MILAN — A court in Isernia, Italy, has rejected a request to sequester the Gianfranco Ferré brand put forward by the label’s administrators in October, saying it did not have jurisdiction to make a decision in the case.

This story first appeared in the May 22, 2012 issue of WWD. Subscribe Today.

A legal source explained that the judge merely deemed Isernia was not the appropriate court to decide on the issue. The commissioners will now turn to the court in Milan, which has a section specializing in industrial and intellectual property, said the source. Isernia is the Italian city where Ferré’s previous owner, IT Holding, was based, while the brand is legally headquartered in Milan.

Gianfranco Ferré SpA said it was satisfied with the verdict.

According to sources, the administrators, who oversaw the sale of Ferré in February 2011 after two years of state-controlled bankruptcy protection, believe the label has not been developed by its new owner, Dubai-based Paris Group. For this reason, they are seeking to confiscate the brand to avoid further deterioration of its assets. A legal source said the commissioners opted for this procedure because they believe Paris Group may “finally reduce the brand to a licensed operation in the Middle East.” Another source said the administrators decided to proceed not because they had any intention of putting the brand up for sale again, but because they had not seen “any signal of a serious development. They thought the worst thing was that Paris Group had not relaunched the brand in the first three or four months after the acquisition.”

Ferré’s lawyer, Giuseppe Strano of Milan-based legal studio DCS & Partner, said that, contrary to media reports, the brand’s owners have invested more than 30 million euros, or $38.2 million at current exchange, in a year, and had paid off 97 percent of its debt, as certified by Deloitte & Touche Paris. The debt amounted to 11.6 million euros, or $14.8 million.

He conceded that there had been an initial “delay in the payment of suppliers” because “when the company changed ownership, the accounting books were in Isernia, and the books were not visible until September 2011.”

A source close to the commissioners firmly denied this, as “direct access to the numbers was available via computer since Day One.” Another source said that Strano’s remark cannot be true because all companies must have their books available for any fiscal enquiry at all times.

Strano contended that debts and credits were supposed to be balanced upon the acquisition, but that credits were only “on paper,” referring to payments on consignment, with clients having a right to send back merchandise that had not been sold. The source close to the commissioners denied this as well. “The commissioners could not make up the figures. And it’s obvious that, in such a situation, cashing in credits is never guaranteed. Also, the company later had problems recovering those sums because it went on to demand payment when the goods reached the stores — something hard to achieve in this industry and at this moment even for companies in much better shape.”

Strano said that Ferré in March sued the commissioners asking for damages and payment of these “nonexisting credits.” They were seeking 4 million euros, or $5.1 million at current exchange.

Ferré’s lawyer argued that, contrary to the commissioners’ accusations and, as proven by Deloitte, all employees had been regularly paid.

Strano denied speculation about Ferré being entirely transferred to Dubai. “It has set up a branch in that city, with the goal to open stores in the area, which, as it is widely known, is a relevant market with growth potential. Since early on, the opening of stores in the Middle East was part of the initial investment plan. [The owner] is planning investments in Russia, too,” he said, questioning the commissioners’ request to sequester the brand. “It separates the brand from the production, and it’s tantamount to closing the company, you would lose all that Ferré is about,” he said.

There still may be changes, however. A well-placed source said Paris Group last year did not renew the lease on the brand’s historic Via Pontaccio headquarters in Milan. The sprawling building, where the brand has been holding its runway shows, is owned by the late designer’s family. Although the building is not officially on the market yet, it is the family’s intention to sell it, said the source, and the palazzo has already been visited by a number of potential investors.

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