WASHINGTON (Bloomberg) — World Bank President Paul Wolfowitz pledged to “cooperate fully” with an investigation by the bank’s board into a pay increase given to a female employee with whom he was romantically involved.The staff member, Shaha Riza, worked as a communications officer at the Washington-based lender. Three months after Wolfowitz became president in June 2005, she was transferred to the State Department under bank rules that forbid one partner to report to the other.

At the same time, she was given a raise that was twice as large as bank rules allow, according to the Staff Association, which represents bank employees.

Wolfowitz, who is preparing for the bank’s semi-annual meeting of member governments, said yesterday that he raised the issue with the board when he arrived at the bank. Later, on the advice of the board’s ethics committee, the former US deputy defence secretary said he “worked out an agreement” for the staffer’s transfer for the duration of his five-year term.

“Over the past few weeks, information regarding the external assignment of a World Bank staff member has raised concerns among some of you about upholding Bank Group rules regarding the rights, obligations, and fair treatment of all employees,” Wolfowitz, 63, said in a statement to employees released by the bank. “As president of this institution, I accept full responsibility for the actions taken in this case.”

The statement came four days after the bank’s executive board said it was looking into a “possible violation of staff rules in favor of a staff member closely associated with the president,” according to a statement posted on an internal World Bank web-site.

Riza, 52, couldn’t be reached for comment. World Bank spokeswoman Amy Stilwell said the lender would have no further comment.

The review by the board came in response to a complaint from the Staff Association. In an April 3 e-mail to bank employees, Staff Association chair Alison Cave said the group had been “inundated with messages from staff expressing concern, dismay and outrage”.

Wolfowitz’s tenure has been marked by discord. He has raised hackles among staff members over plans to beef up the bank’s presence in Baghdad, and his drive to fight corruption among the bank’s borrowers has prompted concern that aid intended to help the poor might be halted.

“There have been questions over whether he was still promoting the White House policies in bank lending to Iraq, in addition to questions over his poor management of the corruption issue and now this personnel issue,” said Edwin Truman, a former assistant secretary of the US Treasury for international affairs and now a senior fellow at the Peterson Institute for International Economics in Washington.

The timing of the personnel probe is “unfortunate,” Truman said, because it comes before next weekend’s meetings of the shareholders of the World Bank and its sister institution, the International Monetary Fund.

Riza remained on the World Bank payroll while working on assignment at the State Department. On the day of her move, she was given a promotion that “is supposed to be competitive, vetted and approved by the relevant sector board”, according to Cave. “This promotion clearly does not conform to the procedures.”

Riza’s promotion came with a 36-percent pay increase, to $180,000, according to the Government Accountability Project, a Washington-based non-profit organisation, which cited payroll data obtained from the World Bank. The following year she got a 7.5 percent raise, bringing her salary to $193,590.