ARMANI ADMITS BRIBE, AS ITALY'S PROBE WIDENS

Byline: Sara Gay Forden

MILAN--Giorgio Armani admitted Saturday to bribing the national tax police, as Italy's tax corruption probe touched a growing number of top fashion figures.
Also joining the list Saturday of those who have been interrogated was Gianfranco Ferre. Ferre declined to comment on his questioning, but reportedly he also acknowledged a bribe.
On Friday, Basile chairman Luigi (Gigi) Monti was arrested and jailed after he had denied knowledge of a bribe reportedly paid by his firm during questioning last week.
Monti was the first fashion executive to be jailed in the scandal, although legal experts here generally don't expect
many players in the fashion business will be imprisoned, especially if they cooperate with the judges.
Armani confessed to paying a $64,000 bribe (100 million lire) bribe to the tax police in 1990 for the speedy conclusion of an audit, the designer's lawyers said.
Both Armani and Ferré were interrogated Saturday morning by Milan magistrate Antonio Di Pietro, the judge who led the epic "Mani Pulite"--or "Clean Hands"--corruption probe into illegal financing of Italy's political parties.
Now Di Pietro is heading up the investigation into bribes paid to the national tax police in exchange for favorable audits. News of the Armani and Ferré interrogations wasn't entirely unexpected after rumors circulated late last week that some of fashion's top names had been implicated in the widening probe.
Said Oreste Dominioni, one of Armani's lawyers, "He simply explained to the judge that during the audit, he was forced to pay the tax controllers."
"He paid to end the audit quickly," added another Armani lawyer, Lionel Ceresi.
Ferré, who met with Di Pietro later on Saturday, told reporters as he was leaving the courthouse that he had no comment on his interrogation. As of press time, a Ferré spokeswoman hadn't returned WWD's phone calls and his lawyer was unreachable for comment.
However, courthouse sources who had learned details of Ferré's deposition said he admitted to paying $193,000 (300 million lire) via a company executive to the tax police, also in 1990.
The depositions by Armani and Ferré follow those of Krizia's Mariuccia Mandelli and Versace chief executive officer Santo Versace, who came forward to the judges in the last 10 days. As reported, Mandelli admitted she paid a bribe that she felt she had been pressured to pay, according to Krizia's lawyer, Mario Scamoni. Versace's lawyers have not revealed specifics of Santo Versace's deposition, but a marshal of the tax police was arrested Thursday on charges of accepting a bribe from the Versace fashion group.
Current as well as former Basile executives and jeweler Gian Maria Buccellati have also been interrogated by the magistrates over the last 10 days. Buccellati admitted to making a payoff.
Interestingly, although the kickbacks involve essentially administrative aspects of doing business here, the designers have taken on full responsibility for personally answering the judges' questions.
Armani, reached at his Borgonuovo headquarters in Milan Sunday, where he was at work preparing for the presentation of his spring collection next week, said matter-of-factly, "I told the truth about what happened, and I explained why.
"I was forced to pay," he added, noting that his firm wasn't any different than so many other Italian businesses.
"The fashion sector is made up of companies that are part of this country's industrial reality, and therefore it shouldn't come as a surprise that the fashion houses haven't been able to escape a phenomenon of doing business in this country that has been diffuse," Armani said.
Basile's Monti is being held at the Milan jail San Vittore awaiting further questioning.
"He wasn't involved," said Raffaelle Di Palma, Monti's lawyer. "He didn't know anything, but clearly the judge didn't believe him."
Former Basile chairman Nicola Di Luccio, who was not arrested, reportedly admitted in a separate deposition last week that he had paid a bribe of $254,000 (400 million lire) to a tax official. Basile went into bankruptcy last year and currently is liquidating.
Also awaiting further questioning at San Vittore is Luciano De Camillo, who turned himself in to police over the weekend after fleeing from an arrest warrant last week for his alleged role in arranging an illegal, offshore payment by Krizia to tax officials.
De Camillo, who is an executive with Libyan oil company Tamoil, is accused of being the intermediary between Krizia and the tax police, though he reportedly wasn't acting in an official capacity for Tamoil. Use of preventive custody during the corruption investigations has been arbitrary and controversial, but generally the magistrates have let those who confess go free.
