September 23, 2013 12:18 pm

Prosecutor’s star rises in the fashion firmament

Designers Stefano Gabbana (L) and Domenico Dolcei

Laura Pedio pursued the case against designers Stefano Gabbana (left) and Domenico Dolce

As the Milan shows drew to a close, it was clear that an unlikely new figure had emerged in the fashion firmament: public prosecutor Laura Pedio.

Ms Pedio, 46, petite and soft-spoken, is the lawyer responsible for pursuing the case against designers Domenico Dolce and Stefano Gabbana that resulted in their sentences this summer of one year and eight months in prison for tax evasion. According to Ms Pedio, the designers had committed “a sophisticated fraud” by selling two of the company’s main brands to a Luxembourg-based holding company Gado in 2004, and she had asked for a two-year jail sentence for the pair.

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Their lawyer, Massimo Dinoia, said the case was “groundless” and they plan to appeal. The designers will not go to prison, as under Italian law sentences of less than three years tend to be served with community service or house arrest, but they do face a fine of €500,000 if they lose the appeal.

Ms Pedio is also pursuing a case again Matteo Marzotto, the textile dynasty heir, as well as other members of the family and their managers, arguing they had dodged €65m in Italian income taxes when they sold fashion house Valentino through a Luxembourg holding company in 2007. They also deny the charges.

As a relatively young woman in a profession dominated by men, not to mention gerontocratic Italy, Ms Pedio stands out.

She has worked in the Italian justice system since 1994, focusing on white-collar crimes. Fraudulent bankruptcy and tax evasion by corporate entities are her specialities. She also prosecutes financial crimes related to anti-mafia investigations.

Speaking in her sparse office in Milan’s main law court (where Silvio Berlusconi has frequently been on trial), Ms Pedio says that the Dolce & Gabbana and Marzotto investigations came her way when she was handed files from raids undertaken by Italy’s financial police.

Wearing slim-cut jeans and a white T-shirt, she says she has no interest in going after fashion companies per se, but after what she believes to be the biggest tax evaders – “the most serious cases.” Known in court for being concise and clear-cut in her argument, Ms Pedio says her focus is bringing clarity to cases that are invariably highly complex “with a lot of smoke and mirrors”. She says she is particularly happy with the initial verdict by the judge in the Dolce & Gabbana case, because it also fingered accountants and business managers “who should know better.”

Since the financial crisis, Italian tax authorities have ramped up pressure on tax evasion, seeking to claw back an estimated €120bn a year in unpaid taxes. They have cracked down in particular on Italian companies using offshore centres.

According to tax authorities, Italy lost about €17bn in undeclared or under-declared income to offshore centres last year, up from €11bn in 2011.

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Luxembourg is considered to be the leading country used by Italian individuals and companies seeking to hide money abroad. Corporate tax rates there are about 21 per cent, but can be lower through deals struck with the tax authority, while they are 27.5 per cent in Italy, with regional taxes and social security on top of that.

Lawyers for Mr Dolce and Mr Gabbana say their clients did nothing wrong, and were using Luxembourg only as means for internationalising the brand. They also say it was no secret. An annual report from 2005 makes clear mention of the movement of part of the business to Luxembourg.

Mr Dolce and Mr Gabbana have the right to appeal the verdict twice, meaning the case could take two years or more to come to a conclusion. The trial of the Marzotto family members and their managers will start later this year. But the fashion world, currently packing its bags as the shows move on to Paris, is settling in to watch the legal drama for the long-haul.

“I’m surprised and a little bit alarmed,” Ms Pedio says of her new found fame. “We are only at the beginning”.

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