Global Economics

Deutsche Post CEO Resigns in Tax Probe


The head of the German postal service offers to resign a day after the authorities raided his home and office as part of an investigation into tax evasion

Klaus Zumwinkel, 18 years at the helm of Deutsche Post, has offered to resign a day after the authorities raided his home and office in connection with charges of massive tax evasion.

A Finance Ministry spokesperson confirmed on Friday that Zumwinkel had presented his offer to resign to the company's supervisory board and that the full board would be given the offer on Monday. Chancellor Angela Merkel's spokesman Ullrich Wilhem told reporters that "the federal government welcomes the offer of resignation." He added that Merkel was critical of the way the Deutsche Post CEO had dealt with the allegations and that she felt it would have been in the interests of the company's employees, and also those of many citizens, if he made a statement on the matter.

The federal government is the company's largest shareholder and had been pushing for his resignation.

Earlier on Friday Kurt Beck, leader of the Social Democrats (SPD), the junior partner in the ruling coalition along with Merkel's conservatives, suggested that Zumwinkel had confessed to the allegations that he had evaded taxes by placing money in a foundation in Liechtenstein. "After, according to my knowledge, he admitted to the allegations, one can only say that either he step down immediately or be immediately let go." Speaking to reporters, Beck added that he hoped no deal would be made with the man who has been one of Germany's leading executives.

Neither Zumwinkel's lawyers nor the Bochum prosecutor's office, who are dealing with the case, have confirmed that a confession was made.

The authorities raided the 64-year-old manager's villa near Cologne and the Deutsche Post headquarters in Bonn on Thursday as part of an investigation into allegations that Zumwinkel evaded about 1 million euros ($1.45 million) in taxes via investments in Liechtenstein. He was taken to the Bochum prosecutor's office for questioning and released later on Thursday afternoon.

Zumwinkel had already attracted criticism last December after selling some of his own shares in Deutsche Post just as the government approved a minimum wage for the postal industry (more...), forcing the company's competitor PIN Group to say it would lay off up to 1,000 workers. The measure came just ahead of the liberalization of the postal industry on Jan. 1, 2008. The CEO later conceded that the "timing was wrong."

On Friday the Finance Ministry also confirmed that the tax authorities were not satisfied with looking into Zumwinkel's financial affairs. In what looks increasingly like a huge tax scandal, hundreds of people are being investigated for tax evasion via Liechtenstein's LGT bank, spokesman Torsten Albig told reporters. "They are well known and not well known, but all are people in the higher income brackets," he said. In fact as many as 125 separate investigations are to be launched next week, involving as many as a thousand people. Conservative estimates put the sums involved at around 300 million euros, but the amount could reach as high as a staggering 4 billion euros.

On Friday the German newspapers weigh in on the latest German business scandal.

The Financial Times Deutschland writes:

"Germans demand as much of their business leaders as of their politicians. But whereas ministers often lose their positions if there are even tiny irregularities, managers seem to view misdemeanors in companies or in their private finances as venial sins. And that is despite the fact that after the Mannesmann affair, the Siemens scandal and the VW debacle it must be clear that the public will react sensitively to anything unsavory."

"That is justified: Company bosses act as role models. Irreproachable behavior is a prerequisite for their jobs."

"Zumwinkel has now become a suspect.... Thursday's raid damaged his reputation. He now wants to fight for his honor. ... It will be stroke of luck for him and his career if the investigators were so negligent as to base their suspicions on a thin factual basis. Hard to imagine -- but possible."

The conservative Die Welt writes:

"Is Germany's business elite in the process of gambling away any kind of support from society? It seems that way at least. Whether Volkswagen, Siemens or Düsseldorf's IKB bank -- the cases of significant to complete failure are building up in an alarming manner. The allegation of tax evasion against Deutsche Post's long-serving CEO Klaus Zumwinkel gives the debate a whole new dimension: This is not just any manager. No, Zumwinkel represents more than any other manager the close ties between the state and the economy. He has recently used his political influence to ensure Deutsche Post numerous privileges."

"His downfall would be grist to the mill for the critics of capitalists and the left-wingers in the country."

"However, politicians should be careful about putting all managers and companies into the same boat. The failures of a few individuals are in contrast to the thousands of companies and managers who are doing excellent work. The German economy is in better shape than it has been for years. That would not have been possible if the top bosses had acted as a caste of corrupt deadbeats."

The left-leaning Die Tageszeitung writes:

"It's not every day that the CEO of DAX listed company is led away by the police on suspicion of tax evasion -- and in this case it was the Deutsche Post boss who always seems serious and successful."

"The surprise, however, is not the allegation, but the fact that it is so seldom heard. After all, tax evasion is part of German normality. It is estimated that 300 billion euros have escaped the tax office by being placed abroad, to the detriment of the collective good. But normally these crimes by the rich and powerful stay hidden and are rarely mentioned."

"The federal states hope that by being lax in pursuing tax offenders they will attract or keep investors and so tax investigations are financially and politically thwarted."

"The real scandal here is not that a company boss evaded tax, but that the politicians do so little against it -- and prefer to take on Hartz IV welfare recipients rather than the country's business elite."

The center-right Frankfurter Allgemeine Zeitung writes:

"(Zumwinkel) always seemed to be the clean man among the managers, the one who called for morality and responsibility. He was unparalleled in his understanding of how to use his closely connected network of the best contacts in politics, trade unions and managers for Deutsche Post and for himself."

"Deutsche Post cannot wait for the end of the investigation. Zumwinkel's reputation with the grand coalition is already damaged. After he agreed on a minimum wage with the trade unions ... the shareholders celebrated on the stock exchange, Zumwinkel cashed in, sold shares and made a million euros in profit.... Now his reputation is ruined."

"At Deutsche Post the Zumwinkel era is coming to a premature end. The images of the raid were followed by strong gains for the Post shares. The shareholders are expressing the hope that his successor will follow the wishes of the markets more closely."

The center-left Süddeutsche Zeitung writes:

"It is like a litany of disasters: Managers with frivolous salaries, supervisory boards who don't supervise, state banks that don't care about the common good, company boards that care more about their share packages than about their employees."

"All the present discussions about Zumwinkel's tax evasion lead to comments about how 'all of them' are all the same. Now public opinion is seeing a failure of the system in the individual misdemeanors."

"Now the Zumwinkel case is confirming many citizens' general suspicion of politics and business: 'All of those up there lie and cheat.'"

"Behind all this outrage, the justified and unjustified criticism of politicians and top managers, there hides a desire for role models and values. A desire to have something to hold on to. Zumwinkel's case affronts this desire. Security is not just a feeling that has to do with laws, police and the legal system. It is the result of a basic trust in the country's leadership figures. This basic trust is being destroyed by people like Zumwinkel."


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