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Dolce, Gabbana Tax Evasion Ruling Is Overturned

The decision means the designers will have a new preliminary hearing in front of a new judge.

MILAN — Stefano Gabbana on Thursday took to Twitter to defend himself and Domenico Dolce after Italy’s equivalent of the Supreme Court overturned the decision of a Milan court absolving the designers and several associates of alleged tax evasion.

The designers have always denied any wrongdoing and refrained from commenting since issuing a statement in May 2009. However, on Thursday, Gabbana dropped his guard and angrily vented through his Twitter page.

“Ladri!!! [‘thieves’ in Italian],” Gabbana tweeted, addressing the State. “They don’t know what to do to get money out of us.” The comments were quickly removed, but Gabbana then tweeted: “It’s really true that in Italy they do what they want…as they please.…Perhaps it would be best to leave…”

“The door is open, feel free to go,” reacted one Roman follower. “If you leave Italy, first remember to pay ALL backed up taxes! And don’t come back!,” said another. To this, Gabbana replied that he was “sorry only for [the group’s] more than 5,000 employees.” Another tweeter urged Gabbana to prove that he was not evading taxes, and to leave his employees out of it. “No dear!!! First they have to pay me for the slanders…and then I leave!!!:)),” said the designer. “Why should I pay for something I didn’t do?”

Italy’s equivalent of the Supreme Court on Wednesday overturned the decision of a Milan judge last spring to clear the designers’ of charges of alleged tax evasion.

Giuseppe Bana, lawyer for the designers’ accountant, Luciano Patelli, who is also indicted, told WWD he was “extremely surprised” by the Court’s ruling.

The Court’s motivations are usually presented after 20 days or a month, but in light of the Christmas holiday, they are expected in early January. One legal source said, “It’s back to square one. Anything can still happen.”

The decision means there will be a new preliminary hearing in front of a new judge. “I assume the Supreme Court believes the judge’s decision to clear the designers was tainted by a legal flaw, a defective motivation or an error in the application of the law,” said a legal source.

In April, deeming there was no foundation for a trial, judge Simone Luerti dismissed the charges against Dolce and Gabbana and five other defendants, including Dolce’s brother and board member, Alfonso Dolce, and managing director and board member Cristiana Ruella.

Milan-based prosecutor Laura Pedio appealed to the Court, which issued its pronouncement after about six months. The decision comes as Italy is plagued by debt, unemployment and curbed growth. Many of the tweets underscored the average Italian’s impatience with the situation. Several tweeters complained that their salaries were cut in half by taxes. Entrepreneurs should “understand that taxes are not accessories,” said one. Aother tweeter called for a boycott of Dolce & Gabbana products.

But the designer also had his share of supporters. One expressed “LOVE!” and another told Gabbana to forget about the ill-wishers. Gabbana’s Twitter page has about 165,000 followers.

Both designers were charged with alleged tax evasion to the tune of 416 million euros, or $562 million at current exchange, related to the 2004 sale of the Dolce & Gabbana and D&G brands to the designers’ Luxembourg-based holding company, Gado Srl. The Italian tax police reportedly consider Gado essentially a legal entity allegedly used to avoid higher corporate taxes in Italy.

The designers in 2009 said the accusations were “based on a completely abstract calculation” that enables the tax authorities to replace the sum actually paid with a hypothetical market value. Luerti’s acquittal of the designers last spring, said the 2004 sale “was a real operation, corresponding to legitimate and precisely identified needs.” A separate criminal probe into supposed tax irregularities at the Dolce & Gabbana Group was part of the case dismissed in April. Those accusations address unpaid taxes of 200 million euros, or $270 million. Conviction of national income tax evasion can carry up to a three-year prison sentence or a fine of up to 1 million euros, or $1.3 million at current exchange.

If the new judge decides to proceed, Dolce and Gabbana’s lawyers may decide to negotiate and pay a fine to avoid a long and costly court trial and keep the designers’ criminal records clear. But having maintained their innocence, the designers may opt for an ordinary trial. Another alternative is a speedier trial based on a fewer documents and witnesses tthat would result in a penalty discounted by one-third.

The news that Dolce and Gabbana had been indicted and could face a court trial emerged a year ago. The investigations, which began in 2008, were initiated by the Guardia di Finanza, an Italian police force under the authority of the national minister of economy and finance.