Dolce and Gabbana Fined in Italian Tax Case

June 21st, 2013

MILAN — The fashion designers Domenico Dolce and Stefano Gabbana were handed a 20-month suspended prison sentence and a heavy fine on Wednesday for hiding hundreds of millions of euros from the Italian tax authorities.

Vittorio Zunino Celotto/Getty Images

Stefano Gabbana, left, and Domenico Dolce in February. They face a fine that could reach 10 million euros for hiding income.

Mr. Dolce and Mr. Gabbana were not present in court here and have repeatedly denied the charges. They must pay 500,000 euros as a first installment of a fine that could reach 10 million euros ($ 13.4 million).

“We will read the reasons for the verdict, and we will appeal,” Massimo Dinoia, one of their lawyers, said after the hearing.

The judge ruled that the pair sold the Dolce & Gabbana and D&G brands to the holding company Gado, based in Luxembourg, in 2004 to avoid declaring taxes on royalties of about 1 billion euros ($ 1.3 billion).

A prosecutor, Gaetano Ruta, had asked for a two-and-a-half-year jail term.

The judge acquitted the pair of charges that they had filed inaccurate tax returns.

Another prosecutor, Laura Pedio, told the court in her closing arguments that the designers were “well aware that they would reap a tax advantage” from the transfer to Gado, which, she added, is nothing but a shell company that made no administrative or financial decisions.

Dolce and Gabbana’s lawyers said in a statement they were “frankly stunned” by the verdict and were “certain that it will be overturned on appeal.”

The designers still risk a possible tax bill of more than 400 million euros as a result of the case, their lawyers said, which could affect their fashion house.

“We are afraid to even imagine what the social and economic consequences of such a move would be,” the lawyers said.

Mr. Gabbana’s immediate reaction on Wednesday was to post to Twitter 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.

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