House of Versace: The Untold Story of Genius, Murder, and Survival

by Deborah Ball

  Donatella got little relief in the atelier, where the atmosphere was increasingly chaotic. There had been a steady exodus of longtime Versace employees who couldn’t adapt to Donatella’s style. She had always been chronically tardy, but her schedule now ran hours behind. She rarely turned up much before noon and often called meetings late in the evening. The large turnover of people, combined with Donatella’s lackadaisical management style, left her group working marathon days.

  The team she’d put together only made things worse. Painfully aware of her own shortcomings as a designer, she relied heavily on the taste of the young people she’d hired. But much of the group was horribly out of place at Versace. One of her main assistants, who came from the punk scene in London, had spiky bleached-blond hair and brought a skull-and-crossbones aesthetic to Versace. Others made sly jokes about the traditional Versace look, rolling their eyes when they had to wear the designs to company events. Longtime Versace employees viewed the newcomers as disrespectful young Turks and resisted working with them.

  Donatella added to the confusion by hiring outside stylists to help her lead the group, hoping they could serve up the vision she lacked. Instead, they only seeded confusion. They clashed with Donatella’s top assistants over how the collection should be put together. They also reinforced Donatella’s own inclination to favor flash over substance. As a result, the collections emphasized elaborate evening gowns but neglected more marketable day clothes. The stylists also ignored the feedback from the sales executives about what department store buyers wanted. While Gianni had been able to cherry-pick fresh ideas his assistants came up with and meld them into a coherent collection, Donatella was paralyzed. She carried the key to the gate of the Miami mansion—the last thing that Gianni had touched—everywhere she went, fingering it as if it could conjure up Gianni’s spirit to help her.

  Unsurprisingly, the reviews got worse and worse. When Donatella stuffed her front row with eight A-list stars for one show in 1999, the New York Times pilloried her for “stocking the show with celebrities, like a trout farm in the Catskills. It’s bogus, it’s bush league, but mainly, it’s just old.” The collection of screen-printed T-shirts slashed open in the back, white denim skirts, and Lolita-like tops “looked as if [it] had been designed by a lecherous old groupie on break from a Grateful Dead tour.”4 Editors at powerful magazines such as Vogue and Harper’s Bazaar used Versace clothes in their editorial spreads less and less often. Complaints from the Versace press office on the drop in coverage were politely ignored.

  The reviews stung Donatella badly, and the strain she felt began to poison the atmosphere at Via Gesù. The atelier was starting to resemble an alcoholic home where the children constantly try to anticipate the humors and vagaries of a drinking parent. Donatella was moody, coldly ignoring one longtime employee one day only to warmly embrace him the next. She insulated herself within a tight inner circle of assistants that became her enablers, catering to her whims and reinforcing her feelings of being under siege.

  In the presence of her posse, she was the old Donatella. She threw five-course dinners in her apartment for friends and close assistants, and took the leftover desserts to Via Gesù the next day for all to enjoy. When she discovered that one employee loved lasagna, she had her cook prepare a pan of it whenever they traveled together. She lavished her favorite employees with gifts. When an assistant admired a delicate diamond necklace a jeweler had brought for a photo shoot, Donatella flicked her hand dismissively. “Oh please, darling,” she quipped, as if the item were costume jewelry. “If you like it, just take it.”5 On good days in the atelier, she exuded her former irony and wittiness. She joked that she wanted actress Charlize Theron to play her should a film ever be made about Versace. Happy to forget her own personal problems, she delved into her assistants’ private lives with relish, doling out tough-love advice whether they asked for it or not.

  But more and more, the heavy drug use, the personal stress, and her growing fame combined to create a destructive diva. Her self-restraint was slipping away. She snorted cocaine openly in front of Versace staff. Just hours before one runway show in 1999, she did a line in the courtyard of Via Gesù in full sight of the workers who were finishing mounting the set. At after-parties in her apartment, she disappeared to her bathroom, a bodyguard standing sentry outside while she got high.

  As the company’s downward spiral accelerated, she became defiantly extravagant and started spending the house’s money with stunning abandon. In the atelier, Donatella mimicked Gianni’s over-the-top habits, justifying huge expenditures in the name of creative freedom. She ordered far more samples than her team would ever use on the runway and demanded as many as two hundred pairs of shoes just days before a show, despite the enormous cost involved in such a rush job. Her reliance on stylists was another huge expense. They charged up to five thousand dollars a day plus accommodations and business-class travel, and spent at least ten days most months in the atelier in Milan. For the runway, Donatella not only hired the most expensive models but gave favorites such as Naomi and Kate Moss diamond bracelets or rings backstage after the show.

  Her personal spending was rocketing. She used only private jets for herself and her family, even for ninety-minute flights to Paris. Bodyguards followed her everywhere, sitting in the reception area of Via Gesù as she worked. While chatting with guests at parties, she often raised one hand with two fingers flipped open into a “V.” It was a sign for the nearest bodyguard to whip out a Marlboro Red and slip it between her fingers, ready to be lit with her rhinestone-encrusted lighter. When she was depressed, she sent one of them down to a jeweler near Via Gesù to buy her a new bauble. It was all on the company’s dime.

  Donatella, now nearing forty-five, also became enormously obsessed with her physical appearance. A hairstylist and a makeup person trailed her everywhere, brushing invisible specks from her clothes and dabbing her face with fresh foundation. She flew a top hairdresser who specialized in extensions from New York to wherever she was at the time. Harsh color treatments and daily styling with hot irons had burned Donatella’s natural hair to a crisp. To attach extensions, her hairdresser had to braid Donatella’s real hair into tiny cornrows running horizontally around her head. She then took thick wefts of real human hair—costing more than $1,000 altogether because that shade of blond is so rare—and painstakingly sewed them into the cornrows with a curved needle and thread. While most women go as long as four months before replacing their extensions, Donatella redid hers every six to eight weeks. The cost: more than $150,000 each year.

