Deutsche Post chief resigns amid scandal

Deutsche Post's chief executive Klaus Zumwinkel was forced resign yesterday amid a potentially devastating tax evasion scandal in which hundreds of wealthy Germans were suspected of illegally transferring up to €4bn (£3bn) into secret bank accounts in Leichtenstein.

Mr Zumwinkel, 64, who had led the partially state- run corporation for 18 years, was obliged to step down after state prosecutors announced that they suspected him of dodging some €1m in taxes over a period of 20 years.

The German government, which owns 31 per cent of Deutsche Post, said in a statement yesterday that it "saluted" Zumwinkel's decision to quit, adding, unusually, that it believed that he himself considered the tax fraud allegations to be true.

"We have the impression that Mr Zumwinkel thinks that they are," said Torsten Albig, a German Finance ministry spokesman. He appealed to others implicated in the fraud investigation to turn themselves in.

His resignation followed raids by tax fraud investigators on Mr Zumwinkel's Cologne villa and Deutsche Post's headquarters in Bonn. He was subsequently taken by police escort to the offices of state prosecutors leading the tax probe. Police removed several boxes of documents from his home.

Mr Zumwinkel, who until yesterday was regarded as a pillar of the German business establishment, is suspected of illegally depositing funds in foundations in the tax haven of Leichtenstein since the early 1990s.

The German Chancellor, Angela Merkel, yesterday described his departure as "unavoidable".

Peer Steibrück, the German Finance Minister, said the tax fraud investigation had already caused " considerable moral damage".

German media reports yesterday said that the raid on Mr Zumwinkel's home was part of a series of investigations into a tax evasion racket involving a figure that ranged between €300m and €4bn that had been illegally deposited in accounts in Leichtenstein, the principality bordering Switzerland and Austria.

A confiscated CD was said to have revealed the identities of hundreds of wealthy Germans suspected of illegally depositing sums in the Leichtenstein bank, LGT. "We've cracked the whole bank," one investigator was quoted as saying to Germany's Handelsblatt newspaper yesterday.

Further raids by investigators were expected across Germany over the weekend and on Monday. They said some 1,000 individuals were suspected of involvement. Bernd Junkers, a spokesman for LGT bank, said yesterday that his organisation has "taken note" of the allegations but was unable to comment further.

Mr Zumwinkel was the longest-serving head of a DAX company. He was credited with transforming Germany's postal service but sought to reduce the company's dependence on domestic mail by expanding its DHL express and logistics divisions. However, he had recetly struggled to reverse losses at DHL's Express business in the US.

Mr Zumwinkel was sharply criticised late last year after he sold 200,000 share options worth €2.24m immediately after Deutsche Post's introduced a minimum wage for postal workers which caused share prices to rise sharply. The move, in effect, protected Deutsche Post from lower-cost competition.

His contract was due to end in mid-2008. Frank Appel, Deutsche Post's logistics and mail chief, and John Allan, its finance director, have been tipped as potential sucessors.

Politicians reacted with shock to Mr Zumwinkel's resignation, and growing evidence of a major tax fraud.

Briton eyes top job in Germany

Klaus Zumwinkel's departure paves the way for an unprecedented event in German businesss – the appointment of a Briton to the top job at a Dax 30 company. John Allan, Deutsche Post's chief financial officer, pictured right, is widely tipped to take over as chief executive once Mr Zumwinkel formally steps down. Mr Allan joined Deutsche Post in 2005 following its takeover of Exel, the UK logistics group where he was chief executive. While it was initially assumed that Mr Allan would step down from the company once the integration of Exel was completed, he was instead promoted to the CFO's role last year, as Deutsche Post sought to shore up flagging investor confidence in the company. However, Mr Allan's accession is not assured. While he is understood to have the support of leading institutional investors in Deutsche Post, he faces a serious rival in Frank Appel, head of the company's logistics division. Dr Appel has support from the German government, which owns a third of the company, as well as from leading trades unions.