Dolce and Gabanna have been convicted of tax evasion by an Italian court.
Italian fashion designers Domenico Dolce and Stefano Gabbana have been given a one year and eight months suspended prison sentence and a hefty fine for not declaring hundreds of millions of euros to Italian tax authorities.
A court in Milan ordered the pair to pay 500,000 euros ($670,000) to Italy’s national tax agency.
Following the Wednesday judgment, lawyers for Dolce and Gabbana immediately said they would appeal. Under Italian law the sentence will be suspended while they do so.
“We will read the reasons for the verdict, and we will appeal,” said Massimo di Noia, one of the pair’s defense lawyers.
The design duo, whose clientele includes stars such as Kate Moss, Madonna, Beyonce, Bryan Ferry and Kylie Minogue, were not present in court on Wednesday.
The pair were accused of transferring control of the Dolce and Gabbana brand to Luxembourg-based holding company Gado — an acronym of the surnames of the two designers — while the company still operated out of Italy, was an attempt to avoid declaring taxes on royalties.
In her closing argument at the trial, public prosecutor Laura Pedio told the court that the designers were “well aware that they would reap a tax advantage from this transaction.”
Pedio said there was “rock-solid proof” that the duo had committed “sophisticated tax fraud.”
Arguing that Gado is nothing but a shell company that took no administrative or financial decisions, the prosecutor added: “Gado is a radio relay station. The orders originated in Milan, and bounced from Luxembourg back to the Milan offices where the decisions regarding the brands were made.”
Although Dolce and Gabbana were originally accused of tax evasion amounting to around one billion euros, trial Judge Antonella Brambilla ruled that only 200 million euros of that sum was relevant to the case.
Four other people, including Dolce’s brother Alfonso, were also given suspended jail sentences.
Wednesday’s court judgement is the culmination of an investigation that began in 2010 after Italian tax authorities ordered a crackdown on tax evasion post 2008 as a world recession began to bite.
Following an initial dismissal of the 2010 investigation in April 2011, the case was reopened in June last year before going to trial. For their part Dolce and Gabbana have always said they are innocent of the charges.
“Everyone knows that we haven’t done anything,” Gabbana tweeted last year after the trial was ordered.
“All that I care about is making clothes, that’s all. Let them do and say whatever they want,” he added.
Established in 1985, Dolce & Gabbana employs over 3,000 people and has 250 shops in 40 countries around the world.
The designers remain defiant in the face of the court ruling. Gabbana’s immediate reaction after the verdict was announced, was to tweet of a photograph of the branch of a citrus tree — a symbol of Sicily, which is where Dolce was born.
A fuller statement from the duo’s lawyers was released yesterday. It focused on what they saw as the positive aspects of the ruling, in particular, the reduction of the pair’s financial limitation from one billion Euros to 200 million.
The lawyers statement read [partial]:
“With great satisfaction, we acknowledge that – for the second time – a judge of the Milan Court has reiterated once more the absolute innocence – because the allegations are untrue – of Mr Domenico Dolce and Mr Stefano Gabbana of the accusation of having unfaithfully declared their earnings (the ‘notorious’ million dollars of Euros).”
“Even more so, we are satisfied about the result of this part of the verdict because, according to Italian legislation, the statute of limitations had already run out of the charge of misrepresenting income. Despite this fact, the judge felt the need to acquit them on the matter: this means that, according to the Italian law, the proof of their innocent is more than obvious.”
To see the rest of the lawyers’ statement click here.
According to at least one report, there is “little chance” Dolce and Gabbana, or their four other co-defendants will serve any jail time “because the sentences are below the two-year minimum generally required in Italy to do so.”
[Image via News 965]