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|Castroneves' tax woes are terrifying for his fellow drivers.|
This column appears in the May 5 issue of ESPN The Magazine.
"God bless him, but he's clueless."
Those words echoed through my head as I sat in Miami's U.S. Federal Courtroom 13-4 on March 18. Not 10 yards away was the man who'd recently uttered that opinion, criminal tax defense attorney David M. Garvin. To his left sat his client, Helio Castroneves, fidgeting in a navy suit while on trial for failing to pay nearly $2.5 million in taxes.
On one side, the U.S. government was alleging that Castroneves and his sister, Katiucia, had set up a shadow company in Panama 10 years ago to avoid taxes. On the other, the family was claiming that the company, Seven Promotions, was simply intended to support Helio's emerging fame back home in Brazil. Meanwhile, the two-time Indy 500 winner and one-time Dancing With the Stars champ scribbled on a yellow notepad, trying to look like he understood all the accountants taking the stand. Seven weeks later, Helio, Katiucia and Alan Miller, Helio's financial adviser, would be cleared of all tax evasion charges, but the damage had already been done: to Helio's legacy, his image and, thanks to legal fees and races missed, his wallet.
For you and me, having every detail of our lives laid bare in court would be difficult. For the alpha male professional athlete, it is nothing short of devastating. And for many drivers in IndyCar and NASCAR, the trial was terrifying. Racers are nonunionized, independent contractors. Unlike athletes in major team sports, they have no structure in place to educate them on how to handle their finances. The fear of not knowing exactly where their money goes is why drivers from Danica Patrick to Kurt Busch have recently unearthed their own contracts to sift through the details. "The big money only really got to racing in the past 15 years or so," says Tony Stewart, who owns at least a partial stake in 16 different businesses. "Baseball, football and basketball have had decades to get a handle on this. But it's still new to us, and that's scary."
Another Castroneves lawyer, Roy Black, also argued that his client never made financial decisions, that all he did was drive. During a break in the proceedings, Helio said as much. "All any racer wants is to drive for Roger Penske," he told me, pointing to a giant stack of file boxes being wheeled into the courtroom. "But a handshake doesn't make that happen. Papers do. Boxes and boxes of confusing papers."
The U.S. tax code is 3.7 million words spread across 17,000 pages. On April 15, President Obama called it "monstrous" and "too complicated for most Americans to understand." The more you make, the more those pages stick to you like flypaper. Which is how newly minted teenage athletes, fluent in BFF and OMG, suddenly find themselves drowning in a sea of LLC and PBGC.
Mets slugger Carlos Delgado has never been in financial peril, but he empathizes. "Imagine how it is when you don't even speak English," said the Puerto Rico native, in Miami for the World Baseball Classic. "It all happens so fast and is so confusing that you end up just handing it to people who seem like they know what they are talking about. And there are so many of them coming at you, it's hard to determine who you can trust. If they mess it up, it's on you. It's your life."
Picking the wrong person to handle your cash seems to be easier than picking the right one. Ask Darryl Strawberry or Wesley Snipes, who've been dragged through tax trials. When faced with all those confusing contracts, Castroneves took the same step so many others have and turned to those he trusted most: his sister and his father (not charged in the case). They were the smartest people he knew, but they were not accountants, and they were certainly not lawyers. So when Penske came calling in 1999, Castroneves enlisted Miller, the most trusted money-handler in motorsports, whose clients include Jimmie Johnson, Clint Bowyer and Casey Mears. Miller did his best to undo the damage done by Helio's family, but he was mending cannon holes with masking tape. A few boxes of paperwork later, he found himself in courtroom 13-4 with Castroneves, accused of cooking up a three-continent tax-shelter scheme involving shell corporations and Monte Carlo escape plans.
Team owners will still search deeper and younger for the next Joey Logano or Graham Rahal. Let's just hope tomorrow's stars will heed today's lessons. After all, the "clueless" defense gets one shot. And Castroneves used it up.