Helio's financial life under scrutiny
MIAMI -- The Helio Castroneves tax-evasion trial took its version of a yellow flag on Wednesday afternoon, a needed four-day pause after a five-hour courtroom session that consisted of long periods of wearisome tax-law discussion punctuated by moments of combativeness.
As the case wrapped up its abbreviated third week to begin the long weekend, the two sides of the U.S. Federal courtroom in downtown Miami fired shots across each other's bow, each using the day's featured witness, New York tax attorney Fred Feingold, as the cannon.
Government prosecutors continued to connect the dots of a paper trail time line that they believe will prove that the racer was the secret owner of Panama-based Seven Promotions, which he, sister Katiucia and attorney Alan Miller have been accused of creating as a hiding place for $5.5 million in deferred royalty payments from Penske Racing.
During what became an exercise in paperwork tedium (at least two of the 17 jurors dozed off during the morning session), the two-time Indy 500 champion's entire financial life was on display for everyone in Courtroom 13-4, including a group of local high students on a field trip.
Meanwhile, the defense maintained its longtime stance that the "Dancing with the Stars" champion is merely an innocent victim of both his self-admitted ignorance concerning American tax law and his naive trust in others to handle his business affairs, beginning with his original mentors and business advisors, his father and Brazilian racing legend Emerson Fittipaldi.
"Would you say that there was a hole in this agreement?" defense attorney David M. Garvin asked, referring to the racer's 1999 contract with Seven Promotions, when he was a driver with now-defunct Hogan Racing and managed by Fittipaldi.
"Yes," Feingold replied, "a big one."
During the redirect, prosecutor Matt Axelrod asked, "During your meetings with Mr. Castroneves was [the Seven contract] an issue?"
Feingold responded, "It was always an important issue."
In 2002 the Manhattan law firm of Feingold & Alpert was hired to look over the driver's licensing agreement with Seven Promotions after Miller grew uneasy with what he had determined was an unstable, unmotivated company that hadn't produced any of the promised sponsorship dollars for his client.
Feingold testified that on June 5, 2002, less than two weeks after winning his second consecutive Indy 500, Castroneves traveled to New York with Miller and met with Feingold and an associate for more than three hours. "About half" of that meeting was dedicated to discussing the driver's relationship with Seven.
"He made it clear to us that he did not own the company or shares of the company in any sense," Feingold stated to the court, adding that he shared Miller's concerns over the stability of Seven Promotions and before the meeting had already started researching the possible benefits of a new partnership with Netherlands-based Fintage Licensing, with whom Feingold had a prior relationship while representing "another driver."
Later that summer a new marketing agreement was reached with Fintage, drawn up by Miller and signed by Castroneves, and the disputed funds were diverted from Panama into a deferred royalty account. The IRS contends that because Castroneves owned Seven Promotions, he still owes taxes on the diverted funds.
"Helio made it very clear that he wanted this done correctly," Feingold said when asked about his one and only face-to-face meeting with the racer.
Then, to reinforce the defense of blissful ignorance, Garvin asserted that Miller and Feingold had hammered out the legal details of it all while Castroneves merely thanked the two attorneys and got out of their way.
"None of this was explained to Helio?" Garvin asked Feingold during cross-examination. "Is that correct?"
"That is correct."
Six months later, Feingold delivered a formal tax opinion to Miller in which he spelled out the tax benefits and detriments of the now-disputed deferred payments received from Penske. Much of Wednesday morning was dedicated to poring over that opinion, particularly the details of a one-page spreadsheet drawn up by Feingold to illustrate to Miller the level of income made and taxes owed by the driver over a 15-year deferral period. In particular, the chart emphasized the differences between being a resident of the United States and a nonresident.
The prosecution presented that spreadsheet to the jury as proof that the decision to move money around and not pay taxes on it has been a carefully calculated plan, the image of a wealthy professional athlete trying to tunnel around the law. The defense claims that it proves the total opposite.
Garvin stressed to the jury that "Helio is not a U.S. citizen and the source of the money is not U.S.-based," which would protect the income from U.S. tax law. And when Feingold was asked if it helped or hurt Castroneves tax-wise to reside in the United States, he replied, "Based on these assumptions [in the tax opinion] it would have been a detriment."
When asked to clarify the word "detriment," he chuckled and said, "Bad things ... he's worse off."
The most animated moment of the day came via high-profile Washington attorney Bob Bennett, best known as President Bill Clinton's lawyer during the Monica Lewinsky scandal, and now representing Miller. After a morning full of reading and rereading decade-old memos and contracts, Bennett woke the jury up with a short, concise and high-volume line of questioning for Feingold about his discussions with Miller and Castroneves regarding Seven Promotions.
"Did [Castroneves] ever say, 'Don't worry about it, I control this company'?"
"No," Feingold replied. "Quite the contrary."
Then he turned the attention to his own client, who has handled the finances for an all-star list of racers over the past four decades, including Jimmie Johnson.
"Did you find Alan Miller to be a man of integrity and high ethics?"
"Yes, I did."
Judge Donald Graham adjourned the court for a four-day break just as the prosecution was beginning its examination of IRS special agent Antonio Gomez, which will resume Monday morning. Axelrod says he expects to wrap up the government's side of the trial by the middle of next week and is hopeful the case will be in the hands of the jury shortly thereafter.
As his fate was argued on Wednesday morning, a future with a potential maximum sentence of more than six years behind bars, Castroneves took notes while surrounded by an army of seven attorneys, his two codefendants and a sparse gallery of onlookers, primarily made up of IRS agents.
While the two groups of attorneys packed box after box of papers to vacate the courtroom, the smallest man and biggest star in the room held up his notepad to reveal what he'd been writing down.
"It's mostly just scribbles," he said with a smile. "I have to do something to keep my hands and mind occupied. Otherwise I'll go crazy."
Ryan McGee, a senior writer for ESPN The Magazine, is the author of "ESPN Ultimate NASCAR: 100 Defining Moments in Stock Car Racing History." He can be reached at email@example.com.
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