The scandal has topped a long list of complaints within the World Bank about Wolfowitz's managerial style, triggering an open revolt from staff. Some of the institution's top managers have in recent weeks openly called for Wolfowitz to resign.
Hundreds of World Bank employees met in an auditorium Monday, according to The New York Times, to hear a top bank official say that with Wolfowitz as president, the bank's anti-poverty agenda was at risk because European countries refused to give financing.
In April, German Chancellor Angela Merkel, as European Union chief, called for Wolfowitz to resign, saying she reflected the majority view of European countries.
Highlighting the souring relationship between Wolfowitz and the World Bank's board of directors, his top aide, Kevin Kellems, resigned Monday.
Kellems had moved with Wolfowitz from the Pentagon to the World Bank, serving as a senior adviser and director of external relations strategy at the bank.
In a statement to the press, Kellems cited poor working conditions inside the bank for his departure and said he is looking for new opportunities.
"Given the current environment surrounding the leadership of the World Bank Group, it is very difficult to be effective in helping to advance the mission of the institution," Kellems' statement read.
Critics say that Kellems and another top Wolfowitz aide, Robin Cleveland, were considered by bank staff to be more loyal to Bush administration policy than to the international development mission of the bank.
Wolfowitz had accused his critics of trying to undermine his leadership and discredit his anti-corruption campaign.
"The goal of this smear campaign, I believe, is to create a self-fulfilling prophecy that I am an ineffective leader and must step down for that reason alone, even if the ethics charges are unwarranted," read a statement by Wolfowitz to the board of directors in April.
Taking on the job in 2005, he vowed to rid developing countries receiving World Bank aid of government corruption by bypassing their administrations.
However, some critics said Wolfowitz's plans kept aid from getting to countries that needed it.
Wolfowitz garnered embarrassing headlines from around the world in January when he visited a mosque in Turkey. Shoeless, Wolfowitz was photographed with a hole in his sock so large his toe poked through it.
Many of Wolfowitz's early critics were dismayed that an official so closely tied to the Iraq War would lead the world's anti-poverty institution.