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Dolce and Gabbana convicted of tax evasion

Italian court handed down a 20-month suspended prison sentence to designer duo

All’s not well in the world of fashion.

Yesterday an Italian court sentenced designers Domenico Dolce and Stefano Gabbana—the duo behind the brand Dolce & Gabbana (D&G)—to 20 months in prison for tax evasion. The designers also must pay €500,000 as part of a fine that could eventually reach €10 million ($13.4 million).

The alleged tax misconduct dates back to 2004, when D&G sold two of its main brands to a Luxembourg-based holding company called Gado. Prosecutors claim Dolce and Gabbana sold the brands to the shell company so they wouldn’t have to declare taxes on €1 billion in royalties derived from the two brands. They say the misconduct allowed the designers to hide hundreds of millions of euros from Italian tax authorities.

Luckily for Dolce and Gabbana, Italian law dictates that prison sentences totaling less than three years are served under house arrest or community service. Nonetheless, the designers’ lawyer said after the hearing that they plan to appeal the “groundless” decision. Italian law allows them to appeal the verdict twice.

Read Reuters and the Wall Street Journal for more information.

For more InsideCounsel stories related to fashion, read:

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Aeropostale executive convicted over kickback conspiracy with vendor

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YSL seeks to dismiss counterclaims against Louboutin

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Ashley Post

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