A Milan judge ruled Friday that the designers Domenico Dolce and Stefano Gabbana would not have to stand trial on criminal charges of tax evasion and fraud.
After a morninglong closed hearing in Milan’s main courthouse, Judge Simone Luerti dismissed the charges brought by prosecutors who accused the designers, executives of their Italian fashion house and a tax consultant of defrauding the government and evading taxes on what prosecutors claimed were undeclared earnings of close to €1 billion, 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 speak to reporters on 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.”
The charges had cast a deep shadow on the fashion house in a world where image is as important as brand. Founded in 1985, the house shot to fame and fortune as major celebrities like Madonna, Kylie Minogue and the actor Matthew McConaughey plugged the brands in splashy advertising campaigns.
The investigation was prompted by the 2004 sale of the Dolce & Gabbana and D&G brands to a Luxembourg holding company that prosecutors claimed was merely a front to pay lower taxes. Prosecutors also charged that the brands had been sold for a fraction of their actual value to withhold taxes from the revenue agency. The brands were sold for €360 million but investigators calculated that their true worth was closer to €1.2 billion.
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 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 by telephone after the hearing Friday. “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 and mounted the case, said she had not expected the exoneration and would wait for Judge Luerti to file his opinion before deciding whether or not 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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