What actually happened in the summer of 2005 has now been mostly obscured under the lobbying and partisanship that has buffetted Paul Wolfowitz and his presidency of the World Bank in recent weeks. But yesterday's report by a panel of seven World Bank executives, the so-called "Ad Hoc Group", claimed to present a version of events that was based on "a strong and largely undisputed documentary record". Its conclusions were as follows:

He violated the code of conduct

The code of conduct for board officials at the World Bank requires members to "avoid any conflict of interest, real or apparent". At the time of his appointment to the World Bank in May 2005, Mr Wolfowitz informed the board that he had a pre-existing relationship with Shaha Ali Riza, one of the bank's Middle East experts.

He suggested "recusing myself from any influence over personnel decisions involving Ms Riza" but was told that his proposal did not go far enough. By later ordering Xavier Coll, the bank's Vice President of Human Resources, to accept Ms Riza's demands for a transfer to the US State Department, two promotions and a pay rise, the panel found that Mr Wolfowitz "engaged in de facto conflict of interest".

He broke the staff rules

Ms Riza's new contract, whose contents was directed by Mr Wolfowitz and not vetted by World Bank lawyers, broke staff rule 6.01 with its pay increases and guarantees of promotion.

He automatically ordered her promotion to staff level H, a move which Ms Riza claimed that she had been denied because she was Muslim and a woman, and raised her pay from $132,660 to $180,000. Under the rules, Ms Riza was eligible for a pay increase of between 3 and 12 per cent. Her increase of $47,340 was a rise of 28.2 per cent.

During her secondment at the State Department, Ms Riza claimed she would miss out on further promotions. Mr Wolfowitz "guaranteed" her a promotion to level I at the end of his first five-year term and then J should he serve another term, also a violation of staff rules.

A separate clause, covering "external service", said that staff in Ms Riza's situation should receive an annual pay increase of 3.45 per cent while on attachment. But her first raise, from $180,000 to $193,590 in 2006, was more than twice that, at 7.55 per cent.

He broke his contract

Mr Wolfowitz is bound by his contract to obey the code of conduct for board officials and avoid conflicts of interest. The code also orders officials to "observe principles of good governance". The panel said that Mr Wolfowitz's decision to have Ms Riza's contract checked by external lawyers rather than the World Bank's own general counsel "was inconsistent with the principle of good governance and concern for the interests of the Bank". The code also has rules for the disclosure of information. The panel "noted that Mr Wolfowitz made available to the press his statement to the Ad Hoc Group within hours of having delivered it to the Group".

He damaged the bank

As a result of the scandal and negative media coverage, the panel found "erosion in the operational effectiveness of the Bank triggered by the current crisis in leadership. The ability of staff, particularly those working in borrowing countries, to interact with their counterparts and the instituations ability to convene partners, is eroding. The Bank's Independent Evaluation Group believes that that the institution is currently at a critical juncture where its development effectiveness is being jeopardised by the crisis in leadership. This is of great concern to the Group."

Mr Wolfowitz's defence

In a statement last night, Mr Wolfowitz repeated his central defence: "that I engaged in a conflict of interest because I relied on the advice of the ethics committee as best I understood it". He claims that he was advised to help draw up Ms Riza's contract by the Bank's ethics committee after asking their advice on how to resolve the situation.

In the key document, a letter sent by the chairman of the ethics committee, Ad Melkert, on August 8, 2005, Mr Wolfowitz was informed that: "The EC (ethics committee) cannot interact directly with staff member situations, hence Xavier (Coll) should act upon your instruction."

Mr Wolfowitz told the panel that he understood this to mean: "Get it done. Report back by the end of the week. You give Mr Coll his instructions. We've given him some general guidelines but you're the one who has to take responsibility for the negotiations."

But the panel said that Mr Wolfowitz's interpretation of the advice, coming after he was told that his initial suggestion to withdraw from personnel decisions about Ms Riza was insufficient, "simply turns logic on its head". It called his explanations "unpersuasive" and found:

"To conclude that the Ethics Committee was instructing Mr Wolfowitz to become directly involved in the details of the conflict of interest matter and that that was the sole reason why he got involved would require one... to conclude that the Ethics Committee, the General Counsel and Mr Wolfowitz ignored the requirement set forth by the Code of Conduct to withdraw from attendance or participation in deliberations or decision-making connected with that matter. It is simply not reasonable to believe that such a scenario was possible."

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