The Messi case, part 1: appeals court affirms tax fraud conviction

A year ago, the soccer star Lionel Messi was on the coveted cover of Sports Illustrated (SI). SI touted the success of his professional team and an upcoming match called the Copa America.

What a difference a year makes. This week’s news about Messi is that an appeals court has affirmed his conviction on tax fraud charges.

In this two-part post, we will use a Q & A format to discuss what can U.S. taxpayers learn, as a cautionary tale, from the Messi case.

Who is Lionel Messi?

He is an Argentine who plays for FC Barcelona and earns millions of dollars a year in salary and endorsements. To use a basketball analogy, he would be like Stephen Curry or Lebron James in this country.

How long has the case been going on?

Tax authorities in Spain have been after Messi for several years. They contended that his father, Jorge, engaged in tax evasion by using numerous offshore shell companies to hide income from endorsement contracts.

Authorities initially filed charges in 2013. Messi asserted he had done nothing wrong, but did make a substantial payment of 5 million Euros to address his tax debt.

Eventually the case went to trial. Messi again argued that he had done nothing wrong and that he had trusted his father and other advisors.

What was the outcome of the trial?

In July of 2016, a court in Spain convicted both Lionel Messi and his father. The court disagreed with the argument that Lionel’s lack of knowledge of his financial affairs absolved him of responsibility. Choosing to remain willfully ignorant, the court said, is not an excuse for lack of compliance with the law.

Lionel Messi appealed his conviction. But the Spanish Supreme Court agreed with the lower court that Messi should have known about the tax evasion scheme and affirmed his conviction.

Will Lionel Messi go to prison?

Though his sentence was for 21 months in prison, it seems likely that he will get probation, not prison.

What can U.S. taxpayers learn from this case?

Trying to defend against tax evasion charges by claiming lack of knowledge is problematic. Even if you want to focus on success in your chosen field, you can’t leave everything tax-related to your tax or financial adviser.

We will discuss this further in part two of this post, along with the implications for offshore compliance from the Messi case.