Erg executives in Italian tax fraud probe

Reuters

* Erg deputy chair, CEO under investigation

* TotalErg confirms tax police visited offices

* Erg shares down 6.7 pct

By Mario, Sarzanini and Stephen Jewkes

ROME, Dec 3 (Reuters) - Two top executives at Italian energycompany Erg are under investigation in a probe intosuspected tax fraud at Italy's No. 3 petrol service stationoperator TotalErg, Erg said on Tuesday confirming media reports.

The two executives being probed are deputy chairmanAlessandro Garrone, a member of the controlling family, andChief Executive Luca Bettonte, the company said, adding it hadalways acted lawfully and was confident it would be cleared inthe probe.

Erg also said in a statement it had been notified with asearch warrant by Rome prosecutors probing alleged taxirregularities carried out in 2010 and involving TotalErg, itsjoint venture with French oil major Total.

News of the investigation was first been reported byjudicial sources, sending Erg shares down 6.7 percent and Totalshares down 1.6 percent.

Erg, which has exited oil refining to focus on renewableenergy, owns 51 percent of TotalErg. With 3,300 petrol stations,it has a market share of around 12 percent behind Eni and Esso. Total owns the rest of TotalErg.

"Erg considers that it has always fully respected the law,"Erg said. Garrone and Bettonte could not immediately be reachedfor comment.

Earlier on Tuesday, judicial sources said Italian tax policehad searched the offices of TotalErg in Rome, Milan and Genoaover suspected false invoices for 904 million euros ($1.2billion) issued by a Bermuda-based company.

TotalErg confirmed the tax police had visited its officesand said it was co-operating the authorities.

Besides the two Erg executives, three other people were alsounder investigation, the sources said.

Business at TotalErg has been under pressure in recent yearsdue to a fall in petrol consumption caused by the economiccrisis as motorists leave their cars at home.

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