Since early this summer, Di Pietro has been investigating the widespread practice here of paying kickbacks in exchange for favorable audits. The investigation has targeted the elite SECIT corps of the Guardia di Finanza--the tax police--which answers directly to the Finance Ministry and ordered a series of audits in the fashion sector in the period 1990-1991.
Courthouse sources said it wasn't surprising that the auditors sooner or later turned their sights on the fashion houses, given the high profit margins and low accountability of the fashion sector in Italy, which is dominated by family and privately held firms.
None of the designer houses is quoted on the stock market, with the exception of Simint SpA, which is controlled by Armani and produces the Armani jeans line.
The sources said 14 more fashion firms are being targeted in the investigation for kickbacks amounting to more than $642,000 (1 billion lire).
The Italian press, which has dubbed the probe "Fiamme Gialle" for the yellow flame insignia on the uniform of the fiscal police corps, dedicated ample space to the designer depositions and couldn't resist a description of what the players were wearing on their day in court. Di Pietro, who made a fashion statement during the nationally televised Enimont corruption trial last year with burgundy polo shirts worn under his black toga, was wearing an elegant, dark blue suit for the occasion, complete with blue shirt and a blue tie, the press reported.
Ferré arrived in classic attire: double-breasted blue jacket with gold buttons, grey slacks and striped shirt. The Italian reports didn't say what Armani was wearing.
When asked whether he thought the fashion sector was being singled out unfairly, Armani lawyer Ceresi said, "This investigation is taking place in a much wider context. "The investigating magistrates are interested in getting answers to their questions, not in throwing designers in jail."
Furthermore, he noted, that given the widespread and systematic nature of the corruption, a number of political and legislative solutions are being debated here, though no specific reforms have yet been voted into law.
The investigation has already snared more than 50 tax officials, implicated hundreds of businessmen, and included interrogations at such leading firms as Prime Minister Silvio Berlusconi's Fininvest media empire, Fiat investment company Gemina SpA, Milan merchant bank Mediobanca and department store chain Rinascente. It has also investigated local branches of such multinational companies as Swiss drug giant Sandoz Ltd., and French cosmetics group L'Oreal.
Three tax officials have committed suicide over the investigation.
Italy has one of the most complicated taxation systems in all of Europe, and one of the highest tax rates. In this context, it's no surprise that tax evasion has become somewhat of a national sport. According to government statistics, seven out of 10 Italian companies cheat on their income tax returns.
According to Finance Minister Giulio Tremonti, the total value of taxes evaded from 1989 and 1993 was some $322 billion, or about $64 billion a year.
Judge Di Pietro himself has come up with a proposal that would institute incentives for confessions and step up plea-bargaining procedures to speed the mountainous caseload that is growing out of these investigations.
By the time any of these cases come to trial--it could take years--many will probably have forgotten what the fuss was all about.
In the meantime, however, the probe has shaken the Milan fashion community, which isn't accustomed to reading about its big players in the same headlines with investigating magistrates and kickbacks. Many hasten to distinguish the tax police investigation from the larger "Mani Pulite" probe, which over the last two years uncovered systematic kickbacks by Italian industry to finance political parties and earned the nickname "Tangentopoli," or "Kickback City."
Others lament the unfortunate timing of the designer interrogations a week before the spring-summer presentations, which begin on Saturday. In fact, the news prompted an unexpected defense of the design community from the city's colorful culture councilman, Phillippe Daverio, who just months ago was at the designers' throats for wanting free public spaces for their shows and receptions.
"It's already heavy going in the fashion world due to the economic slumps, and our image overseas is below zero. This just helps it slip further," Daverio said in an interview published in Milan daily Corriere della Sera."
"We risk compromising a pillar of the Italian economy," he said.
--Fairchild News Service

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