MILAN — Matteo Marzotto and his sister are going to appear at last at the next hearing in their tax trial here, which is scheduled for Sept. 30.
The Marzottos will each make personal statements to the court, their lawyer said. That was the new and surprising development that emerged during the hearing at the Milan courthouse Wednesday as witnesses called by Matteo Marzotto’s lawyers continued to present the young textile heir as being opposed to the sale of Valentino, against the backdrop of feuding private equity funds, executives and members of the Marzotto family.
But Valentino Garavani’s longtime partner Giancarlo Giammetti and the brand’s chief executive officer Stefano Sassi are no longer slated to take the stand as witnesses in the trial. Also, additional hearings are scheduled for Oct. 16 and Oct. 28 — possibly the last, said Judge Orsola De Cristofaro. The verdict could be handed down that day.
The Marzotto siblings, indicted with other defendants for alleged omission of earnings declaration and tax evasion, have so far not been present in court. Matteo Marzotto has in the past declared that he had “always operated in the full respect of the law.”
The allegations involve the Marzotto family’s association with the sale of Valentino Fashion Group to private equity fund Permira Advisers LLC in May 2007 for more than 782 million euros, or $855 million at current exchange rate.
Core to the trial is International Capital Growth, a firm the tax police believe to be a fictitious entity based in Luxembourg and managed in Milan, and allegedly created for the purpose of selling 29.9 percent of VFG. According to the indictment, taxes on the profit derived from the transaction were never paid in Italy.
The first witness heard on Wednesday, lawyer Umberto Nicodano, a partner at Milan-based legal studio Bonelli Erede Pappalardo, said he assisted Permira in the acquisition of Valentino, but said he had “worked with nobody from ICG.” Nicodano and Matteo Marzotto connected only to write up the contracts for Garavani and Giammetti’s exit, which eventually took place in January 2008, and for Alessandra Facchinetti as the couturier’s successor, but never in relation to the Valentino sale. Nicodano pointed to competing potential buyers for the brand, including The Carlyle Group, and said that no due diligence had been done as the company was publicly listed at the time.
Gianluca Andena, who in 2007 was co-ceo of Permira Associati SpA, the Italian arm of the private equity firm, said that the contract between ICG and Permira was written up on May 16 that year, and that former shareholder Andrea Donà Dalle Rose, who is also a member of the Marzotto family, had always been the main contact for ICG. Andena recalled that Permira had been contacted in fall 2006 by investment banks suggesting the opportunity to approach and gain control of Valentino Fashion Group.
“Andrea Donà Dalle Rose was the main contact for ICG with potential buyers,” said Andena.
Permira was also negotiating with former VFG chairman Antonio Favrin and shareholder Dario Segre through their vehicle Canova, but never reached an agreement.
“We had a different vision of the future and the governance did not fit with ours as [Canova] wanted to maintain control,” said Andena.
For that reason, Permira reached out to two other branches of the Marzotto family to see if it was possible to buy more than the ICG quota and reach a majority stake. The two branches, each with a 10 percent stake, were controlled by Count Paolo Marzotto and four Marzotto brothers, headed by Gaetano, and cousins of Matteo Marzotto.
Carlyle had emerged as the main competitor in the bid, as it bonded with Canova. “Permira finally closed the deal with ICG and the two Marzotto branches,” said Andena.
Responding to a question by Marzotto’s lawyer Alessandra Mereu, who asked if Andena had ever negotiated the deal with Diamante or Matteo Marzotto, the executive said he met the latter for lunch at his home a week after the sale had been agreed. “I went to meet him because we knew very little of the world of fashion, and we wanted to understand it better. He was the president of Valentino, it was good for us,” Adena said.
Also, he noted that the situation was “delicate” as an agreement had been reached with Garavani and an heir had been chosen. “We wanted to know how he felt about it. That was the first meeting, then there were others, but always very operative. Matteo was the only one [of the Marzottos] working in the company.” Reiterating statements made by previous witnesses, Andena said that “Matteo had never attended any meeting about the sale.”
Fabrizio Carretti, who worked with Andena at Permira on the Valentino acquisition, also said he met Matteo Marzotto after the deal was done and that he had never met his sister Diamante.
Responding to a question about the sale of Valentino to the Qatar-based Mayhoola for Investment in 2012, Carretti said it had been “a good deal” for Permira and also for the new owner. “We were very happy and they are very happy. The brand is developing very well.”
A former manager of ICG, the French-born Patrice Gallazin, said he never knew Matteo Marzotto, but was asked to write to him because the entrepreneur had told the media that he did not want to sell Valentino. In the letter, Gallazin told Marzotto “it was not in his power to speak on behalf of ICG as he was not an administrator of that company.” Gallazin said VFG was publicly listed and Marzotto’s statements could influence the performance of the shares, but added that he had not received any response to the letter.
Gabriele Escalar, called by the Marzottos’ lawyers as a technical consultant, contested the prosecutor’s assumption that the company’s administrative headquarters were in Milan, hence effectively surmising that the headquarters of the company were in that city.
“There are three criteria upon which a company can be considered resident in Italy: its legal headquarters; its administrative headquarters, or its essential activities are based in the country, and only one of these is enough [to this end],” said Escalar. In a case of double fiscal residence, as contested by the Italian tax police, Escalar said it is where the administrative headquarters are based that counts and where the effective management took place, i.e., in Luxembourg.
According to the accusations brought forward by the prosecutor, Escalar said ICG “was managed in Milan, but the administrative headquarters identify the location where the administrators made their decisions, where the board meetings were held [in Luxembourg], not where the ideas were first formed.”
Also, he pointed out that of the three members of the board, two were resident in Luxembourg, “where ideas took shape, including the most important one, that of the sale.”
There is no connection with Milan, continued Escalar, pointing out that, even after the Valentino sale in May 2007, ICG continued to be active in other deals, including that of selling shares in Hugo Boss.