Dolce & Gabbana Go to Jail

STORY BY Emily Kirkpatrick

Published: July 28, 2013

Domenico Dolce and Stefano Gabbana have been under investigation for tax fraud since 2008, before they were finally indicted in November for failure to pay taxes owed on more than one billion dollars in income and standing trial on criminal charges just this past week.

According to the New York Times, tax evasion in Italy is often taken very lightly, considered to be “a national sport,” rather than a federal crime. But Dolce and Gabbana’s brand of tax evasion has taken a much more serious turn. The accusations against them were recently resurrected after the Italian supreme court overthrew a lower court’s decision to dismiss tax evasion charges from two years ago. The court papers filed by prosecutors accuse the designers, along with upper level executives, of crafting a “criminal design” to defraud the state. They’ve been accused of duping the Italian revenue service out of taxes on the brands total sale, which they claimed was sold well below market value to Gado, a “dummy company” in Luxembourg, while the brand continued to operate out of Italy. They’ve also been charged with lying about the income made from royalties, which were taxed in Luxembourg at a much lower rate. The Dolce & Gabbana brands were sold for $508 million, which in the opinion of Italian investigators is under a third of its actual value according to their own estimations. Apart from the two head designers, four of the company’s executives and their tax advisor have also been charged.

Dolce & Gabbana are hardly the first designers to cross paths with Italy’s internal revenue service. According to the Times, the “list of fiscally errant designers reads like the roster at Milan fashion week.” But unlike their fellow fashion luminaries, whose cases were all either thrown out our settled with the payment of a simple fine, Dolce and Gabbana won’t be getting off so easily. Earlier this week, Italian judge Antonella Brabilla found all accused at the company to be guilty of tax fraud and sentenced them to a year and eight months in jail in addition to paying a penalty of $670,000 to the tax authorities. Harsh for defendants with their level of fame and notoriety, but also a far cry from the maximum five to seven year sentence recommended by the prosecution. The designers have already said they will appeal the sentence, as they’ve repeatedly claimed their innocence and told WWD that they prefer to, “pretend it doesn’t exist. It’s not in our thoughts on a daily basis.”

After the sentencing, Dolce & Gabbana’s lawyers released a formal statement which focused on the more positive aspects of the ruling, namely that their defendants were cleared on charges of lying about the value of their company and incomes. Their lawyers made it clear that they would also be seeking to overturn the court’s decision that D&G had failed to declare $268 million in income to authorities, calling the charges “a paradox.” As of now, the designers prison sentence has officially been suspended until further legal action can be taken.

The Dolce & Gabbana case is interesting because of its apparent ubiquity throughout the fashion industry. Dolce & Gabbana are not even close to the first designers to pull this sort of shady bookkeeping, and they certainly won’t be the last. So the question becomes one of accountability and punishment, particularly when matters of celebrity are involved. If this were any regular Italian citizen, it’s doubtful that the case would be carried on for so many years, or that they would consider appealing the case at all, let alone have enough money to sustain a case of this magnitude for even longer. With fame and privilege comes the ability not only to dupe the government to the tune of millions of dollars, but also to prolong indefinitely an unfavorable ruling and ultimate punishment. It seems you’re innocent as long as you can afford the millions it takes to avoid being proven guilty. Perhaps that’s where all this missing tax money’s been going.

Other Stories by Emily Kirkpatrick
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