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Italy Hits Guess With $12M Tax Bill

Prosecutor weighing charges against former president Carlos Alberini, others.

Guess Inc. and its former president have become the latest in the fashion world to face the scrutiny of Italian tax authorities.

This story first appeared in the October 24, 2012 issue of WWD.  Subscribe Today.

The company said in a Securities and Exchange Commission filing Tuesday that it will “vigorously contest” a $12 million tax assessment for 2008 and 2009 levied by officials in Italy as a prosecutor commenced a review of the actions of three members of its European management team and its former president and chief operating officer, Carlos Alberini.

Alberini, who is now chief executive officer of Restoration Hardware Inc., was the signing officer for Guess’ Italian tax filings during the years covered. He left the company to become co-ceo of Restoration Hardware in May 2010.

Guess said it could face additional tax assessments for 2010 and 2011, resulting in “similar or even larger assessments.”

Deborah Siegel, Guess’ senior vice president, general counsel and secretary, told WWD that only one of the three members of the European management group remains with the company. She declined to identify the individuals or the specifics leading to the dispute. “We do not know the next steps to be taken or the timing involved,” she said.

Because the additional tax amount is greater than 2 million euros, or about $2.6 million at current exchange, the matter was automatically referred to a public prosecutor “who may seek to pursue charges or close the matter,” Guess said. According to Italian law, if charges are brought, they would be against individuals affiliated with the company’s Italian subsidiaries rather than against the company or its affiliates.

Shares of Guess dropped 44 cents, or 1.8 percent, to $24.52 in New York Stock Exchange trading Tuesday.

Calls seeking comment from Alberini at Restoration Hardware’s offices in Corte Madera, Calif., weren’t returned at press time Tuesday. The tax dispute came to light just as Restoration Hardware prepared to float 5.2 million shares at $22 to $24 in an initial public offering. Alberini rose to the ceo post in August after Gary Friedman was ousted as co-ceo over an alleged relationship with an employee and became ceo of the firm’s Hierarchy spin-off.

The fashion world has long been a target of Italian tax authorities, with most designers being cleared of any allegations. The latest to be caught up in a tax probe are Domenico Dolce and Stefano Gabbana. The designers were cleared of tax-evasion charges in April 2011 after a three-year probe, only to see the ruling overturned seven months later. The case was reopened in March and is still pending.