The Italian fashion duo have been found guilty of tax evasion by Judge Antonella Brambilla and sentenced to one year and eight months in prison. Neither Dolce nor Gabbana appeared at the sentencing in Milan and have continued to deny the charges.
The sentencing follows a lengthy and public inquiry into the pair’s financial affairs by Italian tax authorities. The official investigation began in 2007 and focused on the years 2004-2006. It was in 2004 that Dolce & Gabbana sold their business to a Luxembourg-based holding company, Gado Srl. The holding company was under the control of the two, who reportedly undervalued the company at sale in order to avoid paying Italian taxes on the transaction. They have been accused of attempting to skirt tax on nearly 1 billion euros of royalties ($1.3 billion U.S.).
The pair’s luxury brand has made a billionaire out of Stefano Gabbana and Domenico Dolce, found on the Forbes billionaires list tied at #11 Italy, and #736 overall.
With wealth has come increased scrutiny. The pair has spent a number of years battling the charges, which initially appeared to be resolved in their favor. That decision was overturned by Italy’s Supreme Court and the case went back to trial. In April 2013,a Milan tax court ruled in favor of Italy’s tax authority, Agenzia delle Entrate, and fined the pair 343.3 million euros ($439.70 million U.S.) as restitution. In addition to the fines, the two were charged in criminally on charges related to the same business and faced up to five years in prison; the actual sentence which was handed down is considerably shorter.
The two join an increasing number of wealthy Italians facing scrutiny over their financial transactions, including Roberto Cavalli (eventually cleared), Valentino (fined), and former Italian Prime Minister Silvio Berlusconi (sentenced). Italy is thought to forfeit an estimated $150 billion a year in unpaid taxes, the third highest rate in Western Europe.
Gabbana, who proclaimed his innocence on twitter earlier in this year, continued to tweet short denials to his fans after the ruling today:
His twitter stream was filled with support from fans, many of whom he thanked with a simple, “Grazie.”
Fans have encouraged Dolce & Gabbana to leave Italy altogether as a result of the fine and criminal charges. An appeal is expected.
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