- The Washington Times - Wednesday, October 22, 2008

International Monetary Fund chief Dominique Strauss-Kahn‘s reputation as a womanizer may have finally caught up with him, but economists and financial analysts expect the Frenchman to escape the fate of Paul Wolfowitz, who lost his job as head of the World Bank last year under similar circumstances.

Although Mr. Strauss-Kahn has admitted an affair with an employee, there is no evidence so far of favoritism, which Mr. Wolfowitz was found to have engaged in, though a report from an independent probe is not expected until later this month.

“We don’t know all the facts, but on the surface of it, there are [some] differences,” said Terry Miller, director of the Center for International Trade and Economics at the Heritage Foundation. “Unless something more came to light, I don’t think he will resign. But I’ll leave it to the member states to decide.”

Mr. Wolfowitz was forced to step down after it was established that he had intervened to secure promotions for a female companion, Shaha Riza, which some employees considered unmerited. He was also found to have influenced severance payments for Ms. Riza when she left the bank.

So far, there have been no similar charges proven in Mr. Strauss-Kahn’s case. But his monthlong affair with Hungarian economist Piroska Nagy last year was serious enough for the IMF board to hire the Washington firm Morgan, Lewis & Bockius LLP to carry out an investigation.



Mr. Strauss-Kahn has been cooperating, which was not the perception of Mr. Wolfowitz’s behavior at the time of his probe, said Steven R. Weisman, who until recently covered the World Bank and the IMF for the New York Times.

“The impression in the Wolfowitz case was that he had been more involved in the arrangements” with Ms. Riza’s severance package, and that “he didn’t level with people about how that happened,” said Mr. Weisman, who is now a public policy fellow at the Peterson Institute for International Economics.

At the time the scandal broke, there was widespread dissatisfaction with Mr. Wolfowitz’s leadership at the bank and a perception that he was “taking the organization in a direction that most people there didn’t approve,” Mr. Weisman said.

There is no such sentiment against Mr. Strauss-Kahn, analysts said. They noted that his womanizing reputation long preceded his appointment last year and was no secret in France, where he was finance minister.

“If he broke the IMF’s code of sexual conduct, he’d have to resign, but we don’t know that,” said Michael Mussa, senior fellow at the Peterson Institute.

He said the issue is whether Mr. Strauss-Kahn “pressured a subordinate into a relationship,” not the mere existence of the relationship. Another issue is whether he “used his capacity to favor or disfavor a member of the staff for reasons related” to the affair.

“We haven’t seen any sign that she was in any way coerced,” Mr. Mussa said.

Philippe Aghion, an economics professor at Harvard University, said that, unlike Mr. Strauss-Kahn, Mr. Wolfowitz was disliked by many at the bank for his role in promoting the Iraq war as deputy secretary of defense during President Bush’s first term.

Mr. Aghion also noted “cultural differences” between France and the United States.

“It’s obvious that in the U.S., sexual affairs at the workplace and unfair preferences linked to them are taken much more seriously than in France,” he said. “It’s a question of culture.”

On Monday, Mr. Strauss-Kahn publicly apologized for “an error of judgment” but insisted that he had not abused his position. His wife, French television host Anne Sinclair, wrote on her blog: “For my part, this one-night stand is now behind us; we have turned the page.”

Ms. Nagy, who left the IMF in August and now works at the European Bank for Reconstruction and Development in London, is separated from her husband, Mario Blejer, a former Argentine central bank governor and an adviser to the Bank of England.

Her lawyers have said that she left her job in Washington on her own and received a standard severance package for employees at her level. The IMF recently eliminated 380 positions under a cost-cutting plan.

Diplomats, analysts and IMF officials said that the current probe could not have come at a worse time - in the middle of a financial crisis that has put the spotlight back on the fund after a decade during which it almost faded into irrelevance.

“The IMF needs to be concentrated on its work, and this episode is a distraction both for the fund and the managing director,” Mr. Miller said. “They need to keep focus on the financial crisis.”

The World Bank, which provides development assistance to poor nations, is usually headed by an American - currently Robert B. Zoellick, a former deputy secretary of state. The IMF, which monitors world financial trends and provides emergency loans to countries in financial crisis, is led by a European.

Mr. Strauss-Kahn was nominated by the European Union under pressure from French President Nicolas Sarkozy, though the two men belong to different political parties. Mr. Strauss-Kahn, a Socialist, is viewed as a potential challenger to Mr. Sarkozy in the 2012 election.

On Tuesday, the IMF said Mr. Strauss-Kahn was cleared of a charge that he improperly influenced the hiring of a family friend for a temporary internship at the lending institution. Spokesman William Murray said that an internal investigation found “no evidence of favoritism” in the hiring of the intern, Emilie Byhet.

Anne-Laure Buffard contributed to this article.

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