Dolce & Gabbana lose appeal against tax fraud verdict

An Italian court on Wednesday upheld a guilty verdict against celebrated fashion house duo Domenico Dolce and Stefano Gabbana for evading taxes totalling 200 million euros ($277 million).

The pair were sentenced to one year and six months in prison, though under Italian law they will not face jail until the appeals process has been exhausted.

"I am speechless, totally stunned. We will without doubt appeal to the high court," the fashion giants' lawyer Massimo Dinoia said.

Dolce and Gabbana, whose celebrity clients include Beyonce and Madonna, were accused of having transferred control of their brands to a shell company in Luxembourg in 2004 and 2005 to avoid paying Italian taxes.

Prosecutors had argued that setting up the Luxembourg company Gado - an acronym of the surnames of the two designers - while the company was operating out of Italy was a bid to defraud the state.

They were found guilty in June 2013, and given 20-month jail sentences - which they appealed.

Dolce and Gabbana were originally accused of tax evasion of around one billion euros, but the court ruled that just 200 million euros of that sum was relevant.

The appeals court also upheld guilty verdicts against four other people - including Dolce's brother Alfonso - who were given suspended jail sentences.

Investigators completed a probe into the designers and five other people in 2010.

The case was dismissed in April 2011 but reopened in November 2012 and went to trial.