Aldo Gucci Admits Evading $7 Million in Income Taxes

Aldo Gucci, former chairman of the worldwide Gucci clothing and leather goods empire, pleaded guilty Friday to using phony foreign companies to evade more than $7 million in U.S. income taxes.

The 80-year-old son of the founder of the company, which is based in Florence, Italy, wept during his 15-minute appearance before U.S. District Judge Vincent Broderick and proclaimed his “love for the United States.”

Gucci, who has been a legal resident of the United States since 1977 but is not an American citizen, faces up to 15 years in prison and a $30,000 fine. He will also have to pay court costs and tax penalties, which have not yet been determined.

The tall, balding patriarch of the company that has supplied the affluent with expensive leather loafers, purses and suitcases from Hong Kong to Palm Beach, repeatedly and nervously answered, “Yes, sir,” and “No, sir,” to a series of questions put to him by the judge. He said, “No, sir,” when asked if he had been coerced into pleading guilty.

The government charged that Gucci and co-conspirators, who were not identified, defrauded the United States “by impeding, impairing, obstructing and defeating the lawful functions of the Internal Revenue Service . . . in the ascertainment, computation, assessment and collection of the revenue.”

The government charged that Gucci, who retired as chairman of Gucci Shops Inc., as well as of its Italian parent firm in November, 1984, and no longer has a role in its management, underreported his U.S. personal taxable income by approximately $11.8 million, on which there was a tax due of about $7.4 million. Although Gucci pleaded guilty only to evading 1979 and 1980 income taxes, the government said he actually owed for the period from 1977 through 1982.

His guilty plea will bar further prosecution for any past tax violations, the government said.

The government said he paid $27,961 in personal income taxes for 1979, when the correct payment should have been $2 million, and $32,546 in 1980, when he should have paid $1.5 million.

Gucci was charged with “using various fraudulent devices” to divert income from Gucci Shops Inc. The devices employed, the government charged, included the use of sham foreign corporations to hold the stock of Gucci Shops Inc. and other shops controlled by the Gucci family, the use of sham foreign corporations to submit bills to Gucci Shops Inc. for services that had not been performed and to receive diverted corporate income, and the creation of bills and invoices to justify payment of money allegedly diverted from Gucci Shops Inc. to Gucci and members of his family.

Only Gucci Charged

Although Gucci was the only person charged in the case, Howard Wilson, assistant U.S. attorney for the Southern District of New York, said the investigation is continuing.

Dressed in a dark suit with a red handkerchief in the breast pocket and looking 20 years younger than his age, Gucci had to wait in the courtroom for about three hours while the judge disposed of other cases. When his turn came, he read a statement admitting his guilt but blaming others for setting up the scheme.

“While I was generally aware of the situation,” he said, “the details of these various methods of income diversion were devised by an accountant, and I was not involved in the creation of these methods. As a result, Gucci Shops Inc. failed to report a substantial amount of its income during the period described . . . . The diverted income was divided among myself, members of my family and others.”

Accountant Has Died

Wilson said that the accountant, whom he refused to identify, has died.

Under the terms of an agreement Gucci has made with the government, an accounting will be completed and he must pay the back taxes by the date scheduled for his sentencing, April 7.

Gucci, who was said to have waived a grand jury hearing, was released after his court appearance Friday. Before leaving the court, he handed over a check for $1 million as a down payment on the taxes due. Wilson said that no deals have been made regarding sentencing.

The Italian parent company of Gucci Shops Inc. is named Guccio Gucci for its founder, Aldo’s father. The American subsidiary, which was formed in 1953 by Aldo and his two late brothers, Vasco and Rodolfo, has seven stores in this country and franchises others.

For several years, Aldo Gucci and his sons have been feuding with the current president of the company, Maurizio Gucci, son of Rodolfo Gucci.

Aldo Gucci owns residences in New York, Rome, Beverly Hills and Palm Beach, Fla.