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FT.com / Home UK / UK - Zumwinkel resigns amid tax probe

Zumwinkel resigns amid tax probe
By Gerrit Wiesmann and Richard Milne in Frankfurt and,Hugh Williamson in Berlin

Published: February 16 2008 02:00 | Last updated: February 16 2008 02:00

What looks set to become Germany's biggest-ever tax-evasion scandal claimed its first victim yesterday as Klaus Zumwinkel, a veteran of Germany's corporate elite, resigned as chief executive of Deutsche Post and chairman of Deutsche Telekom.

Alongside Mr Zumwinkel, people close to the investigation said state prosecutors had about 750 residents in their sights on suspicion of holding undeclared trusts in Liechtenstein, robbing the German exchequer of hundreds of millions of euros.

Prosecutors on Thursday said Mr Zumwinkel was being investigated on allegations he failed to pay taxes totalling €1m ($1.5m) on money he placed in a Liechtenstein trust. People close to events said it contained assets of €10m and that the tax liabilities could yet rise.

In a statement, the Bochum state prosecutors office simply said documents passed on to it from tax authorities provided "serious evidence" of tax fraud - mostly using trusts in Liechtenstein - by "several hundred" people living all over Germany.

People close to the investigation told the Financial Times: "We are sitting on a mountain of names, including several of international prominence akin to Mr Zumwinkel", although nothing currently points to heads of other blue-chip companies being involved.

The allegations led to outrage from politicians, who fear that the scandal will increase public dissatisfaction with the business establishment in the midst of a banking crisis, job transfers abroad and ire over executive pay levels.

Chancellor Angela Merkel said the scandal triggered by Mr Zumwinkel was "difficult and depressing" and that his resignation was "unavoidable". The scale of his alleged tax evasion was "beyond my imagination and beyond that of many people".

The coalition of conservative Christian Democrats and left-leaning Social Democrats must quickly find new top executives for the former postal and telecoms monopolies, in which Berlin still holds just over 30 per cent a piece.

Frank Appel, Deutsche Post logistics director, is seen as favourite to become chief executive. The leading candidate for Telekom chairman, Linde chief executive Wolfgang Reitzle, was reluctant to take the job, an official said yesterday.

Officials said Ms Merkel is likely to use a previously scheduled meeting in Berlin on Wednesday with Otmar Hasler, Liechtenstein's prime minister, to call on the tiny principality to ease its tight bank secrecy rules.

Peer Steinbrück, finance minister, told N24 TV that Mr Zumwinkel had admitted to tax evasion when questioned on Thursday. Mr Zumwinkel's legal and media advisers declined to comment.
Copyright The Financial Times Limited 2008