WASHINGTON (Reuters) - World Bank President Paul Wolfowitz broke staff rules when he intervened directly in the personnel matters of his girlfriend even though he said he wanted no part in a deal to transfer her outside the bank, the head of a bank ethics panel at the time said on Tuesday.

World Bank President Paul Wolfowitz looks down during a news conference at the European Union headquarters in Brussels May 2, 2007. REUTERS/Francois Lenoir

In a statement to a bank committee examining Wolfowitz’s role in arranging a high-paid promotion for his girlfriend, the former official, Ad Melkert, said it would have been better if Wolfowitz had instructed one of his deputies to handle the transfer for Shaha Riza, to avoid conflict of interest issues.

“Contrary to what the staff rules allowed for, Mr. Wolfowitz’s proposal explicitly insisted on the possibility of maintaining professional contacts with Ms. Riza,” said Melkert, who has been at the U.N. Development Program since March 2006.

“He kept that opinion even after grudgingly following the advice by the ethics committee. Thus, Mr. Wolfowitz denied that the general staff rules should be applicable to his particular situation,” Melkert said.

In a late-night statement, the World Bank’s overseeing board of directors, said the special committee had completed interviews on the matter and would now draw up a report.

The board expressed concern over the impact of the controversy on the poverty-fighting institution, which has been paralyzed since the issue exploded into the open a month ago.

“The executive directors remain very concerned about the impact on the work of the bank group and are committed to the earliest possible resolution of the matter,” the board said.

In his statement, Melkert said he decided to speak out when those speaking for Wolfowitz “were intent on continuing to spread erroneous information” about the ethics panel.

Wolfowitz, an architect of the Iraq war when he was U.S. deputy defense secretary, has accused his critics of conducting a smear campaign. He contends he followed guidance offered by the bank’s ethics officers in arranging Riza’s promotion and transfer to an outside job at the State Department.

Wolfowitz said on Monday that the ethics panel would not accept his recusal and “told me over my strong and repeated objections” to address the issue.

But Melkert said the president of the World Bank -- and not its board or committees -- is responsible for staff matters.

GOOD FAITH ACTIONS

Melkert, the Dutch government’s representative to the bank’s board at the time, vowed he personally acted in “good faith” in trying to resolve the issue, saying he wanted to save the institution from “a confrontational and embarrassing situation” over its newly minted president.

Melkert said the ethics panel was not consulted, nor did it approve, the terms and conditions of Riza’s transfer, which included a “large initial pay increase.”

Meanwhile, Wolfowitz continued to face calls for his resignation.

Senate Finance Committee Chairman Max Baucus, a Democrat from Montana, said Wolfowitz should bow out before the bank’s credibility was further damaged by the controversy.

“It would be my hope, frankly, that Mr. Wolfowitz realizes that discretion is the better part of valor and finds a graceful way to no longer be president of the bank,” Baucus told reporters at a state economic development conference.

Without the “trust of the world ... it is very difficult for the bank to function as an institution,” he said.

In calling for Wolfowitz to step down, Baucus joined other prominent Democrats, including presidential candidates Bill Richardson, a former U.N. ambassador, and John Edwards, a former U.S. senator and 2004 vice presidential nominee.

The controversy has raised questions over whether having only Americans head the World Bank should give way to a more transparent system based more on qualifications for the job.