Dolce and Gabbana Caught in a Fashion Snafu

Dolce

Italian Fashion house Dolce and Gabbana may want to start thinking of creating stylish designs that includes prison stripes. Domineco Dolce and Stephano Gabbana, the names behind the iconic high-end fashion brand are in a snag with the Italian law. Dolce and Gabbana have been handed down suspended time for evading taxes. The snafu will earn the pair 18 months.

The ruling that came down from an Italian appeals court on Wednesday was a follow-up from a June 2013 verdict convicting the stylish duo to 20 months in prison for neglecting to pay royalty taxes totaling $1.38 billion for an off shore business the fashion icons established in Luxemborg called Gado. On Wednesday, an appeals Judge upheld the 2013 ruling however lowered the sentence for both Dolce and Gabbana to 18 months due to certain statutes of limitations that had expired.

Dolce and Gabbana had been under scrutiny for sketchy business practices regarding taxes dating back 10 years. Other persons included in the charges include Dolce and Gabbana general director Cristiana Ruella, finance director Guiseppe Minoni, and Domineco’s brother Alfonso, each receiving 14 months in jail. Under Italian law however, no one in this matter will actually spend any time behind bars. Italian law is written so that incarcerated time is served on sentences of two years and more.

With corporate taxes the highest of any European country, Dolce and Gabbana are among a handful of Italian designers under a financial microscope of late. Other fashion houses under examination for tax issues include Cavalli, who was eventually absolved of any wrongdoing while Valentino had to pay fines. In April Italian design house Giorgio Armani  coughed up 270 million euros to settle a tax issue as did similar high-end brand Prada  who reportedly forking over 400 million euros in Italian taxes. Those involved closely to the european fashion sector say red flags started to wave by tax officials after it was discovered that the high-end fashion industry performed incredibly well in light of what has been called the longest recession since World War II, proving that Italian fashion companies were stashing cash in tax friendlier shelters.

Domineco Dolce and Stephano Gabbana established their fashion brand in the early 1980s, drawing its creative inspiration from the rich tapestry of Italian films, using them as a reference. The unique look and immediate name recognition, as a quality product, quickly caught on among consumers and the fashion world.  With its use of sexy marketing campaigns and celebrity endorsements, from the likes of musicians like Madonna, Mary J Blige and Kylie Minogue, all who wore the trendy styles in their concerts, Dolce and Gabbana became a hip yet sophisticated brand. With a desire to reach the urban consumer, Dolce and Gabbana would introduce more cost friendly merchandise under their D&G brand. D&G would incorporate items like sunglasses, sportswear and fragrances making them readily attainable to the cash-strapped fashionista who may not have the means to acquire the more bigger ticketed designs.

Even in light of being proven caught by authorities, both Dolce and Gabbana maintain that whatever allegations or snafu brought against them is unfounded, claiming they have done nothing wrong. Massimo Dinoia, legal representatives for the fashion designers, called the judgement shocking and inexplicable. In an attempt to once again mend the situation, Dinoia states that another appeal will be sought.

By Hal Banfield

Sources:
Huffington Post
Wall Street Journal
Forbes

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