World Bank faces setback to war on corruption

•In the US, major universities are scrambling to clean up a scandal involving financial-aid officers who allegedly accepted financial perks from lenders while steering students toward their loans.

Raymond Baker, a scholar at the Center for International Policy in Washington, says the problem is so big that the very survival of global capitalism in this century is at stake. The reason: Too many of the world's peoples are held in poverty by the illicit transfer of wealth.

Over the past decade, the World Bank has begun to acknowledge the importance of the problem. Bank president James Wolfensohn put it squarely on the agenda in 1996.

Now some observers say that his successor, Wolfowitz, has pushed the issue even further into the forefront.

"He has certainly attacked the corruption issue in a much tougher way than anyone has before him," says Patricia Adams, executive director of Probe International in Toronto, which follows trade and aid issues. "The biggest thing that he did, that no one else has done, is just stop the flow of money" to certain countries.

In the process, Wolfowitz has become embroiled in a longstanding debate, inside and outside the bank, over how to reconcile two priorities – clamping down on corruption and continuing to assist nations that in many cases are desperately poor.

Wolfowitz has been controversial from the start of his tenure. Fairly or unfairly, he has been criticized within the bank for bringing in a handful of advisers from the Bush administration, in which he had served immediately prior to his current post.

And he made what seemed to critics to be arbitrary moves – suspending all aid to some nations, such as Chad, as part of the anticorruption effort. Faced with criticism from Europeans and aid organizations, he has backed off such hard-line tactics.

Regarding Riza, he disclosed their relationship to the bank in 2005, asking to be recused from personnel decisions related to her. But, according to news reports based on documents that the board recently released, the ethics committee asked Wolfowitz to arrange for Riza to leave the bank, with a pay raise or promotion to reflect any unintended cost to her career from this step.

After earning $133,000 as a communications adviser in the bank's Middle East department, Riza got a $180,000 job at the State Department.

Wolfowitz has said he has no plans to step down. At the same time, calls for him to exit have mounted this month.

Vogl says it is hard to judge the matter until all facts are made public.

"There's an awful lot of partial information out there," he says. "We feel in Transparency International that there may have been fault not only on the part of Mr. Wolfowitz, but also on the part of the ethics committee."

In the end, some analysts say this could become one more cautionary tale on the need for clear ethical lines – whether on personnel matters or bank projects.

Mr. Baker says the flow of dirty money is often enabled by the view that "the end justifies the means" – that a little unfairness or bending of rules is acceptable so long as some greater good is being served. The consequences can involve national security as well as poverty.

"We probably wouldn't be in Iraq today if it wasn't for the money that passed through the oil-for-food" program, he says.

Wolfowitz, as a advocate for the Iraq war, knew all about that.

What he might not have guessed is that today, with Saddam Hussein's regime gone, Iraq would remain a hotbed of financial abuse, at the bottom of Transparency International's ranking.

There and elsewhere, there's plenty of anticorruption cleanup work to do.

•Material from wire services was used in this article.

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