by Staff Reporter
June 19, 2013 (TSR) – Domenico and Stefano Gabbana have been handed suspended prison sentences of a year and eight months and were also fined nearly €500m, by a court in Milan for evading millions in taxes, opening up the possibility that tax police may seize shares in the company and assets, FT reports.
A jury met for three hours this afternoon to discuss the legal ruling which is one of three legal procedures that will determine a final verdict.
Judge Antonella Brambilla ruled in the case on one of two counts. They were cleared of the second count – involving the valuation of their company and the tax rate paid – at an earlier date. The designers are expected to appeal the decision, WWD reports.
The case, which has dragged on through the Italian court system for years, concerns the taxes on transactions related to the sale of the label’s 2004 sale of its signature and D&G lines to Luxembourg-based holding company Gado Srl in 2004 in order to avoid declaring more than €100m in royalties – which Italian authorities believe was a means of evading Italy’s high taxes.
Mr Dolce and Mr Gabbana, who were not present in court, have denied the charges and their lawyers have said they intend to appeal against any conviction. They are unlikely to serve any prison sentence because of the length of the appeals process in Italy.
The Italian prosecutor’s position, following an investigation in 2008, was that the Luxembourg company was for all purposes controlled and operated in Italy — and that it therefore should have been subject to taxation as an Italian corporation.
The designers’ lawyer, Massimo Dinoia, called for the pair to be acquitted of the charges – while prosecutor Gaetano Ruta demanded that Dolce, Gabbana and company board member Cristiana Ruella should be sent to prison for two-and-a-half years. He added that their accountant, Luciano Patelli, should be incarcerated for three years.
Dolce & Gabbana’s lawyers released this formal statement, following news of Judge Antonella Brambilla’s ruling this afternoon, as reported below by Vogue UK:
“With great satisfaction, we acknowledge that – for the second time – a judge of the Milan Court has reiterated once more the absolute innocence – because the allegations are untrue – of Mr Domenico Dolce and Mr Stefano Gabbana of the accusation of having unfaithfully declared their earnings (the “notorious” million dollars of Euros).
Even more so, we are satisfied about the result of this part of the verdict because, according to Italian legislation, the statute of limitations had already run out of the charge of misrepresenting income. Despite this fact, the judge felt the need to acquit them on the matter: this means that, according to the Italian law, the proof of their innocent is more than obvious.
On the other hand, as we had the chance to state during the trial, the charges were simply a paradox: the two designers were charged with not having paid taxes for an amount of money which was double of what they had actually earned.
The Court has ruled correctly to what we have always stated and has calmed all the citizens: nobody will ever be held responsible for not having paid taxes that exceed what they had actually grossed.
Frankly speaking, we were astonished that our thesis on the regularity of everyone’s behaviour related to the taxes omission payment by Gado, was not accepted. In fact, the CEO of this Company together with other people including the designers, were found guilty of having contributed in a violation of the said taxes declaration omission. We will strongly appeal this part of the verdict, certain that the result will be over-turned in appeal
The absolution of the designers for the declarations related to their individual earnings is at the same time blatant and dramatic, because, notwithstanding the same fact was ruled as non-existent by today’s Court, the Internal Revenue Service might proceed with their operations against them, fining them for the excessive and surreal amount of money of more than 400 million Euros.
Due to the fact that the two designers do not have this kind of money – as the judge stated today, that they have never earned it – most probably the Internal Revenue Service will attack their most precious part of their patrimony, which is their shareholding in the Dolce & Gabbana Company.
We are anxious to even think of what the economic and social repercussion of this act might mean.”
While the Dolce & Gabbana trial is the most high profile tax evasion case to come to court since the started in Italy. Other brands are also under the radar now.
The Italian police seized assets owned by Roman jeweller Bulgari and the Marzotto textile dynasty in recent raids alleging that they had failed to pay taxes. Both have denied the allegations.
Based on Financial Times, Vogue UK and Women’s Wear Daily reports.