Dolce & Gabbana are convicted of tax evasion

Fashion designers Domenico Dolce and Stefano Gabbana were handed a 20-month suspended prison sentence and a heavy fine yesterday for hiding hundreds of millions of euros from the Italian tax authorities.

Prosecutor asked or two-and-a-half year jail term

The design duo, who are nearly as famous as the stars they dress, were not present in court in Milan and will lodge an appeal against their conviction on charges that they have always denied.

“We will read the reasons for the verdict, and we will appeal,” said Massimo di Noia, one of the pair’s defence lawyers after the hearing.

Public prosecutor Gaetano Ruta had asked for a two and a half year jail term. However, the two designers will have to pay €500,000 as a first instalment of a fine that could reach €10 million.

A spokesman for their Dolce & Gabbana company declined to make an immed-iate comment.

The success of Dolce &Gabbana’s sexy corset dresses and sharply tailored suits favoured by celebrities such as Kylie Minogue, Kate Moss and Bryan Ferry have earned them a glamorous lifestyle. In 2009 they hosted popstar Madonna, a friend and client, for her birthday at their villa perched above the chic Mediterranean resort of Portofino.

The case involves an investigation that began in 2008, when authorities tried to crack down on tax evasion as the financial crisis began to bite. But the Dolce & Gabbana inquiry is one of the few high-profile cases to come to trial so far.

The judge ruled that the pair sold their brand to Luxembourg-based holding company Gado in 2004 to avoid declaring taxes on royalties of about one billion euros.

Public prosecutor Laura Pedio told the court in her closing arguments that the designers were “well aware that they would reap a tax advantage from this transaction.”

Gado is nothing but a shell company that took no administrative or financial decisions, said Pedio. “Gado is a radio relay station,” she said. “The orders originated in Milan, and bounced from Luxembourg back to the Milan offices where the decisions regarding the brands were made.”

The pair’s flamboyant designs are inspired by the island of Sicily, where Dolce was born in 1958. They showed their first collection in 1985 in Milan, the home city of Gabbana who is now 50. The brand took hold internationally in the 1990s and global revenues hit just under 1.5 billion euros in 2011.