Helio Tax Evasion Charges
Helio Castroneves is a fast Indy car driver and former winner of the Indianapolis 500. He’s in a race for his freedom now having been hit with tax evasion charges.
By all accounts, Helio Castroneves has lived the good life. A professional race car driver, he has won the Indianapolis 500 not once, but twice. To non-race fans, he is better known for winning the “Dancing with the Stars” reality show in the fifth season. A single man with good looks and considerable wealth, he had it all. Now he has a major headache.
On October 2, 2008, Helio tax evasion charges came down. The suave Helio, his sister and his lawyer were indicted on tax evasion and conspiracy charges. Specifically, they are accused of working together to evade taxes on his income earned in the United States by using an offshore corporation in Panama. The indictment includes six charges and each carries a maximum prison sentence of 5 years each, to wit, he faces 30 years in the “grey motel.” All three defendants have pled innocent.
The specifics of the case are interesting to say the least. The attorney for Helio formed a corporation in Panama called Seven Promotions Corporation. The entity then received payments from Penske Racing [his wages as a driver] and Coimex Internacional SA, a Brazilian entity [Helio is Brazilian].
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.
The statements made by the IRS in regard to the case clearly show that they wish to make an example out of Helio on the tax evasion charges. The IRS despises offshore banking. That being said, Helio better have one heck of an explanation for the above allegations or he is in deep trouble. This case will be interest to watch.
The trial date is currently set for March 2, 2009.