfowitz should resign. This week, one of his two top deputies told him he should quit for the well-being of the bank.

OPERATING UNDER CLOUD

While the board deliberates Wolfowitz's future, concerns mount about the bank's ability to operate under such a cloud.

Multiple bank sources holding both high and low-ranking jobs told Reuters the bank's work has been paralyzed by the scandal, with meetings to discuss projects for poor countries dominated by discussions over aspects of the controversy.

In e-mails sent to Reuters, staff in the field have reported that some governments in Africa and southeast Asia had questioned whether the institution had the authority to tell them what to do, especially on anti-corruption measures.

Over the past two years, Wolfowitz has made good governance and fighting poverty one of the main pillars of the World Bank's work in developing countries despite widespread conflict over how it should be done.