Can racecar champ Helio Castroneves outrun the taxman?
He left the courthouse after pleading "not guilty" and posting $10 million bail so that he could continue to work, though only within the United States (which means he will have to forego a scheduled race in Australia later this month).
Castroneves, born in Sao Paulo, Brazil is still a Brazilian citizen, though he now resides in a mansion in Coral Gables, Florida, a suburb of Miami. He is a two-time winner of the Indianapolis 500, and last year, won Dancing With the Stars with his partner Julianne Hough.
His sister, Katiucia (also a Brazilian citizen) and his former attorney Alan R. Miller of Birmingham, Michigan are accused of assisting him in the alleged tax fraud. Castroneves served as president of his company, Castroneves Racing Inc., while his sister was the treasurer and Miller was the secretary. According to court papers, the corporation was formed to manage the racer's daily operations.
Here is what Castroneves is charged with...
Over a period of three years, he was paid six million dollars by Penske Racing for driving and for the use of his name. Prosecutors say that the defendants formed a Panamanian shell corporation, called Seven Promotions Corp., to conceal Castroneves's income. Some payments that were intended for the racecar driver were made to the company, and, in other situations, the company was used to transfer money through various bank accounts to hide or disguise income.
Penske was required under a "deferred royalty plan" to send five million of the racer's fees to a Dutch company, Fintage Licensing. Tax on money put into such a plan can be delayed, but only if the taxpayer has no control over the money. Castroneves told his accountants he did not have control, though in fact, he did. The bottom line is, Castroneves is accused of constructively receiving six million dollars from Penske but reporting and paying income taxes on only one million.
Other charges against him include payment by a Brazilian firm, Coimex, of $600,000, between 1999 and 2001, for sponsorship contracts. Castroneves reported and paid taxes on only $50,000 of that money. His sister is accused of transferring some of the hidden money to Swiss bank accounts which both she and her brother controlled.
Alan Miller allegedly filed false tax returns on Castroneves's behalf, that failed to report a total of $5,550,000 in income.
According to IRS Commissioner Doug Shulman, "This case sends a clear message that the IRS is committed to vigorously enforcing the tax laws and stopping offshore tax evasion."
And here is what the lawyers had to say...
The racer's current attorney, Mark Seiden, says his client did nothing wrong, having relied on the advice of his accountants and attorneys.
David Garvin is another attorney also representing Castroneves. He told ABC News:
"Helio has always done the appropriate thing and hired accountants and attorneys he relied upon. We are of the strong belief that he did not do anything wrong. We're looking forward to going to court."
And Miller's attorney, Michael Tein, claims that prosecutors acted "recklessly" in bringing the charges and added that Miller has always had "an absolutely stellar" legal reputation.
The charges amount to six counts of tax evasion, for 1999-2004, and one count of conspiring to defraud the U.S. government. Each count could bring a statutory maximum of five years in prison. Castroneves and his sister each face up to 35 years in prison, while Miller faces a maximum of 20 years. Expectations are that if convicted, the penalties will be substantially less than the maximum.