Dolce & Gabbana designers convicted of tax evasion

FASHION designers Domenico Dolce and Stefano Gabbana, who head one of the biggest brands in the industry, have been given a 20-month suspended prison sentence and a heavy fine for hiding hundreds of millions of euros from the Italian tax authorities.

Stefano Gabbana, left, and Domenico Dolce have been convicted of tax evasion. Picture: Getty

The duo, whose brand has become almost as famous as the stars they dress, were not present in court in Milan and will lodge an appeal against their conviction on charges they have always denied.

“We will read the reasons for the verdict, and we will appeal,” said Massimo di Noia, one of the pair’s defence lawyers after the hearing.

Public prosecutor Gaetano Ruta had asked for a jail term of two and a half years.

The two designers will have to pay the equivalent of £428,000 in euros as a first instalment of a fine that could reach £8.6 million.

A spokesman for the Dolce & Gabbana company declined to comment after the sentencing.

The success of Dolce & Gabbana’s sexy corset dresses and sharply tailored suits favoured by celebrities such as Kylie Minogue, Kate Moss and Bryan Ferry has earned them a glamorous lifestyle. In 2009, they hosted pop star Madonna, a friend and client, for her birthday at their villa above the chic Mediterranean resort of Portofino.

The case involved an investigation that began in 2008, when authorities tried to crack down on tax evasion as the financial crisis began to bite.

However, the Dolce and Gabbana inquiry is one of the few high-profile cases to come to trial so far. The judge ruled the pair sold their brand to Luxembourg-based holding company Gado in 2004 to avoid declaring taxes on royalties of about £856m.

Prosecutor Laura Pedio told the court the men had conducted a “sophisticated tax fraud”, and in her closing arguments said the designers were “well aware that they would reap a tax advantage from this transaction”.

“Gado is nothing but a shell company that took no administrative or financial decisions,” Ms Pedio said. “Gado is a radio relay station. The orders originated in Milan, and bounced from Luxembourg back to the Milan offices, where the decisions regarding the brands were made.”

The pair’s flamboyant designs are inspired by the island of Sicily, where Dolce was born in 1958.

They showed their first collection in Milan in 1985, the home city of Gabbana, who is now 50.

The brand took hold internationally in the 1990s and global revenues hit just under €1.5 billion in 2011.

The designers have always asserted that they were innocent.

“Everyone knows that we haven’t done anything,” Gabbana tweeted in June 2012 after the trial was ordered.

His only immediate reaction yesterday was to tweet a photograph of the branch of a citrus tree, a symbol of Sicily that is the duo’s signature, just seconds after the verdict was announced.

The prosecution of the pair is said by experts to be further proof that the Italian tax authorities were taking an increasingly aggressive stance on evasive or abusive tax schemes.

Theirs may be the most high profile case to come to court since the tax clampdown in Italy, but it is not the only one.

Tax police have seized assets from Italian jeweller Bulgari and the Marxotto textile family, over allegations they had failed to pay taxes, something both deny.