WASHINGTON – Helio Castroneves, a U.S. resident and two-time winner of the Indianapolis 500, was indicted by a grand jury today on charges of conspiracy to defraud the United States of income taxes and with six separate counts of income tax evasion for tax years 1999 through 2004, announced the Justice Department, U.S. Attorney for the Southern District of Florida R. Alexander Acosta and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent-in-Charge Michael E. Yasofsky Jr. Also charged in the indictment were Helio Castroneves’ sister and business manager, Katiucia Castroneves of Miami, and his attorney, Alan R. Miller of Michigan.
Count one of the indictment charges Helio Castroneves, Katiucia Castroneves and Miller with conspiring to defraud the United States by using an offshore Panamanian shell corporation – Seven Promotions Corporation (Seven Promotions) – to fraudulently conceal from the IRS income received from two sources: Coimex Internacional SA (Coimex) and Penske Racing Inc. (Penske).
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.
An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless and until convicted through due process of law.
If convicted, the defendants face a maximum penalty of five years in prison on the conspiracy to defraud the United States count, and five years in prison on each of the tax evasion counts.
"Taxpayers, small and large, famous and not famous, should be aware of the enormously severe consequences they face if they fraudulently use offshore accounts to hide income, including potentially going to prison, paying back all their taxes plus interest and penalties, and being branded a felon for the rest of their lives," said Nathan J. Hochman, Assistant Attorney General of the Justice Department's Tax Division.
"Whether one makes a living parking cars or racing them, paying taxes is a responsibility that everyone shares. Our tax laws apply equally to everyone, regardless of status, class and income, and the U.S. Attorney’s Office will prosecute these cases vigorously," said U.S. Attorney Acosta.
U.S. Attorney Acosta commended the investigative efforts of the IRS. Acosta also noted the assistance and cooperation in this investigation of the Brazilian Federal Police, the Dutch Federal Police and the Brazilian Federal Public Minister’s Office in Sao Paulo.
"It is a legal requirement for individuals to accurately report all income and pay their tax liabilities," said Special Agent-in-Charge Yasofsky of the IRS-CI Miami Field Office. "IRS will investigate and hold accountable those who conspire to intentionally evade their responsibility in complying with the tax laws."
"Using offshore corporations for the purpose of evading taxes is a crime. This case sends a clear message that the IRS is committed to vigorously enforcing the lax laws and stopping offshore tax evasion," said IRS Commissioner Doug Shulman.
The case is being prosecuted by Assistant U.S. Attorneys Matthew Axelrod and Jared Dwyer. Related court documents and information regarding this case can be found on the Web site for the U.S. District Court for the Southern District of Florida at www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.