Fashion Designers Dolce, Gabbana Lose Appeal of Tax-Evasion Case

Domenico Dolce and Stefano Gabbana, the founding designers of the Italian fashion company that bears their name, were sentenced to 18 months in prison for tax evasion, their lawyer’s office said.

An appeals court in Milan upheld last year’s conviction, shortening the sentence by two months, an official at the office of lawyer Massimo Dinoia said by phone, confirming a report by Italian news agency Radiocor. The designers, who have denied any wrongdoing, will appeal the ruling to Italy’s top court, the official said.

Spokesmen for Dolce & Gabbana Srl, the Milan-based fashion company run by the designers, didn’t immediately return calls and e-mail requests for comment. No one answered phones in the Milan judges’ chambers after business hours.

The case relates to the non-payment of 40 million euros ($55.5 million) of taxes at one of the designers’ companies between 2003 and 2004. Authorities ruled that Gado, a Luxembourg-based holding company for Dolce & Gabbana, should have filed tax returns in Italy. Gabbana said in an interview in July that “Everybody knows we are innocent.”

The closely held maker of $795 canvas wedges and $2,295 lace dresses, whose clothes have been worn by actors Matthew McConaughey and Scarlett Johansson, has an enterprise value of about 2.5 billion euros, or about 2.3 times 2011 sales, Mario Ortelli, an analyst at Sanford C. Bernstein & Co. analyst, estimated last year.