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Did Paul Wolfowitz lose his job as president of The World Bank Group because he wouldn’t listen to its top lawyer? Roberto Da�ino, the bank’s former general counsel, thinks so. Da�ino says that Wolfowitz prevented him from reviewing a contract for the president’s girlfriend that was more lavish than what the bank’s ethics committee had approved. Had he seen the contract, Da�ino says, he would have sent it back for revision, and Wolfowitz might have held on to his job. “I tell my children all the time: When you make a mistake, it’s not so much the mistake you make [that counts], but how you react to your mistake,” Da�ino says. “If [Wolfowitz] had reacted different than what he did, this might have blown away.” Da�ino spoke with Corporate Counsel in May in his first media interview since leaving the World Bank early last year. On May 17 the bank’s board of executive directors announced that Wolfowitz would step down at the end of June. It was a stormy tenure. When he was named president in March 2005, the World Bank already employed Shaha Riza, a Middle East specialist and Wolfowitz’s girlfriend. Da�ino says that he told the president’s personal lawyers that under bank rules, Riza and Wolfowitz could not have professional contact. Unhappy with the solutions that Da�ino suggested, Wolfowitz took the matter to the board’s ethics committee. After consulting with Da�ino, the committee approved a deal in which Riza would be promoted and transferred outside the bank for the duration of Wolfowitz’s presidency. But Wolfowitz subsequently negotiated benefits for Riza’s new post-at the U.S. Department of State-that the ethics committee hadn’t endorsed. Among the perks: a 28 percent pay boost, as opposed to the standard 3-12 percent increase for a promotion; hefty annual raises; and a guaranteed promotion upon her return to the bank. Neither the ethics committee nor Da�ino was informed of these details, according to an interview with the committee chairman later posted on the World Bank Web site. Da�ino says that if he’d known Wolfowitz had negotiated a richer package for his girlfriend, “I would have had [the matter] brought back to the ethics committee.” Wolfowitz’s attorney, Robert Bennett of Skadden, Arps, Slate, Meagher & Flom, did not respond to requests for comment. But the president has made many statements about the Riza controversy, both in public and in documents released by the World Bank’s board. On April 30 Wolfowitz told a group of directors that he found it “inconceivable that the ethics committee did not know the details of the arrangement with Ms. Riza.” He added: “I believe we all acted in good faith.” A prominent Peruvian lawyer, Da�ino returned to his native Lima last year to become executive director and deputy chairman of Hochschild Mining Group plc. He has an impressive resume, highlighted by a two-year term as prime minister of Peru. He’s also held several posts in Washington, D.C.-general counsel of the Inter-American Investment Corporation; partner at the former Wilmer, Cutler & Pickering; and Peru’s ambassador to the United States. In November 2003 Da�ino became the World Bank’s GC, overseeing a 130-lawyer department. Though the D.C.-based bank is a United Nations agency, its president has always been chosen by the United States, its largest donor. In March 2005 Wolfowitz was named to the post by the Bush administration. That spring, as Da�ino worked with Wolfowitz’s personal lawyers on the president’s employment contract, they soon turned to Riza’s situation. Wolfowitz was not willing to forgo professional contact with her at the bank, his attorneys said [see "Conflicting Accounts"]. Da�ino laid out three options: Riza could resign and accept a settlement; move to a bank division that didn’t report to the president; or temporarily transfer to another government office. Wolfowitz went to the World Bank’s ethics committee, which confirmed that the president and Riza couldn’t work together. He reluctantly accepted Riza’s move to a job at a different agency. But under bank rules, the committee could only advise Wolfowitz to transfer her-he was the one who had to implement it. That’s where he ran into problems, according to a later investigation by the bank’s board. The president negotiated a much more generous package for Riza than the committee had advised. And, according to a memo written by his top World Bank adviser, Wolfowitz decided not to show Riza’s contract to Da�ino because the GC “could not provide legal advice to both parties (i.e., the [ethics] committee and the president).” Da�ino says that he’s baffled by the reasoning in the memo, which he only saw when the bank released it this spring. “The general counsel is not the personal lawyer of the president. The general counsel is the lawyer for the institution,” he says. “How [could Wolfowitz] make a call about conflicting out the lawyer of the bank, who happened to have also given advice that he didn’t like?” After the Riza affair, Da�ino says, he was “frozen out” of meaningful contact with Wolfowitz. “The general counsel of the bank has traditionally been permanent staff,” he says. “But the Wolfowitz style was more that this is a change of regime and you bring your own cabinet.” While Wolfowitz failed to disclose Riza’s contract, governance experts say the World Bank also failed to have policies in place that would have ensured this disclosure. Its compliance policies need reform, says Nell Minow of The Corporate Library, the corporate governance research company. A general counsel should never be frozen out the way Da�ino was, nor should the board be kept in the dark, Minow says. While secrecy may be necessary at times, an organization must also provide “transparency when it’s needed,” she adds. Da�ino says he’s most worried about the damage that the controversy inflicted on the World Bank. He doesn’t think Wolfowitz had impure motives at the start. “I [think] he was in a very difficult personal and emotional space,” Da�ino says. Instead of following the ethics committee’s advice to delegate Riza’s contract negotiation to the bank’s human resources department, Wolfowitz did it himself. “And he forgot that he was in a de facto conflict,” Da�ino says. The president compounded the problem by failing to come clean. “More than bad faith,” Da�ino says, “I think it was a case of blind arrogance.”

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