2-Time Indy 500 Winner Indicted

[Demosthenes]

______________________________________________________________________________
FOR IMMEDIATE RELEASE TAX
THURSDAY, OCTOBER 2, 2008 (202) 514-2007
http://WWW.USDOJ.GOV TDD (202) 514-1888
INDIANAPOLIS 500 WINNER AND TWO OTHERS
INDICTED ON TAX EVASION SCHEME
WASHINGTON – Helio Castroneves, a U.S. resident and two-time winner of the Indianapolis 500, was indicted by a grand jury today on charges of conspiracy to defraud the United States of income taxes and with six separate counts of income tax evasion for tax years 1999 through 2004, announced the Justice Department, U.S. Attorney for the Southern District of Florida R. Alexander Acosta and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent-in-Charge Michael E. Yasofsky Jr. Also charged in the indictment were Helio Castroneves’ sister and business manager, Katiucia Castroneves of Miami, and his attorney, Alan R. Miller of Michigan.
Count one of the indictment charges Helio Castroneves, Katiucia Castroneves and Miller with conspiring to defraud the United States by using an offshore Panamanian shell corporation – Seven Promotions Corporation (Seven Promotions) – to fraudulently conceal from the IRS income received from two sources: Coimex Internacional SA (Coimex) and Penske Racing Inc. (Penske).
Count one alleges that Helio Castroneves entered into sponsorship contracts with Coimex, a Brazilian import and export company, for 1999, 2000 and 2001. Each year’s contract required Coimex to pay Helio Castroneves $2,000,000. However, pursuant to an unwritten side agreement, Helio Castroneves returned $1,800,000 each year to certain Coimex executives, and kept $200,000 for himself. Of the $600,000 Helio Castroneves retained from the Coimex contracts, he reported only $50,000 on his federal income tax returns.
In regards to the Penske income, count one of the indictment alleges that Helio Castroneves joined Penske as a race car driver in November 1999, and that Miller negotiated the deal with Penske and drafted the resulting contracts. Under the terms of the contracts, Helio Castroneves’ $6,000,000 three-year (2000, 2001 and 2002) compensation package would be split between a $1,000,000 driver agreement and a $5,000,000 licensing agreement. Pursuant to the licensing agreement, Seven Promotions was to receive the $5,000,000 in exchange for the licensing rights to Helio Castroneves’ name, likeness and image. The indictment specifically alleges that Helio Castroneves, Katiucia Castroneves and Miller engaged in a scheme to avoid paying taxes on the $5,000,000 in licensing agreement income by creating a “deferred royalty plan” that required Penske to send the $5,000,000 payment to an offshore company – Fintage Licensing B.V. (Fintage) – in the Netherlands, instead of to Seven Promotions.
Despite advice from outside tax counsel that Helio Castroneves would not qualify for the deferred royalty plan and would owe income tax on all payments under the licensing agreement if he or any member of his family owned or controlled Seven Promotions, the three defendants engaged in this deferred royalty plan. Accordingly, Miller and Helio Castroneves falsely represented to tax counsel that neither Helio Castroneves nor anyone in his family had any interest in, or control of, Seven Promotions. Based on these misrepresentations, the deferred royalty plan was executed between Penske and Fintage; Penske paid Fintage the $5,000,0000 originally due to Seven Promotions under the licensing agreement, and no income tax was ever paid by Helio Castroneves on the $5,000,000 in licensing agreement payments.
In counts two through seven of the indictment Helio Castroneves and Katiucia Castroneves are charged with six counts of tax evasion based on allegedly false federal income tax returns filed by Helio Castroneves for years 1999 through 2004. Miller is charged with three counts of tax evasion based on allegedly false federal income tax returns filed by Helio Castroneves for years 2000 through 2002.

An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless and until convicted through due process of law.
If convicted, the defendants face a maximum penalty of five years in prison on the conspiracy to defraud the United States count, and five years in prison on each of the tax evasion counts.
“Taxpayers, small and large, famous and not famous, should be aware of the enormously severe consequences they face if they fraudulently use offshore accounts to hide income, including potentially going to prison, paying back all their taxes plus interest and penalties, and being branded a felon for the rest of their lives,” said Nathan J. Hochman, Assistant Attorney General of the Justice Department's Tax Division.
“Whether one makes a living parking cars or racing them, paying taxes is a responsibility that everyone shares. Our tax laws apply equally to everyone, regardless of status, class and income, and the U.S. Attorney’s Office will prosecute these cases vigorously,” said U.S. Attorney Acosta.
U.S. Attorney Acosta commended the investigative efforts of the IRS. Acosta also noted the assistance and cooperation in this investigation of the Brazilian Federal Police, the Dutch Federal Police and the Brazilian Federal Public Minister’s Office in Sao Paulo.
"It is a legal requirement for individuals to accurately report all income and pay their tax liabilities," said Special Agent-in-Charge Yasofsky of the IRS-CI Miami Field Office. "IRS will investigate and hold accountable those who conspire to intentionally evade their responsibility in complying with the tax laws."
“Using offshore corporations for the purpose of evading taxes is a crime. This case sends a clear message that the IRS is committed to vigorously enforcing the lax laws and stopping offshore tax evasion,” said IRS Commissioner Doug Shulman.
The case is being prosecuted by Assistant U.S. Attorneys Matthew Axelrod and Jared Dwyer. Related court documents and information regarding this case can be found on the Web site for the U.S. District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.

