Washington ? World Bank President Paul Wolfowitz broke bank rules in arranging a hefty compensation package for his girlfriend, a situation that has caused a “crisis in the leadership” at the institution, according to a report released Monday by a special bank panel.

Wolfowitz described the report’s findings as “unfair and unwarranted.”

The special panel said the bank’s full 24-member board must consider whether Wolfowitz “will be able to provide the leadership” to ensure that the bank achieves its mission of fighting poverty around the world.

The board will ultimately decide Wolfowitz’s fate. Board members have discussed a range of disciplinary options. It could fire Wolfowitz, ask him to resign, signal that it lacks confidence in his leadership or reprimand him. Board members have been leaning toward an expression of no confidence or other tough language that would make it difficult – if not impossible – for Wolfowitz to stay on.

Treasury Secretary Henry Paulson, however, does not think the facts merit dismissal, according to department spokeswoman Brookly McLaughlin.

Wolfowitz said he acted in good faith in arranging Riza’s pay package. He has accused his critics of launching a “smear campaign” against him.

He is scheduled to make an appearance before the board late today. The proceedings are not public. A decision could come as early as today or Wednesday.

The controversy that has put Wolfowitz’s job in jeopardy involves his handling of the 2005 compensation pay package for his girlfriend, Shaha Riza, a bank employee.

The special bank panel concluded Wolfowitz’s involvement in the details of the package “went beyond the informal advice” given by the bank’s ethics committee.