Castroneves found not guilty of tax evasion

By midday Friday it looked like Helio Castroneves would be biting his nails through the weekend, waiting for the jury to continue deliberating this week. But by the end of the day Friday... he walked out of the courthouse, free. After six weeks of trial and another six days of deliberation, the jury deadlocked on the key charge of conspiracy. U.S. District Court Judge Donald Graham declared a mistrial on the conspiracy charge and told Castroneves he was free to go. On his way out people everywhere, including court officials, congratulated him. "Go get 'em, Helio," said a U.S. Marshals Service officer.

The feds don't often lose cases like this one, which is why Castroneves likens the last few months to being trapped in a speeding car he couldn't control. "It was like a race, but unfortunately, I couldn't drive this car. I was just a passenger."

To recap the charges, Castroneves, aged 33, and his sister Katiucia were accused of carrying out various schemes designed to evade the income taxes on $5,550,000 in fees he earned for racing and for the use of his name in endorsements in 1999-2002. His attorney Alan Miller was accused of participating in and facilitating the schemes. According to the prosecutors, the racecar driver was paid $6 million by Penske Racing, but he paid taxes on only $450,000. Prosecutors say Miller directed Penske to divert the money from Seven Promotions, a Panamanian shell company, which the feds say was controlled by Castroneves, to a Dutch company, Fintage Licensing, in order to avoid the associated taxes. He is also accused of improperly deducting $687,000 as business expenses to reduce his taxable income.

If convicted on all charges, Castroneves and his sister were looking at several years in prison, plus deportation and the ruination of his career, not to mention owing up to $2.3 million in back taxes and the associated penalties and interest. Attorney Miller was facing a lengthy prison sentence.

Late last week defense attorneys filed two motions for mistrial, based on the jury's inability to understand the complexities of the case. Both motions were denied and the judge and tax attorneys attempted to sort out the issues that were confounding the jurors. Though jurors were able to submit verdicts on some of the charges - which the judge refused to read until all the verdicts were in – they remained deadlocked on the key charge of conspiracy, leading the judge to declare a mistrial late Friday.

The Miami Herald speculates that part of the reason for the jury's hesitation to convict Castroneves was that he "came off as a sympathetic character, a driver, a dancer – not a tax expert."

Defense attorney Roy Black told reporters, "Nobody wants to hear the excuse that 'I didn't know what I was signing; I didn't know what my accountants were doing.' But in a criminal context, the government has to prove you knew what you were signing and you intentionally, deliberately did it to evade taxes."

Outside the courtroom, Castroneves told reporters, "I just want to thank God and my fans and all those who have been praying for me. Instead of going to Disneyland, I want to go to Long Beach and race. I'm going back to racing."

And back he went. No sooner did he get the news of his acquittal than Castroneves headed for California in Roger Penske's private jet, to prepare for Sunday's race in the Toyota Grand Prix in Long Beach. Tim Cindric, president of Penske Racing never gave up on Castroneves, even when it was necessary to replace him for the preseason trials and the start of the season that began on April 5th. Will Power drove the #3 car while Castroneves was on trial, but for Sunday's Grand Prix, it was Castroneves behind the wheel of number three. After Castroneves was cut loose on Friday, Penske entered an additional car in Sunday's race so that Will Power could still drive. During the qualifying rounds of the race Castroneves crashed into a retaining wall, but walked away seemingly unharmed. Castroneves finished seventh in Sunday's race, Power finished second.

You can read the complete summary of the six-week trial in AccountingWEB's Castroneves Tax Trial Diary.

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