Paul Wolfowitz (AFP)

A top-level World Bank ethics panel has ruled bank president Paul Wolfowitz guilty of a conflict of interest for getting his girlfriend a substantial pay raise, the New York Times reported on its website late Monday.

The news came as the scandal entangling Wolfowitz claimed its first victim earlier in the day when one of his senior aides resigned.

"Given the current environment surrounding the leadership of the World Bank Group, it is very difficult to be effective in helping to advance the mission of the institution," Kevin Kellems told AFP.

According to the Times, the panel of seven of the bank’s 24 board members has formally notified Wolfowitz, the former US deputy secretary of defense, of its findings, a move that is likely to add to the weeks of pressure on him to resign.

The committee continued to mull what punishment to recommend, the Times said.

But it reported that most board members want Wolfowitz, whose management style and determination to uproot some of the bank’s bureaucratic practices has upset many staff, to resign.

Last week Wolfowitz rejected criticism that he oversaw an improper pay and promotion deal for his partner.

In a letter released Thursday he said that he had acted within World Bank rules in requesting the pay hikes and promotions worth nearly 200,000 dollars for Shaha Riza, who also worked at the international development lender.

Bank managers are not allowed to supervise employees with whom they have such a close relationship.

"It is grossly unfair and wrong to suggest that I intended to mislead anyone, and I urge the committee to reject the allegation that I lack credibility," Wolfowitz said in a letter to the investigatory panel.

The lingering controversy has threatened to hobble the bank’s lending and development programs, as well as an anti-corruption campaign targeting borrowers that was Wolfowitz’s signature initiative.

Some saw Kellems’ stepping down as possibly an effort to blunt the attack and save his boss’s job.

The director of strategy and a close adviser to Wolfowitz, Kellems said he was leaving for "other opportunities."

A former journalist, Kellems was tapped for the World Bank post after Wolfowitz, architect of the Iraq war, took the helm of the international financial institution in June 2005.

The men had worked together in the Defense Department when Wolfowitz was deputy secretary during President George W. Bush’s first term.

Kellems joined the Pentagon in August 2001 and left to become the spokesman for Vice President Dick Cheney at the White House.

One of Kellems’s statements has been key to the international scandal.

Questioned by reporters, he insisted the salary raises awarded to Riza on Wolfowitz’s orders had been approved by the bank’s board of directors.

But the directors denied they were informed of her promotion and said they had not approved it. They then turned the matter over to the ethics panel to investigate whether Wolfowitz had violated bank rules.

Opponents of Wolfowitz have regularly pointed to Kellems as symbolic of a cloistered leadership that is too centralized and authoritarian.

In this light, Kellems’s departure could be interpreted as representing the former Pentagon hawk’s willingness to acknowledge the criticism in the hope of assuring his own political survival.

"Some may argue that it is a last-ditch effort to stave off a vote of no confidence by the bank board later in the week," said Manish Bapna, executive director of the Bank Information Center, an independent body that monitors the multilateral institution.

"But it is clearly too little, too late," he said. "KellemsÂ?s resignation will not quell WolfowitzÂ?s critics."

"It’s like saying I have a PR problem," said another source, who requested anonymity. "The problem is a problem of substance."

The source also dismissed speculation about a secret deal with the board.

"It is unlikely that it is a deal. It has gone too far. If it would have been three weeks ago, maybe, but not today."

Besides, he said, Kellems is the smallest of all the targets of Wolfowitz’s foes, because he lacks policy-making power.

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