Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, November 18, 1995                   TAG: 9511200036
SECTION: VIRGINIA                    PAGE: C-3   EDITION: METRO 
SOURCE: JAN VERTEFEUILLE STAFF WRITER
DATELINE:                                 LENGTH: Medium

CRANWELL, OTHERS SETTLE IRS TAX SUIT

The suit - filed in March 1994 by Cranwell, Barry Flora and Gary Flora - was an effort to avoid paying more than $90,000 in IRS penalties charged to two former companies in which they held stock.

Cranwell said Friday that he was "extremely pleased" with the compromise, which required that the three pay something, but less than the full amount the IRS claimed was owed. He declined to be specific, saying he wasn't sure whether there was a confidentiality agreement between the two parties.

But, he said, "It was less than the attorney's fees would have been to fight the thing" at trial.

A weeklong trial had been set to begin Dec. 11.

The government's attorney, who may have been sent home as part of the furlough of nonessential federal employees, could not be reached for comment.

The suit stems from an IRS investigation that revealed American Chemical Co. and American Janitorial Co. failed to pay more than $260,000 in employment taxes during six months in 1987 and 1988. American Chemical was fined $37,326, and American Janitorial was fined $56,345. The two companies went out of business in 1988.

Cranwell and the Flora brothers were advised Oct. 5, 1992, that they were equally responsible for the penalties. Cranwell denied responsibility from the outset, saying he was not an employee, director or officer of the corporations when the taxes were owed.

The suit contended that the penalty charges should be abated.

Cranwell's involvement with American Chemical became an issue in his re-election bid two years ago, when former attorney Frank Selbe filed a lawsuit one month before the election alleging that Cranwell had committed tax fraud.

The suit is now dead because the court never served it on Cranwell. It focused on a complex reorganization of American Chemical Co. in 1984 that Cranwell used to justify a $40,000 tax break that year. An IRS inquiry of the American Chemical reorganization ended inconclusively in 1990.

Cranwell said he hoped this was the end of his involvement with two defunct companies.

"If I never hear American Chemical or American Janitorial again," he said, "I'll be a happy man."