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DATE News (chronologically)
05/07/11
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IRS again after Castroneves for fraud  
With the IRS constantly after him, at some point Castroneves may become too much of a burden for Roger Penske
Indy 500 champ Helio Castroneves beat the government in a criminal tax-evasion case two years ago, and paid $5 million in income taxes after the Miami trial was over.

But apparently that wasn’t enough for the Internal Revenue Service, which again says he owes millions more in back taxes.

In U.S. Tax Court, the IRS asserts the Brazilian race car star still owes more than $6 million in additional taxes and fraud penalties on the very same licensing income he earned from Penske Racing Team from 2000-04.

Castroneves, who sold his Coral Gables mansion last year and is renting a Fort Lauderdale waterfront apartment with his wife, Adriana Henao, and toddler daughter, is fighting the IRS’ civil case against him.

“It’s almost like a re-trial,” said Miami attorney David Garvin, who, along with lawyer Roy Black, represented Castroneves in the 2009 trial. “He did pay off his taxes after the trial, but that doesn’t seem good enough for them.”

Garvin, a tax specialist, said he always realized it was possible the IRS would come after his client again in a civil case, which has a lower standard of proof than a criminal trial. “But I had hoped they would realize with the jury’s [not guilty] verdict that their position was without merit,” he said.

The federal trial of Castroneves and his sister-manager Katiucia was a photo finish. The 12-member Miami jury struggled to unravel complex evidence regarding racing-car contracts, tax law and offshore companies. Under his Penske licensing contract, Castroneves’ income was supposed to be sent to a Panamanian tax shelter, but ultimately it was transferred to an annuity account in the Netherlands instead.

After six days of deliberations, the jury acquitted Castroneves and his sister of evading taxes on $5.5 million in income from the Penske licensing deal. But they deadlocked on the lead conspiracy charge against the siblings, leading to a mistrial on that count, which prosecutors eventually dropped.

The jury also acquitted Castroneves’ sports attorney, Alan R. Miller, on the main conspiracy charge and tax-evasion offenses.

After his trial victory in April 2009, Castroneves won his third Indy 500 race one month later. Then he walked into the IRS’ downtown Miami office in August and handed over a $5 million check. He and his lawyers thought that was all the taxes he owed on his Penske licensing income, which covered not only 2000-04 but also three subsequent years.

His tax payment accounted for one-third of the $15 million he earned from Penske Racing -- income that had been deferred in the Dutch annuity account over much of the past decade. The company, Fintage, cut Castroneves a check for his taxes, made out to the IRS. After he delivered it to the federal agency, Fintage wired Castroneves about $10 million.

“Our position was, and is, that he properly handled this as a taxpayer,” Garvin said. “He received the funds from Fintage in 2009 and promptly paid his taxes.”

But the IRS, in its “notice of deficiency,” doesn’t give Castroneves credit for the $5 million payment, Garvin said. The agency says Castroneves -- who gained greater fame when he won the Dancing with the Stars reality TV show – still owes $3.6 million in taxes and $2.7 million in fraud penalties for 2000-04.

According to the IRS’ notice, the agency has “determined that all or part of the underpayment of the required taxes on the returns ... is due to fraud,” noting that a 75 percent penalty has been imposed on the unpaid taxes, as a result.

Castroneves’ lawyer said the IRS’ “actions are not supported by the law and appear to be improperly motivated by a desire to punish [him] and justify [the agency’s] use of resources in the unsuccessful criminal case.” Miami Herald

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