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Armenia Ruling on Telecom Sale Spills Into O.C.

Courts: Country contends developer Barry Hon controlled Trans-World, which it says owes millions. Not so, attorneys say.

July 16, 1999|EDMUND SANDERS | TIMES STAFF WRITER

The government of Armenia contends that a telecommunications company controlled by Orange County developer Barry Hon skipped out on paying $18 million in taxes and penalties before ceasing operations in that country last year.

An Armenian court earlier this week cleared the way for the government to seize $18 million worth of stock in the Armenian telephone company, Armentel, which was once co-owned by Trans-World Telcom Ltd., an offshore company that the government contends is run by Hon.

The dispute began last year after Trans-World sold its 49% stake in Armentel to a Greek-owned company called Hellenic Telecommunications Organization for an estimated $55 million. Trans-World acquired the stake in 1994, according to Harold P. Reichwald, the Los Angeles attorney representing the Armenian government.

In a lawsuit filed June 25, the Armenian tax ministry claimed that Trans-World and Hellenic Telecommunications failed to pay $8 million in capital gains taxes due after the sale, and owe an additional $10 million in penalties and back taxes.

"We will continue to pursue these parties until the taxes are paid," Reichwald said.

An attorney for Trans-World denied that the company owes the taxes, saying Hellenic Telecommunications agreed to pay the taxes as part of the sale agreement.

"Trans-World owes nothing," said Van Krikorian, the New York attorney representing Trans-World.

Trans-World and Hellenic Telecommunications are currently engaged in arbitration in London to work out contract disputes arising from their deal, including what happens to more than $7 million in escrowed funds, Krikorian said.

Officials at Hellenic Telecommunications have said the government should have collected the taxes last year, when the sale took place.

Krikorian also said that Hon doesn't control Trans-World, saying Hon was not an officer or director of the company and did not receive any of the profits, which he said went to charity.

But Reichwald said Hon led the company, adding that he was considering adding Hon's name to the government's lawsuit, which might enable the government to attempt to seize Hon's assets in the U.S.

Hon did not return phone calls Thursday.

The 61-year-old developer is the founder of Laguna Hills-based Hon Development Co., which is one of Orange County's most-active developers and was the master planner behind the 3,900-home community of Foothill Ranch. Hon, a resident of Monarch Bay, also is one of the builders hoping to win a development contract from the conversion of the Tustin Marine Corps Air Facility.

The Armenian government opted to seize Hellenic Telecommunications' stock because it was unable to locate any assets of Trans-World. Under Armenian law, the government can hold Hellenic Telecommunications responsible for the tax payment, forcing Hellenic to seek reimbursement from Trans-World, according to Reichwald.

A hearing on the matter is scheduled for July 26 in Armenia.

Hon is the latest Orange County entrepreneur to stumble abroad. Last year, ICN Pharmaceutical's Milan Panic faced off with the Yugoslavian government after it seized the company's Belgrade factory. The government contended the Costa Mesa company had failed to live up to a 1991 purchase agreement.

*

Times staff writer Edmund Sanders can be reached at edmund.sanders@latimes.com.

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