(FORTUNE Magazine) – James Wolfensohn is a modern-day Santa Claus. The white-maned president of the World Bank has visited dozens of countries in his own private jet, bringing money--or rather, the promise of money--wherever he goes. With its $200 billion loan portfolio, the World Bank plays sugar daddy to the 80% of the earth's population that inhabits impoverished nations; last fiscal year alone, it disbursed $25 billion.

World Bank critics have long complained about its bureaucracy and alleged corruption, but Wolfensohn wants to be remembered as Mr. Clean. He recently rocked the institution by hiring auditors to look for possible embezzlement and bribery among staffers around the globe. "We had to be absolutely certain that we held ourselves to the highest standards," he said in a statement.

Which makes it surprising, to say the least, to learn that Wolfensohn owns 200,000 shares of Bankers Trust--a stake that is rife with potential for conflict of interest. Consider: Bankers Trust last year was among the top 25 institutions that dealt with World Bank short-term deposits, was one of the top 20 involved in its securities trading, and was one the top five involved in its futures trading and currency exchanges. The World Bank's activities could significantly influence the creditworthiness of some of the nations that do business with Bankers Trust. But although Wolfensohn has owned the shares, worth some $23 million, since 1996, it was only last week--when FORTUNE inquired--that Wolfensohn decided to dispose of all his BT holdings.

Wolfensohn cannot be unaware of the importance of perceptions; he's been in the public eye for decades. As a partner in Salomon Brothers he helped engineer the bailout of Chrysler, and over the years he has been a player in such high-profile organizations as the Kennedy Center and Carnegie Hall. When he joined the World Bank in 1995, Wolfensohn sold his ownership in his banking firm to his partners at book value specifically to avoid the appearance of self-dealing, even though he wasn't required to do so. (The World Bank president, who is recommended by the U.S. President and elected by the World Bank board, doesn't face the same strictures as U.S. officials.) But when Bankers Trust bought his former firm in 1996, the Australian-born Wolfensohn received 614,000 BT shares, thanks to a provision in his sale agreement.

Wolfensohn's decision to sell the rest of his Bankers Trust shares is a change in plans. When FORTUNE first called him, Wolfensohn said he intended to reduce his stake to 100,000 shares--and only to diversify his portfolio, not to avoid the appearance of impropriety. The bank didn't require him to set up a blind trust, and he feels he's done nothing wrong. In an unfortunate choice of words, he said, "I've gone out of my way to be whiter than white."

Ibrahim Shihata, the World Bank's general counsel, remembers the issue differently. Shihata said that when he learned of Wolfensohn's BT stake last year, he told Wolfensohn and his portfolio manager that the entire stake had to be sold by the end of 1998 to avoid the appearance of conflict. When told that Wolfensohn intended to maintain a 100,000-share stake in Bankers Trust, Shihata responded, "I hope personally that he wouldn't." He explained that even though Wolfensohn doesn't personally decide how much work Bankers Trust does for the World Bank, "the appearance of conflict may be there." He also said that he mentioned to Wolfensohn when he first came to the bank that as an option he might establish a blind trust, but Wolfensohn opted not to.

Wolfensohn and his portfolio consultant, Robert Bertoldi of Jackson Hole Management, said they didn't recall Shihata's admonition; they now say they will comply. "I will be out of [the stock] by the end of the year," Wolfensohn said. "I'm quite prepared to sell the bloody stock now to get rid of it. The last thing I need is this bloody shit right now.... I'm not actually a moneygrubbing son of a bitch." On the contrary, he said, "I came here with the best motives in the world: to try to be a great contributor to the world for five years. Being in public life is bloody hard."

--Jeffrey H. Birnbaum