SETTLING THE BILL: The favorite spot for socialites and visiting Euros, Cipriani on Fifth Avenue, finally reopened last month and now diners there will have plenty to talk about while sipping their Bellinis: The restaurant’s patriarch, Arrigo Cipriani, and his son, Giuseppe, pleaded guilty to tax evasion on Tuesday. According to a statement from Manhattan District Attorney Robert Morgenthau, the Ciprianis deducted nearly $31 million in “sham” payments to avoid paying about $10 million in corporate taxes to New York City and State between 2003 and 2004.

The alleged scam involved royalty payments that Cipriani USA was supposed to make to Cipriani SA. The royalty payments were deducted from taxable income. However, no royalty payments were made during 2003 and 2004, and “most” were not paid from 1998 to 2002 either, according to the statement.

In exchange for the Ciprianis’ guilty plea, the district attorney will not seek jail time, though the Ciprianis will have to pay New York entities $10 million and must employ an “independent monitor” until 2011 to ensure the family pays “appropriate corporate tax.” The father and son will also be on probation for the next three-and-a-half years.

The details of the agreement surprised several sources in defense and organized crime prosecution, who wondered why tax evasion involving a sum this large did not result in any jail time. But in a press conference, Morgenthau explained the plea agreement was struck because of the difficulty involving investigations that involve foreign countries, as this one did.

In a statement, the Ciprianis’ lawyer, Stanley S. Arkin, said, “The resolution of this matter allows the Cipriani family to put this incident behind them. They will continue to spend their efforts and energies in maximizing the growth of the unique Cipriani brand and their multifaceted businesses.”

This isn’t the first time the Ciprianis’ business tactics have raised eyebrows. For several years, Giuseppe has been locked in a long-running battle with the restaurant unions in New York City. Earlier this summer, Cipriani vice president Dennis Pappas was given a prison sentence of 18 months to four-and-a-half years for defrauding several insurance companies over disability payments he took while under the employ of Cipriani. Pappas has also been tied to the Colombo crime family and was convicted in 1998 of racketeering and didn’t go to work for the Ciprianis until 2000, when he was out on probation.

This story first appeared in the August 1, 2007 issue of WWD.  Subscribe Today.

In 2004, a government witness in the Peter Gotti trial testified Giuseppe Cipriani paid Gotti $120,000 to keep the unions out of the Rainbow Room, of which he’d recently taken control. Cipriani was never charged with any crime — “a bunch of crap” was how he described the allegation. But two years later, he pulled out of a plan to build a catering space at Pier 57 because, he said, he was annoyed by “bureaucracy,” which would have included a thorough probe of his past business practices by the Department of Investigation.

DESSERTS ONLY: Life in the Hamptons is about to get a little sweeter. On Friday, Dylan Lauren will open an East Hampton outpost of Dylan’s Candy Bar. Located on Main Street, the 1,000-square-foot store will feature a sampling of the merchandise available at the original Upper East Side emporium. “It’s actually a minibar,” Lauren explained, “and East Hampton is the perfect place to open a cousin to our New York City flagship.” Other mini Candy Bars are planned for Aspen, Colo., and Newport, R.I. For the moment, however, the entrepreneur is focused on ensuring this week’s opening of the East Hampton store will be a VIP event: her father Ralph will be on hand, as will “Chocolate the Bunny,” the chain’s mascot.

OUT AND IN: Retailers Fred Segal and Ron Herman are pulling a switcheroo in Las Vegas. Segal, who is Herman’s uncle, revealed plans last year to open his third retail location, a 100,000-square-foot store inside a $2 billion W Hotel scheduled to open in Las Vegas in 2009. But in May, when Las Vegas-based development company Edge Group pulled out of the project, which was a collaboration with Starwood Hotels, Segal said sayonara as well. Herman, on the other hand, recently said he will open a 3,000-square-foot store in Las Vegas at the Forum Shops at Caesar’s Palace on Aug. 9. The store will carry women’s apparel and accessories, including the Olsen twins’ debut ready-to-wear line, The Row.

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