Tax Round Lost by Iran-Contra Scandal Figure

Indicted Iran-Contra scandal figure Albert Hakim lost a round Thursday in his low-profile fight to avoid paying approximately $250,000 in income taxes he allegedly owes the state of California.

Karen Hawkins, tax attorney for the international arms dealer who lives in Los Gatos, told the State Board of Equalization that holding a hearing on his tax assessment protest could violate his Fifth Amendment constitutional right against self-incrimination in connection with his Iran-Contra legal difficulties.

She asked the board to “indefinitely postpone” the tax hearing until the criminal charges against Hakim are resolved.

The board rejected her plea and held a brief hearing on Hakim’s protest to paying $219,000 in income taxes the state Franchise Tax Board found he owed since 1982. Interest on the taxes, plus possible penalties, would boost the total sum to an estimated $250,000, state tax aides indicated.

Usually, when a taxpayer disputes an assessment by the Franchise Tax Board, the sum is paid under protest and the taxpayer then can appeal to the Equalization Board for a refund.

But Hakim has refused to pay his tax bill. Documents indicate he has been fighting the assessment for some time. A board official said Thursday’s proceeding was the first public hearing on the issue.

However, the Equalization Board, which acts on appeals of Franchise Tax Board actions, came to no decision on Hakim and continued the case for at least 60 more days. Hawkins indicated she will likely press her case in court for a postponement until the criminal matter “is completed.”

Hakim, an Iranian-American businessman educated in the United States, has pleaded not guilty to conspiracy charges in the diversion of Iranian arms sales and profits to the Contra rebels in Nicaragua.

Hawkins told the Equalization Board that the federal “special prosecutor still is obtaining information from whatever sources he can” on Hakim and that a state hearing on her client’s tax protest could delve into areas that “could damage his constitutional rights.”

Some board members, however, questioned how California taxes related to business dealings Hakim had in Iran before the Iranian revolution in 1979 could play a role in his involvement in the Iran-Contra controversy that emerged in 1985.

In a memo, Franchise Tax Board lawyers asserted that issues related to Hakim’s tax protest “could not possibly have anything to do with the Iran-Contra affair.”

Hawkins said she was handed the Hakim tax matter only two days earlier when his previous tax counsel--the San Francisco law firm Lillick, McHose & Charles--abruptly quit the case. She said she was not familiar with specifics of the Hakim case but repeatedly insisted that questions asked of him in unspecified areas could jeopardize his constitutional rights.

Hakim, an associate of the late Shah of Iran, has told state tax authorities he fled Iran on March 1, 1979, and established residency in California 22 days later.

Franchise Tax Board documents indicate that he took a net operating loss carry-over from 1980 on his 1982 state tax return and another deduction for “worthless stock” he owned in corporations taken over during the Iran revolution.

State tax attorney A. Kent Summers said California did not have a loss carry-over law until 1987. On the “worthless stock” matter, Summers said Hakim could not meet several standards to qualify for the deduction, including one requiring that he prove he owned the stock.

Summers told the Equalization Board that Hakim sought to take a write-off for losses suffered in a foreign country at a time he was not a California resident for tax purposes.

Summers indicated that the assets of two corporations Hakim said he invested in consisted of contracts with American firms that did business in Iran and possibly some cash.