ROANOKE TIMES  
                      Copyright (c) 1996, Roanoke Times

DATE: Monday, July 8, 1996                   TAG: 9607080044
SECTION: BUSINESS                 PAGE: A-4  EDITION: METRO  
DATELINE: NAPLES, ITALY (AP)
SOURCE: Associated Press
MEMO: ***CORRECTION***
      Published correction ran on July 9, 1996.
         NAPLES, Italy - In a July 5 story about a tax investigation of Philip
      Morris Co. Inc., The Associated Press incorrectly reported that the 
      company is under investigation for allegedly evading $6.4 billion  in 
      taxes. Italian prosecutors suspect the company of failing to pay taxes 
      on revenue of $6.4 billion to 1987.

TOBACCO GIANT ACCUSED OF FRAUD

Italian tax fraud experts investigated claims Friday that U.S. tobacco giant Philip Morris Inc. allegedly took part in a $6.4 billion tax evasion scheme.

The case, led by Naples investigators, could spread to other cities in Italy as officials investigate the company's business arrangements with distributors.

Naples prosecutors say Philip Morris unfairly took advantage of lower tax rates reserved for companies without a direct Italian subsidiary. They alleged that Intertaba, set up to distribute Philip Morris brands, was not an independent franchise but controlled by the New York-based food, beer and tobacco conglomerate.

Philip Morris, whose cigarette brands include Marlboro and Merit, holds 46 percent of the Italian market. State-produced brands have 42 percent.

A Philip Morris spokesman denied any wrongdoing by the company.

The amount of the alleged tax evasion, dating to 1987, is more than four times Philip Morris' first-quarter earnings this year.

Philip Morris was not directly named in prosecution documents, but one of its European executives, Walter Thoma, was placed under investigation. Four officials from Milan-based Intertaba, which also manufactures cigarette filters, are also being investigated.

Intertaba is a subsidiary of FTR Holding SA, a Swiss affiliate of Philip Morris, according to Philip Morris spokesman Sean Murray.

Murray, at Philip Morris' European headquarters in Brussels, Belgium, insisted the charges were unfounded.

``We are confident we are in full compliance with Italian law, including fiscal tax law,'' he said.

The director of the state tobacco monopoly, Ernesto Del Gizzo, claimed Philip Morris benefited from a position of ``excessive power and an unjustified fiscal advantage.''

On news of the probe, Philip Morris stock fell $2.75 a share on the New York Stock Exchange.

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