In 2013, Stefano Gabbana and Domenico Dolce were convicted in Italy of tax evasion after prosecutors argued that the designers had failed to declare millions of euros in revenue connected to Gado, a Dolce & Gabbana subsidiary based in Luxembourg. The case struck at the image of a proudly Italian luxury empire that had grown from Milanese beginnings into a global business with more than €1 billion in annual turnover, hundreds of retail locations, factory outlets, and thousands of employees. The founders denied wrongdoing and received 20-month suspended prison sentences rather than immediate incarceration.
The conviction became a major reputational crisis for the house. In 2014, an appellate court cleared both designers of wrongdoing, reversing the earlier judgment. The episode nevertheless exposed the aggressive tax structures and corporate arrangements that could accompany the expansion of an apparently Italian fashion label into a multinational luxury conglomerate. The controversy was serious enough that the designers announced plans to return Milan's Ambrogino Gold medal, awarded to them in 2009, after a city council member renewed public criticism of their tax affairs.
