The Wall Street Journal-20080215-Probe of CEO Adds to Deutsche Post Woes- German Prosecutors Question Zumwinkel In Tax-Evasion Case
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Probe of CEO Adds to Deutsche Post Woes; German Prosecutors Question Zumwinkel In Tax-Evasion Case
Full Text (572 words)German prosecutors are investigating whether Deutsche Post AG Chief Executive Klaus Zumwinkel, one of the country's best-known and most powerful executives, evaded taxes.
The criminal probe heightens uncertainty at Deutsche Post, which lost its domestic-mail monopoly last month and is in the midst of a major strategic review. The company is mulling whether to keep its German banking business and trying to restructure the money-losing U.S. arm of its global express-package business, DHL.
The 64-year-old Mr. Zumwinkel has led Deutsche Post since 1990, longer than any other sitting chief executive at Germany's largest public companies. His contract is set to expire in November.
He also sits on the nonexecutive supervisory boards of four other large German companies, including telecommunications heavyweight Deutsche Telekom AG, where he is the chairman.
Prosecutors in the western city of Bochum said Mr. Zumwinkel was detained yesterday and questioned as a suspect in a tax-evasion probe. He was released after giving a statement and putting up a security deposit. The executive's home also was searched.
Prosecutors said they suspect Mr. Zumwinkel invested in a Liechtenstein foundation to avoid paying about 1 million euros ($1.5 million) in taxes. The probe also involves other unnamed individuals, prosecutors added in a statement. Deutsche Post said Mr. Zumwinkel's office at the company's headquarters in Bonn had been searched.
It added in a brief statement that the company's management board, including Mr. Zumwinkel, "is fully functional and continues its business as usual." It declined to make him available for comment.
It has been widely expected that Mr. Zumwinkel will retire from Deutsche Post later this year, although he has said he won't announce his plans until the summer.
Mr. Zumwinkel helped turn a money-losing domestic-mail company into a profitable postal, logistics and banking conglomerate with operations in roughly 200 countries as the government gradually rolled back Deutsche Post's domestic-mail monopoly. He also directed the company's privatization, including an initial public offering of shares in 2000.
But Deutsche Post's share price barely has risen since the IPO, and some investors have long complained that Mr. Zumwinkel and his management team have been too focused on acquisitions instead of paying more attention to profit margins. Mr. Zumwinkel also triggered a public outcry in December when he exercised 4.7 million euros in stock options amid a political debate over executive compensation and minimum wages.
The criminal probe of Mr. Zumwinkel's personal financial dealings heightens speculation about his potential successor at a critical juncture. Deutsche Post said last month it is exploring strategic options to turn around its U.S. express business, which has lost billions of dollars this decade as it struggles to compete against United Parcel Service Inc. and FedEx Corp. on their own turf.
It recently signaled it could sell its controlling stake in Deutsche Postbank AG, Germany's largest retail bank, with nearly 15 million customers. Deutsche Bank AG and Commerzbank AG in recent days have reiterated their interest in buying Postbank if it were put on the block.
Succession talk at Deutsche Post in recent months has focused on Frank Appel and John Allan, two management-board members. Mr. Appel, a 46-year-old protege of Mr. Zumwinkel, oversees the logistics and international-mail operations. He has been a management-board member since 2002 and helped carry out the company's expansion drive in recent years.
Mr. Allan, 59, joined the management board in 2006 after Exel, the large United Kingdom logistics company he headed, was acquired by Deutsche Post.
