(Adds details on board in paragraphs 6, 7; Wolfowitz request to board in paragraph 8)
By Lesley Wroughton
WASHINGTON, April 12 (Reuters) - World Bank President Paul Wolfowitz admitted on Thursday he made a mistake and apologized for his handling of the promotion and pay increase of his girlfriend and staffer Shaha Riza.
Wolfowitz defended an agreement he signed off on that gave Riza a promotion with a pay rise before she was assigned to the State Department to avoid a potential conflict of interest.
“I proposed to the board that they establish some mechanism to judge whether the agreement reached was a reasonable outcome,” Wolfowitz said in a statement he read at a news conference before meetings of finance ministers in Washington this weekend.
“I will accept any remedies they propose,” he said. “In hindsight, I wish I had trusted my original instincts and kept myself out of the negotiations. I made a mistake, for which I am sorry.”
The bank’s board, which includes representatives from the bank’s 185 member countries, met on the matter on Thursday, focusing on whether Wolfowitz bent the rules on Riza’s promotion and violated staff rules.
By late Thursday night, board officials told Reuters a final statement was still being prepared.
In a new twist, Wolfowitz also requested the board in writing “in the interest of transparency” to release all communication between him and board officials on the issue.
As the board began its deliberations, the bank’s employee representative group called for Wolfowitz to resign.
“The president must acknowledge that his conduct has compromised the integrity and effectiveness of the World Bank Group and has destroyed the staff’s trust in his leadership,” according to written remarks presented at the meeting by staff association chair Alison Cave and obtained by Reuters.
“He must act honorably and resign,” she said.
Cave said it seemed impossible for the institution, whose mission is to fight global poverty, to move forward “with any sense of purpose under the present leadership.”
Witnesses said Wolfowitz came to the meeting and defended his actions to the staff, who have been in an uproar since the staff association questioned the promotion and pay increase of Riza, prompting an investigation by the board.
Wolfowitz, who was nominated for the bank job in 2005 by President George W. Bush, joined the institution from the Pentagon, where he was one of the architects of Iraq war.
Lingering distrust among many staff members and resentment over his close ties to the Bush administration and his role in the Iraq war has overshadowed his first two years at the bank.
“For those people who disagree with the things that they associate me with in my previous job — I’m not in my previous job,” Wolfowitz said. “I’m not working for the U.S. government.”
The White House reiterated its support for him. “In dealing with this issue he has taken full responsibility and is working with the executive board to resolve it,” White House spokesman Tony Fratto told Reuters.
Development group Oxfam said in a statement such controversies could be avoided if the choice of World Bank president was not a U.S. political appointment.
Wolfowitz said when he joined the bank he told the board about his relationship with Riza to address potential conflict of interest issues. He said he took the advice of the board’s ethics committee to relocate Riza, a former senior communications officer in the Middle East Department.
“This was not in any way an attempt to protect personal interests,” he said.