(by the Associated Press 3-3-09)
MIAMI -- Race car driver and "Dancing with the Stars" winner Helio Castroneves never sought to evade U.S. income taxes and planned to pay the Internal Revenue Service when he received $5 million from a deal made a decade ago, his attorney told a federal jury Tuesday.
Defense attorney Roy Black said in an opening statement that the Brazilian driver, a two-time winner of the Indianapolis 500, knows nothing about U.S. tax laws and relied on experts to handle his finances. Black said there was no scheme to hide money from the IRS.
"All his taxes were properly done. They were properly paid," Black told the 12-person jury.
Prosecutor Matt Axelrod disagreed, describing a series of allegedly fraudulent deals dating to 1999 involving a Panamanian corporation created to dodge taxes. Axelrod accused Castroneves' business manager-sister, Katiucia, and Michigan sports attorney Alan Miller of playing a role in the fraud.
"When it came time to pay taxes on the millions of dollars that he made, he turned his back. He didn't pay," Axelrod said.
The three are charged in a seven-count indictment with tax evasion and conspiracy, which could land each of them behind bars for more than six years. The trial is expected to last up to six weeks.
Central to the case is the ownership of the Panamanian entity, Seven Promotions. Black said it was formed by Castroneves' father to promote his son's early racing career and that the younger Castroneves had no ownership. Axelrod said it was set up to appear that way, and that all three defendants repeatedly lied about the race car driver's control of the business.
When Castroneves was hired in late 1999 to drive for Team Penske, the contract drawn up by Miller called for about $5 million to go to Seven Promotions. But Miller then asked Penske not to pay the money, saying he wanted it shifted under a deferred royalty deal to a Dutch company called Fintage Licensing B.V.
Black and Miller's lawyer, Robert Bennett, said that was legal, and that Castroneves will pay taxes on the money when he gets the money in May.
Axelrod said the deal was a diversion because Miller discovered Penske would withhold 30 percent of $5 million for taxes before transferring the money to Seven Promotions.
Axelrod claims even though Castroneves has not been directly paid the Penske money, he should have paid taxes long ago. The ultimate goal, the prosecutor said, was for Castroneves to leave the U.S. and escape the IRS.
"It was the only way they could achieve their goal of having Helio Castroneves illegally get his money tax-free," Axelrod said.
Black disputed the theory and said Castroneves lives in Coral Gables, a Miami suburb.
Prosecutors also claim Castroneves neglected to pay U.S. taxes on income from a sponsorship deal with the Brazilian company Coimex and that he didn't declare as income thousands of dollars worth of clothes and airline tickets he got from other deals.
Castroneves, 33, won the Indy 500 in 2001 and 2002 and the TV dance competition in 2007. He has been temporarily replaced on Team Penske by Australian Will Power pending the outcome of the trial. The Indy Racing League season begins April 5.