Handelsblatt investigation

Deutsche Post Foundation Under Scrutiny

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Is Deutsche Post bending Germany's non-profit rules to lobby secretly against labor market reforms? A Handelsblatt probe tries to sort out the situation.
  • Why it matters

    Why it matters

    Deutsche Post may be trying to influence labor policy by financing an outspoken independent think tank, according to a Handelsblatt investigation. Questions remain as to whether its support conforms to German law.

  • Facts

    Facts

    • Deutsche Post funds the Institute for the Study of Labor (IZA) through the Deutsche Post Foundation.
    • Critics suggest the funding is not in the public interest, and therefore not allowed under its non-profit status.
    • The IZA said it studies “how labor and employment can be organized for the common good.”
  • Audio

    Audio

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“Not-for-profit” isn’t the first phrase that comes to mind when thinking about Klaus Zumwinkel, the disgraced former head of the state-run German postal service, Deutsche Post.

Yet despite his conviction in 2009 for tax evasion, the former executive is still in charge of a multi-million-euro, not-for-profit foundation and an influential non-profit economic research institute, both of which have links to Deutsche Post.

Mr. Zumwinkel, who is in self-imposed exile in Italy and London, founded the Deutsche Post Foundation in 1998 during his tenure as chief executive and chairman of the postal service.

But with the exception of a mailing address, little has been made public about this organization.

This is in contrast to the very public face of the Institute for the Study of Labor (IZA). It describes itself as a “private independent economic research institute” that is supported by the foundation, and is presided over by Mr. Zumwinkel.

Deutsche Post at first refused to provide any information about an 'independent non-profit foundation.'

But this poses the ethical and legal question of whether Deutsche Post, Germany’s largest employer, is using a shell foundation to support a private non-profit think tank whose stated aims are to lobby for changes in labor policy.

Deutsche Post at first refused to provide any information about an ‘independent non-profit foundation.’ But after being confronted with evidence of its existence, a spokesman admitted that the foundation does receive direct payments from Deutsche Post.

Under an agreement that runs until 2022, the foundation is paid donations equal to a quarter of 1 percent of every thousand euros of Deutsche Post revenues, or a third of 1 percent of every thousand euros of personnel costs.

With the postal service achieving revenues of around €55 billion ($63.7 billion) in 2013, this means that the foundation received more than €13 million. When asked who monitors the use of these funds, the Post spokesman named the foundation’s supervisory authority and a public accountant.

 

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Former Deutsche Post CEO and president Klaus Zumwinkel, who was convicted of tax evasion, set up the foundation. Source: IMAGO

 

The foundation has no website and no listed telephone number. But its mailing address in Bonn is the same as that of the IZA.

The institute is very influential in labor market research and policy, producing publications and appointing IZA policy fellows. It also oversaw the German government’s so-called Hartz 4 labor market reforms and its director, Klaus Zimmermann, is often featured in German media touting the dangers of a minimum wage and labor market deregulation.

Mr. Zumwinkel has been working almost since the establishment of IZA and the foundation as president of IZA, without it ever being clear what the job and authority of the president is.

To determine whether the foundation is simply a conduit through which Deutsche Post funnels cash to a labor market research institute, Handelsblatt posed several questions to the IZA’s “office manager.” These included whether the foundation has a board of trustees, whether it is true that it has no other employees, and if the foundation is the only or the main backer of IZA.

The office manager refused to answer the questions, citing an ongoing court case. This involves a lawsuit brought by Mr. Zimmermann against Werner Rügemer, a journalist, who alleged in a Handelsblatt article last month that IZA was not independent.

The case will be heard on January 30.

The foundation is not a party in the court case but seems to identify with IZA. This comes as little surprise considering that the two seem to share office space and personnel.

“The Deutsche Post Foundation and its organs, as well as its funding used to serve the public good, are not directed by the interests of the company,” said the IZA’s office manager. She added that “the executive committee and board of trustees of the Deutsche Post Foundation… regularly discuss with IZA its activities, without interfering with the independent research work.”

The IZA would not reveal the names of the foundation’s board members.

Mr. Zumwinkel has been working almost since the establishment of IZA and the foundation as president of IZA, without it ever being clear what the job and authority of the president is. It seems Mr. Zumwinkel is the only participant in the company’s board of partners.

Mr. Zumwinkel resigned as Deutsche Post’s chief executive in 2008 after German prosecutors opened a tax evasion investigation into his personal dealings. In January 2009, a German court convicted Mr. Zumwinkel of tax evasion.

He was given a two-year suspended sentence and fined €1 million for investing in a foundation in Liechtenstein, a small Alpine tax haven sandwiched between Austria and Switzerland.

“If the activities of the IZA overlap with the interests of Deutsche Post... questions arise about the altruism and with them the public benefit of the whole construction”

Ulrich Müller, Lobby Control

The IZA provides no information on the amount of money it receives from the foundation, though the development of its capital reserves is on its balance sheet for 2012. Under the entry “other additional payments” is the amount of €7.5 million, along with an entry of a similar amount listed under “withdrawals.”

It can be assumed that this is the Deutsche Post Foundation subsidy as the IZA does not name other sponsors.

Ulrich Müller of Lobby Control, an organization that promotes transparency and democracy in Europe, speculated that a possible role of the foundation may be to blur the close connection between Deutsche Post and IZA. “If the activities of the IZA overlap with the interests of Deutsche Post, and the Deutsche Post Foundation were only an empty shell, questions arise about the altruism and with them the public benefit of the whole construction,” he said.

In German law, altruism must be demonstrated to gain legal recognition for acting in the common good. If IZA were not deemed to be working for the common good, the non-profit Deutsche Post Foundation would not be allowed to support it.

Mr. Müller points out that it is not clear whether the foundation supports any other institutions besides IZA and the University of Bonn, which closely cooperates with IZA. Its internal structure is also fuzzy, he adds.

The question remains as to whether an institute can be described as non-profit and working for the public good when it is financed by Germany’s largest employer, the Deutsche Post, directly or solely through a possible funds-funneling foundation.

This is especially the case if the organization is committed to policy change and giving “recommendations for reforming unemployment insurance, modernizing free collective bargaining and opening up the labor market,” as Mr. Zimmermann states in the brochure “15 Years of IZA.”

The finance ministry in North Rhine-Westphalia, the state in which Bonn is situated, refused to comment on such questions, citing tax confidentiality. But the ministry said it regularly checks to ensure companies are meeting the conditions of non-profit status.

The IZA said: “Science and research serve to answer specific questions. Such a question is also contained in the preamble of the articles of association of the IZA, namely how labor and employment can be organized for the common good. From a common good legal perspective, the public demands answers to such questions.”

 

Norbert Häring is a Handelsblatt editor specializing in monetary policy and economics. To contact the author: haering@handelsblatt.com

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