Like most American kids that grew up in the 80's I watched the Indy 500 every year and became interested in motorsports thanks to that race, but I didn't really get hooked until I started watching Formula 1 racing in the late 90's. My favorite era were those years with the great Mika Hakkinen/Michael Schumacher battles. (I was a Mika Hakkinen fan) So my fondness for Formula 1 waned once Mika retired and Schumacher started winning everything, even at the expense of his teammate Rubens Barrichello. My interest in F1 has only been lukewarm since.

Then I turned to Champ Car racing here in the US for my motorsports fix. However that was quickly extinguished once Champ Car and Indy Car merged and we were stuck with Tony George and his many foibles. (It was entertaining to watch the Hulman/George drama I'll admit.) My interest has been less than lukewarm with Indy Car lately, even without Tony George at the helm.

Over time however, the excitement I once had for motorsports has slowly gone. Maybe it has to do with my age, I don't know. But I think I will pour my efforts into my Trooper and my interests in the outdoors to add excitement to my life.

Thanks for checking out my blog, I hope you enjoy it. I will still post racing news when I find something interesting or noteworthy.

Monday, March 16, 2009

Driver Helio Castroneves on a detour at tax trial

(by Jay Weaver 3-15-09)

Helio Castroneves was born with a car-racing gene.

He sped from go-karting to Formula Three to IndyCar, his big break coming in late 1999 when Penske Racing signed him. He won the Indy 500 two years straight and finished second in 2003 -- milestones for the celebrated race.

''He had the ability to do things that human beings can only dream of,'' his powerhouse lawyer, Roy Black, told a jury in Miami earlier this month. ``This has taken him to the heights of athletic stardom.''

Now the Brazilian driver's soaring career, fueled by the fame of also winning the reality TV show Dancing with the Stars, is at risk of crashing in the most unlikely place: a federal courtroom. Castroneves, 33, stands accused along with his sister and business manager, Katiucia Castroneves, and his Michigan sports lawyer, Alan R. Miller, of cheating the IRS.

In a seven-count indictment, Castroneves is charged with conspiring with them to evade paying taxes on more than $5 million from a Penske contract dating back a decade. Ironically, Castroneves, who owns a Coral Gables mansion decorated with his trophies, has yet to receive any of that income from Penske.

But that's the point of the U.S. government's case against the trio, because prosecutors say Castroneves should have already paid taxes on that income -- regardless of whether he has actually received it. The three defendants are accused of masterminding a tax dodge across two continents so that Castroneves wouldn't ever have to pay the IRS -- especially if he were to move to a tax haven such as Monaco for retirement.

How the 12-person jury will view the charges amid a crumbling economy remains to be seen. But for Castroneves -- a fun-loving guy known for leading cheers with racing fans -- the outcome could not be more serious.

Now at the peak of his sport, Castroneves is either going to be back in the driver's seat of racing's most prestigious team -- or he's going to prison for several years.

''Any prison time would destroy his career,'' said Indianapolis-based sports writer Robin Miller, who does commentary for Fox's Speed Channel. ``As much as Helio is part of Penske, how do you overcome putting a convicted felon on his team? It's a kiss of death.

``Now if he's acquitted, you celebrate. He's good for racing. You go ahead and put him back in the car.''

Although Castroneves is still featured on Penske Racing's website -- including in the gift store, selling his images on a 2009 calendar -- he hasn't been on the track since January. Penske has replaced Castroneves with driver Will Power in the No. 3 car during preseason testing and, if necessary, in races this season. The IndyCar season opens April 5, when the federal jury in Miami might be deciding Castroneves' fate.

The root of Castroneves' tax troubles reach back to his breakthrough contract with Penske Racing in November 1999. Roger Penske, the owner, recruited Castroneves immediately after the horrific racing death of Canadian driver Greg Moore, who had just signed with his team. Castroneves' sports lawyer, Miller, had represented Moore, too.

''One man's tragedy, unfortunately, turns into another man's opportunity,'' Black, the criminal defense attorney, told the jury.

