WASHINGTON - The three-week-old flap surrounding World Bank president Paul Wolfowitz and his girlfriend is apparently starting to take a toll on the bank's mission and employees.

Wolfowitz said yesterday that attention should be "focused on the very, very important work of the bank" and not on the investigation that has put his job in jeopardy.

His comments at a meeting in Brussels, Belgium, hosted by the European Union came after the bank's board in Washington expressed fresh concern that the controversy over his handling of pay for his girlfriend, Shaha Ali Riza, was hurting the institution's ability to do its job.

The issue has led to calls for Wolfowitz's resignation, and it has hurt morale among the bank's 10,000 employees worldwide. Critics contend that the bank's reputation has been damaged and that its efforts to raise billions of dollars to help poor countries may be hobbled.

"The bank's work goes on," Wolfowitz said yesterday. "It is critical; there are millions of poor people who depend on us."

After meeting several hours with a special panel probing his handling of the 2005 promotion and pay package of bank employee Riza, the 24-member board issued a statement late Tuesday saying it was "very concerned about the impact on the work" of the bank. It aims to reduce poverty worldwide by providing financial and technical assistance to countries.

The issue erupted April 12 with the disclosure that Wolfowitz helped secure a pay raise for Riza when she was transferred from the bank to the State Department. In her new role, she remains on the bank's payroll.

Even before the Riza issue arose, Wolfowitz, 63, was at bitter odds with some bank employees, who expressed doubt about his qualifications for the job because of his role as an architect of the Iraq war while he was a deputy secretary of defense.

On Monday and Tuesday, the special panel heard from Wolfowitz, Riza, and other present and former bank officials about Riza's promotion and pay raises that lifted her compensation to $193,590 from $133,000.

The bank's board of directors said the next step was for the panel to submit a report to the directors expeditiously. The panel met yesterday to work on its report.

The board could ask Wolfowitz to resign, signal it lacks confidence in his leadership, reprimand him, or take no action. There might also be a compromise under which Wolfowitz would be found to have acted in good faith and he would resign later.

Riza had worked at the bank for eight years when Wolfowitz arrived in 2005. She was moved to the State Department to avoid a conflict of interest. Her pay increases spurred allegations among staff that Wolfowitz showed favoritism to her.

Wolfowitz has maintained that he acted in good faith in helping to secure the compensation package. He said the package's details "flowed from the back-and-forth negotiating process" between the bank's human resources chief and Riza, who had her own counsel in the matter.

He said that he had received guidance from the bank's ethics officials and that they had access to all of the details of the package "if they wanted it."

The bank's former top ethics official, Ad Melkert, however, has said that the bank's ethics committee was not consulted and did not approve Riza's compensation package.

The bank's former general counsel, Robert Danino, also said he believed Wolfowitz acted "incorrectly" in helping arrange Riza's compensation package.

Wolfowitz's attorney, Robert Bennett, said in a letter yesterday to the special panel's chief, Herman H.F. Wijffels, that Wolfowitz would submit a "detailed response" today to Melkert and Danino.

Riza, meanwhile, has defended her pay as being within the same range as employees at the same grade level.

The World Bank

Created: July 1944.

Membership: 185 nations.

Mission: Providing financial and technical aid to developing countries.

Structure: Made up of two institutions -

The International Bank for Reconstruction and Development, which focuses on middle-income and creditworthy poor countries.

The International Development Association, which concentrates on the poorest countries.

2006 loans: $14.1 billion.

Employees: 10,000.

Headquarters: Washington.

SOURCE: The World Bank

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