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Deutsche Post CEO Resigns Amid Tax Evasion Probe

The tax evasion scandal that has led to the fall of one of Germany's most prominent business people, Deutsche Post CEO Klaus Zumwinkel, could drag down hundreds of prominent Germans, a government spokesmen said.

Klaus Zumwinkel

Zumwinkel offered his resignation to Deutsche Post's supervisory board

As the police investigation continues and widens into allegations of tax fraud involving the Deutsche Post chief executive, Klaus Zumwinkel offered his resignation to the supervisory board of the company, German Finance Ministry spokesman Torsten Albig said on Friday, Feb. 15.

"The German government today accepted Mr. Zumwinkel's offer to resign," Chancellor Angela Merkel told reporters in Berlin. "I consider this to be in unavoidable step considering what has happened."

Zumwinkel, who is suspected of evading 1 million euros ($1.5 million) worth of taxes through a foundation in Liechtenstein, also stepped down from his position on the supervisory board of Deutsche Telekom, the government spokesmen indicated.

"In a large number of cases, key personalities from our country sought to avoid their duty of solidarity via taxation by practicing fiscal evasion to Liechtenstein," a finance ministry spokesman told reporters

The daily Sueddeutsche Zeitung said in editions to appear Saturday that some 3.4 billion euros was involved.

Albig urged those involved to file corrected returns detailing their tax evasion - a device known as "self-reporting" under German law and aimed at allowing offenders to reduce possible penalties.

Klaus Zumwinkel

The future looks bleak

The Financial Times Deutschland wrote that it was unlikely that Zumwinkel would take a seat on the Deutsche Post group's supervisory board, as would normally have been the case when his contract expired in November. He has been head of Deutsche Post for 18 years.

Corporate elite under scrutiny

The issue of tax breaks, massive salaries and corporate "extras" for high-powered German executives has come to a head in recent months, with increasing numbers of politicians joining in the growing public furor over the perceived immunity and privileges enjoyed by the country's business elite.

The German population, which places a high value on social and financial probity, was already shocked last year by scandals at two industrial titans, the engineering giant Siemens and the biggest European car maker, Volkswagen.

German Finance Minister Peer Steinbrueck admitted the investigation was damaging the already shaky state of public confidence.

"The moral damage is considerable -- just as it was with his dealing with his share options," Steinbrueck told a group of journalists on his way into parliament.

Zumwinkel is led away by investigators in the company of his attorney

After being held by police, Zumwinkel was later released

In a controversial move, Zumwinkel sold 200,000 share options worth 2.24 million euros in December just after Deutsche Post's share price rose following a deal to introduce a minimum wage that would affect lower-cost rivals. He later said his actions were a regrettable mistake.

"If the public has something like this as a role model then they'll start having doubts about this economic and social system," Steinbrueck added. "I didn't think this was possible."

Peter Struck, the leader of the Social Democratic parliamentary faction, added: "When someone has so much money and nevertheless believes there is a need to hide money from the state, then a lot of people will believe there is a lack of justice. The ordinary taxpayer has to pay his taxes to the tax office."

Merkel's spokesman, Ulrich Wilhelm, said the chancellor regretted the fact that Zumwinkel had not made a public statement on his position since police raided his home and office at dawn on Thursday.

Wilhelm said the highly publicized scandal would be discussed when Merkel meets Liechtenstein Prime Minister Otmar Halser on Wednesday.

German police searched Zumwinkel's villa in western Cologne and Deutsche Post's headquarters in Bonn as the tax probe became public.

The chief executive was taken under police escort from his home in the upmarket Marienburg part of Cologne to the prosecutors' office in the city of Bochum some five hours after the raids. Investigators also removed boxes from the house.

After Zumwinkel had posted what prosecutors described as "a not inconsiderable bond," an arrest warrant was lifted and he was allowed to leave.

Investigation may unearth other big names

A tax advisor prepares to stamp some tax returns

Whose tax returns will be next to come under scrutiny?

The business daily Handelsblatt said the raids were part of a series of probes into tax evasion totaling around 10 million euros deposited in Liechtenstein, the principality bordering Switzerland and Austria, and that other raids would follow across Germany.

Hundreds of suspects had been uncovered by investigating the activities of LGT, a Liechtenstein bank. "We've cracked the whole bank," one investigator told Handelsblatt.

There is speculation that more of Germany's rich and powerful business leaders may be involved.

LGT spokesman Bernd Junkers in Liechtenstein told Reuters that the bank, controlled by the principality's princely family, had taken note of the Handelsblatt report but could not comment in detail further.

From savior to pariah

The Deutsche Post tower in Bonn

The tower that Klaus built

The longest-serving chief of a DAX company, the Frankfurt blue-chip index, Zumwinkel was credited with transforming the postal service into a world leader in logistics, with more than half a million employees, and a German leader in retail banking via its extensive Postbank network.

But he had also been sharply criticized for selling the large stock holding after the imposition of a minimum wage for postal workers boosted Deutsche Post shares last year following a fight for the unprecedented German legislation, which, in effect, protected Deutsche Post from lower-cost competition.

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