The fashion designers Dolce and Gabbana have been found guilty by an Italian court of tax evasion on an epic scale and each sentenced to 20 months in prison.
Domenico Dolce and Stefano Gabbana, whose clients include Angelina Jolie, Beyoncé, Scarlett Johansson and Naomi Campbell, were found guilty on Wednesday of evading around €400 million on a one billion euro business deal - the sale of their D&G and Dolce & Gabbana brands to a holding company in Luxembourg in 2004.
Prosecutors said the sale of the brands to Gado, the holding company that the fashion duo set up, enabled them to avoid a high rate of tax in Italy and pay a lower rate in Luxembourg, thus defrauding the Italian state.
There was "rock-solid" evidence that Dolce and Gabbana had engaged in a "sophisticated tax fraud", Laura Pedio, a prosecutor, told the court in Milan during closing arguments.
The designers, whose commercial and catwalk success has made them pillars of Italy's fashion industry alongside Versace, Valentino and Armani, had "participated actively" in the tax evasion, "signing the contracts for the sale of the brands," Ms Pedio said.
She said Gado, an acronym of the designers' surnames, was a shell company, "a sort of cloud, with the consistency of gas".
Prosecutors had called for the duo to be sentenced to two-and-a-half years in jail. The judge in the case, Antonella Brambilla, ordered the designers to pay 500,000 euros each in damages.
Lawyers for Dolce and Gabbana said they would study the court's ruling and launch an appeal. "We'll certainly lodge an appeal because we believe firmly in their innocence," said Massimo Dinoia, one of the defence team.
The designers will remain at liberty pending the appeals process, as is customary under Italian law. They will have recourse to two levels of appeal before they ever see the inside of an Italian prison.
The fashion kings had vehemently denied the charges, saying the accusation against them was based on "a completely abstract calculation" of their companies' market value.
Investigations into the tax fraud began in 2007.
A court cleared the partners of the allegations in 2011 but Italy's highest court overturned that acquittal and ordered that the case be sent back to trial.
Prosecutors Laura Pedio and Gaetano Ruta look at each other prior to the sentence at the Milan court. Photo: AP
At the time, the decision of the Supreme Court in Rome prompted a tirade on Twitter from Stefano Gabbana, who called Italian tax authorities "thieves" and suggested that he was thinking of leaving the country.
Four other people were found guilty of complicity in tax evasion, including a former executive with D&G, a manager from the holding company and Dolce's brother, Alfonso Dolce.