MILAN — A judge ruled Friday that two fashion designers, Domenico Dolce and Stefano Gabbana, would not have to stand trial for tax evasion and fraud.
After a closed hearing here that lasted most of the morning, Judge Simone Luerti dismissed the charges brought by prosecutors, who had accused the designers, executives of their Italian fashion house and a tax consultant of defrauding the government and evading taxes on undeclared earnings of about 1 billion euros, or $1.4 billion.
A separate case against the designers initiated by the Italian revenue agency is still open, according to an official who spoke on the condition of anonymity because he was not authorized to discuss the matter.
“It’s obvious that it would end like this,” said Massimo Dinoia, the defense lawyer for Mr. Dolce, Mr. Gabbana and three other defendants. “The accusations were groundless.”
Founded in 1985, the house shot to fame and fortune as celebrities like Madonna, Kylie Minogue and Matthew McConaughey plugged the brands in splashy advertising campaigns.
The investigation was prompted by the 2004 sale of the Dolce Gabbana and DG brands to a Luxembourg holding company that prosecutors claimed was merely a front to let the fashion house pay lower taxes. Prosecutors also charged that the brands had been sold for a fraction of their actual value to minimize taxes. The brands were sold for 360 million euros, but investigators calculated that their true worth was closer to 1.2 billion euros.
Prosecutors had accused all seven defendants of fraud, a charge that defense lawyers rejected.
The two designers were also charged with not paying taxes on undeclared income of more than 400 million euros each.
For the defense, Mr. Dinoia had presented the judge with a 150-page rebuttal of the charges, arguing that the prosecutors based their assumptions on a hypothetical value.
“They were accused of not paying taxes on money they had never received,” Mr. Dinoia said after Friday’s hearing. “This is an excellent decision that guarantees the rights of all citizens.”
Mr. Dinoia confirmed that a case was open with the tax authorities, but said he was confident that the judge in the fiscal action “would arrive at the same conclusion.”
The designers, he said, had paid all the taxes they owed “down to the last penny.” Through the fashion house, the designers declined to comment.
“The fraud charge was unusual” for a fiscal case, “and unsustainable,” as the decision showed Friday, said Giuseppe Bana, the defense lawyer for Luciano Patelli, the tax consultant to the fashion house. “This case should have never gone before a judge at all.”
Laura Pedio, the prosecutor who oversaw the investigation, said she had not expected the exoneration and would wait for Judge Luerti to file his opinion before deciding whether to appeal the ruling. The judge has 30 days to file.
“I have no idea how this will end from a fiscal point of view,” she said.
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