March 29, 2024

Judge Dismisses Tax Case Against Italian Designers

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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DealBook: Hermès in Talks for Potential Sale of Gaultier Stake

Hermès, the French maker of Birkin and Kelly handbags that is fending off advances from the LVMH Moët Hennessy Louis Vuitton luxury conglomerate, said Friday it had begun talks to sell its 45 percent stake in the Jean Paul Gaultier fashion house.

Hermès said it had received expressions of interest from potential buyers for its holding in the Gaultier brand, which has been recovering from a sharp drop in sales after the financial crisis that hurt its bottom line.

Christelle Denef, a spokeswoman for Hermès, said the announcement did not necessarily mean the company would sell its entire stake, but declined to elaborate.

Jelka Music, a spokeswoman for Gaultier, said: ‘‘We are aware that Hermès has been approached, but it is too early to say what will happen.’’

Jean-Louis Dumas, the former patriarch of Hermès, recruited Mr. Gaultier, who had a reputation as the bad boy of fashion, in 2003 to design ready-to-wear collections. His headline-grabbing couture included conical-shaped bras for Madonna and skirts for men.

While Mr. Gaultier brought buzz to the house, Hermès never built it into a hard-charging high-fashion group that would take on the likes of Gucci, owned by Pinault Printemps Redoute, or Christian Dior, owned by LVMH.

In fact, the LVMH chairman, Bernard Arnault, passed over Mr. Gaultier and hired the British designer John Galliano to revitalize the Dior fashion house 15 years ago. Soon after, Mr. Gaultier began to self-finance his own line.

Mr. Gaultier’s seven-year honeymoon with Hermès faded after Mr. Dumas’s death last May. Two months later, the designer ceded his role and was eventually replaced by Christophe Lemaire, who had been designing for Lacoste since 2000.

Hermès bought 35 percent of the Gaultier brand in 1999 for $23 million, and took another 10 percent share from the designer in 2008 for about 3 million euros. The Gaultier fashion house gets most of its revenue from ready-to-wear licenses and perfumes, and to a lesser extent, from sales of accessories.

According to the French business paper Les Echoes, several foreign luxury groups or fashion companies are interested in taking a stake in Gaultier to develop it internationally, especially in China and across Asia, where demand for luxury items is soaring.

The announcement comes amid movement toward some consolidation in the luxury industry. Prada, the Italian fashion house seeking to raise cash, this week applied for an initial public offering on the Hong Kong stock exchange, a move that could allow the company to be listed by the middle of the year.

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