Italian fashion designers, Domenico Dolce and Stefano Gabbana, more popularly known as high-end fashion brand name Dolce&Gabbana, were sentenced to a minimum of one year prison time and a fine amounting to $13.4 million as they were found guilty of tax evasion. The fashion designer duo was famous for dressing famous celebrities namely Madonna, Kate Moss and Victoria Beckham, among others.
Messrs Dolce and Gabbana had allegedly hide millions of euros from Italian tax authorities. The duo failed to attend the court hearing in Milan, but their lawyers said that their team was already planning an appeal to save their clients from going to prison.
In an interview with Reuters, Massimo Dinoia, one of Messrs Dolce and Gabbana's defense lawyers, said that they will read the court's reasons for the verdict and will definitely appeal.
The defense lawyers admitted to being shocked with the judge's ruling but that they were "certain that that it will be overturned on appeal."
However, appeal aside, Messrs Dolce and Gabbana still face the possibility of paying tax bills amounting to more than 400 million euro as a result of the case. The huge amount will certainly take a huge blow on Dolce&Gabbana's fashion house.
According to the lawyers' statement, "We are afraid to even imagine what the social and economic consequences of such a move would be."
Public Prosecutor Gaetano Ruta's verdict charged the two fashion designers guilty of selling their brand to Luxembourg-based holding company, Gado, in 2004. The verdict read that the duo did this to avoid declaration of royalty taxes amounting to 1 billion euro or $1.3 billion.
Public Prosecutor Lauro Pedio declared in court that Messrs Dolce and Gabbana were "well aware that they would reap a tax advantage from this transaction."
According to Mr Pedio, investigation proved that Gado was "nothing but a shell company that took no administrative or financial decisions. 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."
In a report from The Wall Street Journal, the official investigation for the tax evasion case against the two designers began in 2007 although the investigations were focused on tax records from the year 2004-2006. It was in the year of 2004 that Dolce&Gabbana was "sold" to Gado. More investigations show that Gado was managed by no other than Messrs Dolce and abbana who undervalued the company at sale in an intention to evade paying Italian taxes amounting to 1 billion euro of royalties.
The two refused to comment on the verdict, but reports said that the duo always said they were innocent. In a June 2012 Twitter post, Mr Gabbana said that, "Everyone knows that we have not done anything," in defense of himself and his business partner.
The Dolce&Gabbana's case is part of an all out effort by Italian officials to combat the financial crisis that paralysed the country's economy.
It is just one of the high-profile cases that had been brought to the Italian court for trial.