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MILAN — Bulgari on Thursday said it is “confident” it will disprove allegations of fraudulent earnings in Italy, and also accused Italian authorities of waging a campaign in the media to destabilize the Roman jeweler by seizing assets.
The comments came after Italy’s tax police, the Guardia di Finanza, said it had confiscated real estate, including two sites on Rome’s Via dei Condotti; life insurance policies, and corporate investments traceable to Bulgari executives for a total value of 46 million euros, or $60 million at current exchange. Paolo and Nicola Bulgari, chairman and vice chairman, respectively, of Bulgari SpA; former chief executive officer Francesco Trapani, and Maurizio Valentini, current legal representative of the Italian parent company, are among the executives named by the tax police.
The investigations are focused on alleged fraudulent earnings declarations and evasion of tax payments of around 3 billion euros, or $4 billion, starting from 2006, through a system of allegedly fictitious companies in the Netherlands and Ireland, set up in order to avoid paying taxes in Italy.
The tax police said it has unearthed nine pages of documents in which Bulgari executives named an “escape strategy” to find alternatives to Italy’s high tax rate and, in particular, to legislation introduced in 2006, “referred to taxes to be paid on dividends coming from countries with a privileged fiscality.”
Bulgari said Thursday that company officers and directors were notified of the precautionary seizures after learning about them in press reports and vowed to “raise this serious breach with the competent authorities.”
“The company is extremely surprised by the arguments deployed in such order and declares that the foreign companies at issue are real and genuine companies performing an undisputable strategic role for the group, employing about 300 employees of various profiles,” said Bulgari, a subsidiary of LVMH Moët Hennessy Louis Vuitton.
Rome-based Judge Vilma Passamonti requested the precautionary seizure following requests from a local prosecutor, said the police.
Guardia di Finanza commander Alfredo Falchetti told WWD that, contrary to media reports, the historical boutique in Rome’s Via dei Condotti has not been confiscated, and that the investigations, initiated in 2011, refer to the years spanning from 2006 until 2010. “It all started in 2011, when we found differences between the papers and the actual movement of goods. For example, jewels did not move from Ireland to Italy but from Switzerland to Italy,” said Falchetti.
According to the “escape strategy,” said the police, Bulgari “margins — the difference between revenues and costs of sales — were reallocated, through foreign controlled companies, in countries other than Italy, and, in particular, first in Switzerland, then in the Netherlands and, lastly, in Ireland.” In the papers found by the police, Bulgari allegedly defined Ireland as “the only country available with a low fiscal pressure, 12.5 percent, not located in a fiscal paradise.” For this reason, Falchetti said Bulgari had singled out Ireland as its “final destination” in terms of fiscal planning for the group. Accordingly, Bulgari Ireland Ltd. (Beire) was founded and entirely controlled by the Italian Bulgari SpA with “the objective, only apparent, of stocking and shipping finished goods to the group’s commercial companies or third distributors around the world,” said the police statement.
It concluded by saying that Bulgari “omitted to declare corporate income taxes in Italy for almost 3 billion euros in the period 2006-2011, as well as a regional tax on production for more than 1.9 billion euros, or $2.5 billion. Dividends that were unduly not taxed in the same period totaled more than 293 million euros, or $381 million.” The corresponding amount of unpaid taxes totaled more than 46 million euros, or $60 million.
In December, the tax police accused the Rome-based jewelry firm of evading tax payments of more than 70 millions euros, or $91 million. The inquiry was said to focus on 2011, when LVMH took control of Bulgari in a cash-and-share swap valued at more than $6 billion. Falchetti said he could not confirm or comment on that investigation.
The Bulgaris are the latest in a long line of Italian fashion industry figures to be targeted by the country’s tax police, ranging from Giorgio Armani to Valentino Garavani and Giancarlo Giammetti to, most recently, Domenico Dolce and Stefano Gabbana. Almost all the cases have subsequently been dismissed, although the Dolce and Gabbana one is ongoing. In November, the Italian tax authorities took aim at another high-profile fashion family: the Marzottos. The allegations involve the family’s association with the sale of Valentino Fashion Group to private equity fund Permira in 2007 and include former Valentino chairman Matteo Marzotto, among others. In this case, too, the police confiscated assets, including land and real estate properties, worth more than 65 million euros, or $83.4 million, owned by a number of Marzotto family members.