MILAN — No case.
This story first appeared in the June 13, 2013 issue of WWD. Subscribe Today.
That was the claim Wednesday of lawyer Massimo Dinoia as he asked a judge for a full acquittal of his clients Domenico Dolce and Stefano Gabbana who, with five other individuals, have been charged with tax evasion. Dinoia asked Judge Antonella Brambilla to dismiss all the charges because there was no case to proceed.
The request for acquittal followed prosecutor Gaetano Ruta’s demand in late May that Dolce, Gabbana and board member and general director Cristiana Ruella be sentenced to two-and-a-half years in prison for tax evasion. Ruta alleged in his statement that the only purpose in selling the Dolce & Gabbana brands to Luxembourg-based Gado Srl in 2004 was to avoid paying taxes.
Spicing up his speech with humor and bon mots, Dinoia spoke for more than three hours, his experience in the courtroom clearly a plus. First, Dinoia delivered a one-two punch to Ruta.
“In his two-hour-17-minute-12-second speech, the prosecutor spoke about how he considers Gado a fictitious entity. To the five defendants he dedicated six minutes and 14 seconds, asking for 11 years and a half jail time. I take my robe off and ask as a citizen, is it possible to determine the responsibilities for each?” said Dinoia, his voice a pitch higher. “He spent 41 seconds and a half for each designer, asking for five years in prison for both.”
After months spent discussing the value of the brands, which is at the heart of the government’s accusations, Dinoia said this is “not the problem” in the trial as it is not a penal issue. Based on a business plan for the 2004-07 period, PricewaterhouseCoopers pegged the value of the Dolce & Gabbana and D&G brands at 360 million euros, or $484.4 million at current exchange. According to police calculations, which took into account lower tax charges in Luxembourg, the value of the brands was estimated at 1.1 billion euros, or $1.4 billion.
The lawyer pointed to contradictions between the work of Ruta and his colleague Laura Pedio and how the accusations and the individuals indicted changed over the years. “At first Alfonso Dolce [Domenico Dolce’s brother] was the only one indicted as a legal representative, then the designers followed after months — not even the tax police had pressed charges against them — and [general director Cristiana] Ruella and [finance director Giuseppe] Minoni for the first time in October 2007,” said Dinoia. “Why? We don’t know.”
He urged the court to look back in time. “Think back to 2003 and 2004 — a Copernican revolution has taken place since then. Remember how the European legislature was ten years ago. No prosecutor at the time would have contested a fiscal elusion because fiscal elusion was not a crime back then. Elusion in 2000 contrasted with evasion, as elusion had no penal implication. In 2011, after seven years, it became criminally relevant, but the Constitution forbids retroactive measures. The result of the defendants’ actions could reasonably not be foreseeable,” said the lawyer.
Dinoia underscored that the designers paid taxes on the amount received for the sale of their brands to Gado after they had turned to the Revenue Agency asking to determine the correct procedure. “The perfidious evaders,” he said with a smirk, “did not choose the easy way out, they maintained a transparent behavior, they wanted to conform to the authorities. In November 2002 they asked the agency for direction and the agency in March 2003 told them what to do: You must pay on the basis of what you receive and that’s what they did. Should they have disobeyed?” His anger rising, Dinoia said: “How can there be deceit if they asked the agency? The agency did not say go and check the market value. What you received you write, it said.”
The lawyer then tackled the subject of the company’s advisers, underscoring that the designers and Ruella always relied on professional experts. While accountant Luciano Patelli had been strongly admonished by Ruta, who requested a higher prison term of three years for him, Dinoia said he admired him for his loyalty and honesty in declaring that he could not have determined the value of the brands, turning to professionals for the task, as did Minoni. “The objective was not to evade the payment of taxes,” said Dinoia, pointing to the real issue: the fact that the brands were physically in the hands of the designers.
The lawyer said that throughout the trial’s testimony, Dolce and Gabbana consistently appeared remote from all of the issues that have led to the case. “How can you expect designers to know what tax rate to apply in 2004? They were never interested in this, they couldn’t know as I know nothing about style. Nobody ever dealt with them, everyone says so. Why should they be responsible? Who made the evaluations, who provided the numbers? Why are the people who provided the figures witnesses and not indicted? Of course the name of the consultants means nothing to the international press, it’s best to pick on designer names. After all this time, and different evaluations, even the prosecutors admit the value of the brands is a complex issue. How could the designers be expected to have understood everything before anyone else? Even the tax police said the designers had a merely artistic and creative contribution.”
Dinoia questioned Ruta’s accusation that Dolce and Gabbana were the only economic beneficiaries of the transaction. “After [founding] Gado they would have perceived the royalties not as profits but as dividends, and they would have saved money because the tax on dividends is lower than the one on profits. However, they never cashed in. The first dividends were distributed only in 2006 and 2007, and the money was reinvested in the company and in Luxembourg.”
He challenged Ruta’s request to charge PricewaterhouseCoopers’ Marco Tanzi Marlotti and Giovanni Ambrosetti, who Ruta had described as related to Pinocchio, for perjury. He also questioned the reliability of several of the prosecutor’s witnesses, calling them even bigger Pinocchios “who can’t even pass through the door for the nose length.”
“But is this the Italian State? I am sure that you will say a strong word,” Dinoia said, addressing the judge. “It is the citizen that is asking you, not the lawyer, a judge that says that there cannot be such an accusation. What can two citizens that have given luster to Made in Italy be thinking? This is the most paradoxical trial ever in the world, nothing similar from the times of the Greeks. The two designers would have presented an unfaithful declaration. They are accused of selling at a value that is too low. Is there damage or economic benefit? You tell me,” he said, asking the prosecutors. “They sold the brands for 360 million euros, but they should have sold it for more and paid double taxes?”
In the almost five-hour afternoon session, the designers’ other lawyer, Armando Simbari, addressed the issue of Gado being based in Luxembourg, dismantling the prosecutors’ accusations. “Luxembourg is not Satan, it’s not an offshore country, and everyone has the right to set up a company in any location they want, it’s a legitimate choice. Not only is this not a crime, it is forbidden to set a limit to this freedom of choice,” said Simbari. “Throughout the trial, I always had this nasty feeling that there is a prejudice whereby you are a criminal if you go to Luxembourg.” The lawyer set out to prove that the protection of the brands was managed with full autonomy by the employees working for Gado in Luxembourg and that this was not a fictitious entity. He also reiterated that Dolce & Gabbana’s public listing project, or a potential sale to a luxury group, was sound and at the base of the sale of the brands to Gado.
Lawyer Fortunato Taglioretti concurred, denying Ruta’s accusations that there was no real trace of a possible initial public offering for Dolce & Gabbana. “It takes from one to two years for an IPO, after depositing at least three years of your financial books. It took Salvatore Ferragamo four years to publicly list. Gado never had that time,” he said. As Simbari pointed out, echoing Ruella, an IPO could never have taken place before being cleared of any fiscal irregularities.
Also, Taglioretti said Ruta “must have been thinking of the Fifties, when companies were rich in employees, infinite merchandise and machinery,” contesting the accusations that one employee in Luxembourg was not enough to count as a full-fledged organization.
The next hearing is scheduled for Friday afternoon.