The president of the Inter-American Development Bank, Mauricio Claver-Carone, allegedly threatened to "burn" or "bring" the bank down over an investigation into a rumored affair he had with a female staffer, according to an outside report.
Why it matters: In response to the confidential report from the law firm Davis Polk, which was commissioned by the bank, there is growing momentum among the bank’s shareholders to oust Claver-Carone, according to a person familiar with the matter.
- Claver-Carone, a former Trump National Security Council official and the first American to lead the bank, denies the accusations that surfaced in March and claims the report clears him of the anonymous allegations.
- At 30%, the U.S. is the bank’s biggest shareholder. The Biden administration wants to use the IADB to counter China’s growing influence in the Western Hemisphere and help the region rebound from COVID-19.
What they're saying: "The United States takes all ethics allegations at the international financial institutions (IFIs) very seriously, and we strongly support whistleblower protections," a Treasury spokesperson said.
- "We also support a prompt and fair process for assessing such allegations. Treasury is closely reviewing the report and is withholding further comment until that review is complete."
Driving the news: Claver-Carone, who is currently in New York for the United Nations General Assembly, expects to address the 48 members of the bank's board by Friday and provide a formal response to what he believes are factual inaccuracies in the investigation.
- The report concluded there is "no direct evidence" of an existing romantic relationship between Claver-Carone and the woman he hired, but it does suggest the two "were in a romantic relationship prior to joining the bank." The two worked together in the Trump administration.
- But the report accuses them of failing to fully cooperate with the investigation and claims his actions inside the bank had a "chilling effect" on employees — with some witnesses expressing fear of retaliation, according to the report, which cited more than 10 employees.
- The "failure to cooperate" by Claver-Carone and the staffer "can be viewed as circumstantial evidence of a current intimate relationship," according to the report.
- The report was first presented to 14 members of a special committee to look into the matter Monday, Reuters first reported.
The other side: Claver-Carone strenuously denies the allegations that he has — or has had — an intimate relationship with the woman, according to a person familiar with his thinking. (She is identified in the report but Axios is withholding her name.)
- The report did not determine that Claver-Carone misused bank funds, nor did it find any evidence of financial wrongdoing or abuse.
- His supporters have long called the investigation a political smear that targeted Claver-Carone, a long-time anti-Castro activist, for wanting to reform the bank.
The big picture: The IADB, along with the World Bank and the International Monetary Fund, are all D.C.-based multilateral institutions that the U.S. uses to fight poverty, help struggling economies and promote good governance.
- The Biden administration wants them to focus more on climate change and to use their loan facilities to counter China’s Belt and Road initiative, which has caused financial distress in some emerging economies.
- Claver-Carone has focused on increasing transparency, anti-corruption standards and moving the bank away from Chinese financing. He has also made fighting climate change a priority.
Flashback: Last year, the Treasury Department helped engineer a change at the No. 2 position at the International Monetary Fund without the White House’s consent, which stunned senior officials, Axios reported in December.
Go deeper: By tradition, the White House chooses the president of the World Bank Group and the European Union decides who will lead the International Monetary Fund. The U.S. picks the No. 2 at IMF.
- But the terms of those positions don’t overlap with the U.S. presidential cycle, and White House officials tend not to fire holdovers from the previous administration in part not to upset the delicate global balance on who gets to pick.
- When former President Trump put forth Claver-Carone as the first American to lead the IADB, some Latin American countries grumbled. But he was ultimately approved by the board.
