The Italian design duo of their eponymous label Dolce & Gabbana were found guilty by a Milan court of tax evasion. This criminal verdict is separate from the verdict the tax commission handed down in April. For the criminal case, they are now sentenced to 20 months in prison and were also fined a half billion euros (or approximately $650 million) on top of the €344 million the tax commission levied. Things are definitely not looking good for the newest members of the billionaires club, according to Bloomberg Billionaires Index.
However, under Italian law, the designers wouldn't go to prison because sentences of less than 3 years are served under house arrest or by doing community service. Prosecutors argued the duo failed to declare €1 billion ($1.3 billion) in income tax. Dolce and Gabbana deny the charges and will appeal the decision. They have the right to appeal the verdict twice, but Italian courts can years to reach a final decision so it may be futile. They were found not guilty on the second count involving filing inaccurate tax returns.
According to the Italian tax agencies, the country is owed approximately €17 billion in undeclared or under-declared income to offshore centers in 2012. During the last few years, Italy has been coming down hard on wealthy citizens and companies who allegedly evade taxes. In 2008, Roberto Cavalli was also tried but cleared of tax evasion and Valentino and his business partner was fined $39 million for the same in 2009.
Dolce & Gabbana's lawyers have just released the following statement:
"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."
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