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Trials and Tribulations

The fashion business certainly kept the courts busy this year. Here are a few of the more notable developments.

The fashion business certainly kept the courts busy this year. Here are a few of the more notable developments.

Taxation Frustration: Italy’s legal system was cluttered with cases of alleged tax evasion by high profile luxury fashion firms. Domenico Dolce and Stefano Gabbana were convicted in June in their long-running tax evasion case. In November, they appealed, stating their focus has been on fashion and style, not management of corporate matters.
Members of the Marzotto family were indicted in connection with the sale of Valentino Fashion Group to private equity firm Permira in 2007, with prosecutors alleging omission of earnings declaration and tax evasion. A court date is set for March 21.
Roman jewelry firm Bulgari and some of its key executives were fighting charges of fraudulent earnings declaration and tax evasion.

Martha Stewart’s Musical Chairs: In the long-running case to determine where Martha Stewart products will end up — Macy’s or J.C. Penney — the brand is staying at Macy’s but, under a revised agreement inked in October, will still head to Penney’s for a much narrower range of product categories. New York State Court Judge Jeffrey Oing is still mulling his decision, and while the revised agreement may allay some of the issues, damages remain a key consideration.

The French Courts’ Turn: John Galliano’s case against his former employers Christian Dior Couture SA and John Galliano SA will be heard in a labor court; the designer is said to be seeking compensation in the range of $8.3 million for his dismissal in the wake of public outbursts and anti-Semitic and racist rants. The case against Nicolas Ghesquière by his former employer, Kering-owned Balenciaga, involves an alleged violation of their separation agreement, with Balenciaga claiming the designer made remarks that were published in a magazine that the house deemed harmful.

Fines And Such: In one of the largest fines ever imposed by France’s stock market regulator AMF, LVMH Moët Hennessy Louis Vuitton was sanctioned for 8 million euros, or $10.6 million, over the way it acquired its initial 17.1 percent stake in Hermès International. Italy’s Bourse watchdog Consob fined the Mariella Burani Fashion Group, its former managers and leather goods unit, Antichi Pellettieri, 6.7 million euros, ($8.7 million), for alleged stock market manipulation. Walter and Giovanni Burani, respectively president and chief executive officer of the group, were sentenced to six years in jail for fraudulently filing bankruptcy.
But neither amount compares with the nearly $25.8 million fine for former Aéropostale Inc. chief merchandising officer Christopher Finazzo, who was convicted on 14 counts of mail fraud, one count each of wire fraud and conspiracy in connection with a multimillion-dollar kickback scheme involving one of the retailer’s key vendors. Finazzo is awaiting sentencing.

Brands Gain Against Counterfeiters: Brands scored in their fight against counterfeiters, winning an aggregate of $154.4 million — but will they really collect? Tiffany won $2.2 million against a ring of Internet counterfeiters, Coach was awarded $8 million against a customs brokerage firm, and Gucci America Inc. won a hefty $144.2 million against several organizations engaged in online counterfeiting. But particularly in the Gucci case, many of the defendants were labeled as “John Doe” — meaning their names are not known. So while Gucci won the fight, it is unlikely to collect a significant amount of the award.