» BACK TO CRASH.NET

Crash.Net IndyCar News

Castroneves facing new US tax pressure

12 May 2011

Helio Castroneves thought that his tax problems were finally behind him, after he walked into the Miami office of the Internal Revenue Service and handed over a cheque for $5m in August 2009. That followed the IRS' highly publicised criminal prosecution of Castroneves for unpaid taxes and criminal tax evasion that could have seen the popular driver sent to jail earlier in that year.

But it emerged at the weekend that the IRS is now demanding a further $6.4m from the IndyCar star - which includes a hefty penalty levied for alleged tax fraud.

In the original 2009 criminal court case, the jury needed six days of deliberations on complex legal and accounting issues to reach a verdict. They decided that case in favour of Castroneves, his sister and manager Katiucia and his sports attorney Alan R. Miller, and acquitted them on charges of conspiracy and criminally evading the payment of taxes. If he had been convicted, Helio could have faced a lengthy jail sentence.

The disputed taxes were on income he received from Penske Racing Team between 2000 and 2004 for the use of his name, image and endorsement on licensed merchandising sold by the team. The income - around $15m - was supposed to have be placed in a Panamanian tax shelter but instead was transferred to a Dutch annuity account and then allegedly not properly disclosed to the IRS for taxation purposes.

Just weeks after the verdict was handed down and Helio walked free, he went on to win his third Indianapolis 500. Later in the year he handed over the $5m cheque to cover the unpaid taxes as well as three subsequent years of income.

But now, according to The Miami Herald at the weekend, the IRS have filed a "notice of deficiency" in the US Tax Court and claim he still owes $3.7m in back taxes over the same 2000-2004 licensing issue.

Furthermore - and despite the 2009 criminal court findings - the IRS asserts that it has "determined that all or part of the underpayment of the required taxes on the returns ... is due to fraud" and accordingly levied an additional $2.7m penalty, and are consequently demanding over $6m in immediate payments by Castroneves.

“It's almost like a re-trial,” said the Miami attorney who represented Castroneves in 2009, David Garvin. "Our position was, and is, that he properly handled this as a taxpayer."

Gavin maintains that his client paid the taxes to the IRS in 2009 promptly after receiving the funds from the Dutch annuity company, "but that doesn't seem good enough for them." Instead, he said that the IRS are using the lower burden of proof in civil court - as opposed to criminal court - in "a desire to punish [Castroneves] and justify [IRS] use of resources in the unsuccessful criminal case."

Castroneves - who sold his Coral Gables mansion last year and moved into a Fort Lauderdale waterfront rental apartment with his wife and daughter - is contesting the IRS claims.

Since his peak days in IRL and IndyCar last decade, Helio has been finding success harder to come by on the race track. In the last 18 months he has been increasingly overshadowed at Penske by the success of his Australian team mate Will Power, who came close to winning the 2010 IndyCar championship after a string of road course wins.

Castroneves did take three race wins in 2010 but is winless so far in 2011, while Power has won twice at Alabama and Sao Paulo. Power tops the IndyCar championship on 168pts while Helio is exactly a hundred points behind in a lowly 17th position. It's a season that has seen him become worryingly accident-prone, including taking his team mate out of a potential race win with an on-track collision at Long Beach.

Ironically, Power's own involvement with Penske Racing dates back to 2009, when the team needed a driver to fill in while Helio was facing his original tax trial.

Helio remains one of IndyCar's biggest star names in the US, not just thanks to his success in the sport and at Indianapolis, but because of his win in the celebrity reality show "Dancing with the Stars" which made him a familiar face and personality across America beyond just motor sports circles. His flamboyant habit of climbing the wire fencing surrounding oval tracks to salute the crowds after a race has also boosted his popularity and fame, and won him the nickname of "Spider-Man".

This month, the Brazilian star - who turned 36 on Tuesday, May 10 - is aiming to become the first four-time Indy 500 winner born outside of the USA, following in the footsteps of AJ Foyt, Rick Mears and Al Unser.

Meanwhile, long-time rival Dario Franchitti will be aiming to join Helio on the three-win step and become only the second foreign-born driver to reach that Indy 500 landmark.


» BACK TO CRASH.NET