[Doktor Avalanche]

It'll be interesting to see if he can dance his way out of this one.

[Demosthenes]

Saturday, October 4, 2008

Castroneves says he'll beat tax evasion rap
By SUN WIRE SERVICES

Race car driver and Dancing With The Stars winner Helio Castroneves pleaded not guilty yesterday to U.S. federal tax evasion charges and declared outside a Miami courtroom that he would treat the case like a race against the Internal Revenue Service.

"I'm a race car driver," the two-time Indianapolis 500 winner told reporters. "This is a very difficult situation. I'll be strong and I'll win this race."

Castroneves, 33, spoke after his release on $10 million US bail following a court appearance in which he was shackled in handcuffs and leg chains and was visibly weeping into a wad of white tissue. Outside, Castroneves acknowledged he was overwhelmed by the weight of the moment.

"It has been a long day. It has been an emotional day, obviously," he said. "I am not guilty."

With that, Castroneves hopped into a waiting car and headed for a flight to Atlanta to participate in this weekend's Petit Le Mans race. Terms of Castroneves' release allow him to travel for work in the United States but not abroad, meaning he likely will miss a race later this month in Australia, said his lawyer, Mark Seiden.

A grand jury on Thursday indicted Castroneves on charges of conspiracy and six counts of tax evasion for purportedly failing to report to the IRS about $5.5 million in income between 1999 and 2004, according to court documents. Each count carries a maximum five-year prison sentence.

Also facing charges are Katiucia Castroneves, the driver's sister and business manager, and lawyer Alan R. Miller of Birmingham, Mich. They did not enter pleas yesterday but were ordered released on bail of $2 million and $250,000, respectively.

[Demosthenes]

I only skimmed the first few pages of the indictment, but I'd already run across shell corps and accounts in Panama, Switzerland, the Netherlands, and Brazil. I wonder how many similar arrangements are out there in the race car world.

From co-defendant Alan R. Miller's website (2005 version via archive.org):

Sports Law. The Firm has represented a large number of athletes and entertainers in connection with both contractual and other problems including salary arbitration. Recently Mr. Miller has done a substantial amount of work relating to automobile racing including the negotiation and drafting of Sponsorship Agreements, Sponsor Finder Agreements, Service Agreements, Driver Agreements, Licensing Agreements and other~reIated documents. Mr. Miller’s clients include drivers in Indy car, Trans Am and international motorcycle racing, a race car manufacturer, Indy car Teams, and NASCAR Teams.

[Mr. Mephistopheles]

Tax trial opens for 'Dancing with the Stars' champ
By CURT ANDERSON, AP Legal Affairs Writer Curt Anderson, Ap Legal Affairs Writer 1 hr 5 mins ago

MIAMI – On top of the world a few months ago, Brazilian race car driver and "Dancing with the Stars" champ Helio Castroneves faces possible prison time if convicted at a tax evasion trial that began Monday with jury selection.

Castroneves, a two-time winner of the Indianapolis 500, smiled broadly as he entered Miami's downtown federal courthouse. Prosecutors say Castroneves, his business-manager sister Katiucia and Michigan attorney Alan R. Miller conspired to hide about $5.5 million in income from the Internal Revenue Service using offshore accounts.

Castroneves claims he relied on experts to advise him on handling finances. He also says his father controlled a Panamanian entity called Seven Promotions at the heart of the prosecution's case.

Castroneves claims the money Seven Promotions received wasn't his tax liability because the income was for his father, who had financed and promoted his son's career for over 10 years.

Castroneves, his sister and Miller also deny acting "willfully" to evade taxes and that they took improper deductions.

Under federal sentencing guidelines, Castroneves, 33, could get more than six years in prison if convicted of conspiracy and tax evasion from 1999 to 2004. That would short-circuit a brilliant racing career that began in Sao Paulo, Brazil, where a youthful Castroneves broke into the sport by driving go-carts.

Before the trial, U.S. District Judge Donald Graham rejected defense efforts to introduce a large amount of racing memorabilia and numerous photos of Castroneves' rise from obscurity to the pinnacle of his sport.

"It seems to me that many of these exhibits are far afield of the issues in this case," Graham said.

Graham said he hoped to seat a jury of 12 people plus alternates by late Monday.

The trial is expected to take up to six weeks, and Castroneves has already been temporarily replaced on Team Penske by Australian driver Will Power for the Indy Racing League season that starts April 5 in St. Petersburg.

Two other prominent Brazilian drivers — Tony Kanaan and Juan Pablo Montoya — may testify on Castroneves' behalf, along with Miami philanthropist Adrienne Arsht. Miller, a former professional football player turned attorney, has former Buffalo Bills quarterback and ex-U.S. House member Jack Kemp and racing mogul Roger Penske on his witness list.

The defense legal team also sports some big names: Miller is represented by Robert Bennett, who was President Bill Clinton's lawyer in the Paula Jones sexual harassment case; Roy Black, who represented radio host Rush Limbaugh in his prescription drug misuse case is there on behalf of Castroneves.

Castroneves, who lives in Coral Gables, won the Indy 500 in 2001 and 2002, then rocketed to even greater fame in 2007 by winning the television show dancing competition with partner Julianne Hough. Castroneves and his co-defendants were indicted Oct. 2.

http://news.yahoo.com/s/ap/20090302/ap_ ... ax_charges