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MILAN — Domenico Dolce and Stefano Gabbana are to stand trial in court on Dec. 3.
This story first appeared in the October 30, 2012 issue of WWD. Subscribe Today.
Because they are charged with omitted and unfaithful earnings declaration, they are not to go through a preliminary hearing. The designers were originally absolved of the claims by a lower court in April 2011, but the Italian Supreme Court in November overturned that decision.
In February, the court laid out the reasons why it decided to reopen the case, alleging Dolce and Gabbana and several business associates evaded taxes. The Supreme Court said tax avoidance, or tax mitigation, on an earnings declaration is a criminal offense under the law. This is a major ruling since tax avoidance — which allows taxpayers to take advantage of certain benefits, such as creating a separate legal entity to which one’s property is donated, for example — previously was not considered a crime.
The designers did not respond to a request for comment at press time Monday.
The investigations began in 2008, initiated by the Guardia di Finanza, an Italian police force under the authority of the national minister of economy and finance. Both designers were charged with alleged tax evasion to the tune of 416 million euros, or $538.1 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 used to avoid higher corporate taxes in Italy.
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 $258.7 million.
Giuseppe Bana, lawyer for the designers’ accountant Luciano Patelli, told WWD on Monday that he was “extremely optimistic” about the outcome of the trial, but said more details were going to be made available the following day.
A legal source said the trial will not allow for plea bargaining or the request for shortened or other alternative proceedings.
“I am optimistic and I consider them innocent until proven guilty,” said Armando Branchini, deputy chairman of Milan consultancy InterCorporate. “It is easier to make headlines with an important and world famous name. Yes, it’s true that the fight against tax evasion is more severe now, but this seems a bit excessive.”
The designers have always denied any wrongdoing and in an interview with WWD in December, they expressed clear consciences and a lack of bitterness, albeit disappointment, over their battle with Italian authorities concerning the alleged tax evasion.
In April 2011, 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. However, Milan-based prosecutor Laura Pedio appealed to the Supreme Court, which issued its ruling after about six months.
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.