At a crossroads, Castroneves dumped his manager, legendary racer Emerson Fittipaldi, and joined Penske Racing. (The split with Fittipaldi would lead to a bitter legal battle in Miami.)

When Castroneves signed the Penske deal in November 1999, he was to be paid $1 million as a driver and $5 million for licensing rights to his name, likeness and image. Marlboro was the team's main sponsor.

Penske paid the $1 million to Castroneves directly over the next three years, in 2000, 2001 and 2002. The other $5 million was supposed to be paid to a Panamanian corporation, Seven Promotions, over the same period. Prosecutors said the company, started in March 1999 to promote the driver's career, was owned by Castroneves.

But that licensing income was not transferred to Seven Promotions because the driver's attorney, Miller, realized that Penske was going to have to withhold nearly one-third in taxes on payments to the Panamanian company, prosecutors said. Under federal law, 30 percent of a person's income sent to a tax shelter in Panama must be withheld to pay the U.S. government.

''We were ready to make payments to Seven Promotions,'' Penske's general counsel, Lawrence Bluth, testified. ''We were told not to'' by Miller.

At that point, Miller consulted with tax lawyers in New York, who proposed that Penske pay Castroneves through a Dutch entity called Fintage Licensing. It would set up a deferred annuity account so that he could receive the money later.

In 2002, the New York lawyers told Miller that sending Castroneves' Penske income to the Netherlands firm would be fine on one condition -- as long as the driver didn't own the Panamanian company, Seven Promotions. If he did, then he would already be responsible for the taxes on the Penske income because it was supposed to be sent to Seven Promotions under his contract.

''The Castroneveses and Alan Miller faced a big choice,'' federal prosecutor Matt Axelrod told jurors. ``They lied.''

They told the New York lawyers that Castroneves didn't own the Panamanian company, he said. Black and other defense lawyers have maintained that the driver's father, who goes by the same name, owned Seven Promotions and set it up to help his son's career.

But earlier this month, Penske's general counsel, Bluth, testified that Miller had told him back then that the Panamanian company was controlled by the younger Castroneves. Prosecutors also produced a 1999 agreement between Castroneves and Seven Promotions saying the driver owns all shares of the Panamanian company.

Despite Castroneves' ownership of the business, prosecutors said, Miller arranged to have Penske pay $5 million from Castroneves' licensing deal to the Dutch company starting in January 2003.

This past week, Castroneves' former accountant testified that the Dutch annuity was legitimate.

''Helio Castroneves never suggested that you do something improper, right?'' asked another defense lawyer, David Garvin.

''Absolutely not,'' said the accountant, Kevin Savoree, an executive with Andretti Green Racing.

But Savoree testified he helped write a memo indicating Castroneves' ultimate goal was to ``maintain a residence in a tax haven, such as Monaco.''

Another prosecutor, Jared Dwyer, asked the accountant how much Castroneves, who has a work visa to live in the United States, would pay in taxes if he were to move to the European principality.

Said Savoree: ``Perhaps zero.''

With that testimony, the prosecution sought to show that paying no taxes was Castroneves' plan all along.

But Castroneves' defense lawyer, Black, scoffed at the government's tax-evasion theory, calling it a ''fiction.'' He said Castroneves relied on his sports lawyer, Miller, who has handled the careers of many pro athletes, to legally set up the Dutch annuity so that Castroneves could draw income later.

Under a U.S. treaty with the Netherlands, Fintage could defer paying Castroneves, delaying his tax liability until he receives the money -- none of which has been paid to him yet.

''It wasn't a tax dodge,'' Black told jurors, assuring them that Castroneves will start paying his taxes in May, when he starts receiving the annuity payments.

The jurors must soon decide whether Castroneves should have paid those taxes in 2001 and 2002, when he was posting back-to-back victories for Penske's team at the Indy 500.

''It would be a terrible thing to lose one of the great drivers in the world, and probably our most popular driver,'' Penske's Bluth testified last week.

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