World Bank President Paul Wolfowitz acknowledged Thursday that he erred in helping a close female friend get transferred to a high-paying job, and said he was sorry.
His apology did not ease concerns among the bank's staff association, which wants him to resign.
The growing controversy has overshadowed major development meetings this weekend and is raising fresh questions about whether Wolfowitz, an American, will stay on the job.
At issue are the generous compensation and pay raises of a bank employee, Shaha Riza, who has dated Wolfowitz. She was given an assignment at the State Department in September 2005, shortly after he became bank president. The situation has brought accusations of favoritism and cries of outrage from the bank's staff association.
"In hindsight I wish I had trusted my original instincts and kept myself out of the negotiations," Wolfowitz said. "I made a mistake, for which I am sorry."
The World Bank Group Staff Association is demanding that Wolfowitz step down.
"The president must acknowledge that his conduct has compromised the integrity and effectiveness of the World Bank Group and has destroyed the staff's trust in his leadership," the association said Thursday. "He must act honorably and resign."
Wolfowitz said he met Thursday with the World Bank's board and that members were looking into the matter. He declined to discuss what actions, if any, the board could take.
"I proposed to the board that they establish some mechanism to judge whether the agreement reached was a reasonable outcome," he said, referring to Riza's transfer. "I will accept any remedies they propose."
Wolfowitz dodged a question about whether he would resign over the controversy. "I cannot speculate on what the board is going to decide," he said.
A World Bank spokeswoman would not comment on what range of options the board could consider and did not know when the board would finish its deliberations on the matter.
A White House spokesman said the Bush administration supports Wolfowitz.
"Of course President Wolfowitz has our full confidence," said spokesman Tony Fratto. "His leadership is helping the bank accomplish its mission of raising living standards for poor people throughout the world. In dealing with this issue, he has taken full responsibility and is working with the executive board to resolve it."
Timothy Adams, the Treasury Department's undersecretary for international affairs, declined to say whether the United States - the bank's largest shareholder - continues to support Wolfowitz's presidency. Adams said the prudent course of action was to let the board handle the matter. "There is a mechanism in place," he said.
As to Wolfowitz's apology, Adams said: "I appreciate the words he put forward."
The Government Accountability Project, a watchdog group, estimated Riza's salary at $193,590 (EUR 143,750) as a result of the job transfer and pay raises. The group says she was paid by the World Bank and remains on the bank's payroll. The World Bank would not comment on Riza's compensation, citing confidentiality concerns.
"I take full responsibility for the details," of the job transfer, Wolfowitz said. "I did not attempt to hide my actions nor make anyone else responsible," he said.
The job change was made, he said, to avoid a conflict of interest when he took his post at the World Bank, where Riza already worked.
World Bank rules bar employees from supervising anyone with whom they had a personal relationship.
"I took the issue to the Ethics Committee and after extensive discussions ... the committee's advice was to promote and relocate Ms. Shaha Riza," Wolfowitz said.
"I made a good faith effort to implement my understanding of that advice," he explained. "And it was done in order to take responsibility for settling an issue that I believe had potential to harm the institution."
Riza worked as a communications adviser in the bank's Middle East Department before she was detailed to the job at the State Department.
The State Department says Riza left in September 2006 and now works for Foundation for the Future, an international organization that gets some money from the department.
The World Bank's stated mission is to fight poverty and improve the living standards of people in developing countries. It lends about $20 billion a year for various projects.
For his part, Wolfowitz, who took the bank's helm on June 1, 2005, asked for "some understanding."
Of the eruption, Wolfowitz said: "Not only was this a painful personal dilemma, but I also had to deal with it when I was new to this institution, and I was trying to navigate uncharted waters."
President George W. Bush appointed Wolfowitz - a main architect of the Iraq war when he served as deputy defense secretary. That appointment was greeted with protests by international aid and other groups. Critics worry that he might try to use the bank to help America's allies and punish its enemies.
When asked about those fears on Thursday, Wolfowitz said: "We're not playing favorites with anybody."