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

DATE: THURSDAY, March 31, 1994                   TAG: 9403310100
SECTION: VIRGINIA                    PAGE: C-1   EDITION: METRO 
SOURCE: MICHAEL STOWE STAFF WRITER
DATELINE:                                 LENGTH: Medium

CRANWELL SUES TO AVOID $90,000 IRS FINES

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.

Cranwell and stockholders Barry Flora and Gary Flora were advised on Oct. 5, 1992, that they were equally responsible for the penalties.

Like Cranwell, the Flora brothers have filed suits against the government denying responsibility for the penalties. American Chemical and American Janitorial went out of business in 1988.

Cranwell has denied responsibility from the outset, saying he was not an employee, director or officer of the corporations when the taxes were owed.

"All I was, was a stockholder," he said Wednesday. "My lawyer and the CPA have advised me that we are not responsible."

The Roanoke County Democrat declined to answer other questions, saying he "didn't want to litigate my case in the media."

Federal law requires anyone contesting an IRS penalty to first pay an amount equivalent to the taxes that would have been withheld on one employee during the infraction period.

In Cranwell's case, that's $800, and on Nov. 4, 1992, the Vinton lawyer sent the IRS a check for it.

The IRS sent Cranwell a letter in January 1993 telling him that he still was liable for the penalty charges and refusing to refund his $800.

That led to the suit filed this week in U.S. District Court that names U.S. Attorney Robert Crouch as the defendant. In the complaint, Cranwell says his $800 should be refunded and that the penalty charges should be abated.

The suit says Cranwell should be free from responsibility because he didn't "willfully" fail to pay the IRS.

"Other employees of the corporations had the responsibility for preparation and payment of payroll taxes of the corporations; they determined what bills and creditors of the corporations should or should not be paid."

Cranwell's involvement with American Chemical became an issue in his re-election bid last fall when convicted felon Frank Selbe filed a lawsuit one month before the election alleging that Cranwell 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.