  As Donatella morphed into a prima donna, any lingering solidarity between her and Santo melted away. Publicly, Santo was still unflagging in his support of his sister. When close friends urged him to find a way to replace her, he rose in her defense. “You don’t understand!” he often replied. “Donatella is the right person. She just needs some time.” In the office, no one had the courage to challenge Donatella about her increasingly extravagant behavior, so they asked Santo to intervene when they had problems with her. Santo urged them to be patient and then tried to resolve the problem himself, usually in vain. If one of Santo’s team members openly criticized her, he sharply reprimanded him.

  But privately, Santo was galled to see the changes in Donatella and believed that her newfound fame had gone to her head. While he had agreed that Donatella would take over the role of creative chief of Versace after Gianni’s death, he felt she had come to view herself as an equal to their late brother. Donatella had even ordered the house’s brand name to be changed from “Gianni Versace” to “Versace.” The labels on the clothes and signs on many of the shops were changed. Santo was horrified.

  He and Donatella were also at loggerheads over the creative direction the company should take. Santo argued futilely that the house should hew closely to the style of Gianni’s glory days. Santo was, by nature, more conservative, so he fell back on what had worked in the past. Sometimes he tried to circumvent his sister. He would sur
reptitiously bring Donatella’s assistants bestselling items from Gianni’s collections, such as trench coats or men’s shirts, urging them to create new versions and slip them into the collection. But the design team, taking their cue from Donatella, snubbed him.

  Once, the head of the factory that produced Versace clothes asked Santo if he could make a minicollection of men’s colorful printed shirts, which had been wildly popular before Gianni’s death. Donatella lacked the technical skill and sharp eye required to make printed shirts, dresses, and scarves, and she had cut them from Versace’s lineup. Santo had long pressed Donatella to revive Versace’s prints and gave the okay for the factory to whip up some shirts. When Donatella saw them in the showroom, she exploded. “What is this?” she demanded of an assistant. “These things don’t have any part in the Versace style now! There’s a new designer around here now. Get rid of these things!”

  In June 1999, the tensions between the siblings erupted into a violent argument. Santo and Donatella had flown to London for the opening of a new boutique. That evening, Donatella was to stage a charity runway-show-cum-dinner in partnership with South African diamond giant De Beers. Before an eclectic audience that included Prince Charles, Pierce Brosnan, Ivana Trump, and the Backstreet Boys, a parade of models, each dripping with diamond jewelry, showed a selection of silver lamé and semitransparent couture dresses, followed by a series of tiny bikinis. One girl’s breast popped out of an ill-fitting dress. Donatella herself wore a 103 karat solitaire diamond necklace.6

  Sitting among the VIPs, Santo felt more and more agitated as he watched the models saunter out in his sister’s creations. After the party, he confronted his sister in a fury. “Che schifo! Those clothes are disgusting!” he screamed at her. “I can’t even look at them. They are simply ugly. Even I could do better than that!”

  The bitter quarrel degenerated into an angry stalemate. By then, Santo understood that it mattered little what he thought of his sister’s collections. He was powerless. Any pretense of their working together had long disintegrated into a loop of bitter recriminations. The company had split into two warring camps—Santo’s team of managers in the offices at Via Manzoni and Donatella’s creative group in Via Gesù. But every employee at Versace understood that Via Gesù was the center of power now. At Versace parties, Donatella’s guests even had precedence on the list over Santo’s. The house of Versace was firmly in Donatella’s hands.

  The torrent of news coming from Versace’s rivals in 1999 only deepened Santo’s distress. In March, Domenico De Sole, grasping for a way to keep Gucci from falling into the clutches of Bernard Arnault’s LVMH, found his white knight: François Pinault. Pinault was Arnault’s nemesis, a rival French billionaire who had built a powerful retail conglomerate. Pinault wrote a check for $3 billion, buying a 42 percent slice in Gucci and leaving LVMH with a useless minority stake.

  In unsuccessfully going after Gucci, Arnault had unwittingly created a monster. The Pinault deal gave Gucci a $3 billion war chest and a mandate to scoop up other brands into a new fashion conglomerate—the first real competition Arnault had ever seen. He suddenly found himself in a billion-dollar arms race with Gucci in buying up other houses. Fueled by the deep personal animosity between Pinault and Arnault as well as the wave of money created by the Internet boom, LVMH and Gucci sent the price of corporate acquisitions to head-spinning levels. Just months after the deal with Pinault, De Sole paid $1 billion to snatch up Yves Saint Laurent.

  Over the next few years, LVMH and Gucci would sweep up a raft of independent fashion houses, which were only too happy to cash out at peak prices. Gucci bought luxury shoe maker Sergio Rossi, jeweler Boucheron, and French couturier Balenciaga. LVMH spent nearly $3 billion in 1999 alone, adding Thomas Pink, Donna Karan, and Pucci to its stable. Prada also got into the act, buying seven labels in quick succession, including Jil Sander, Helmut Lang, and Church’s, maker of fine men’s shoes. Stock market investors joined the fray, and luxury stocks rose 144 percent in 1999.7

  But it was the Fendi acquisition that marked the giddy peak of the handbag wars. Before the boom of the late 1990s, Fendi had been a sleepy Roman fashion house run by five tight-knit sisters and was best known for stylish furs designed by Karl Lagerfeld. All that changed in 1998, when one of the sisters came up with a new bag she dubbed the Baguette, a small, soft purse that fit neatly under the arm and came in an array of bright colors and baroque designs. To their great surprise, the sisters soon had a megahit on their hands, selling more than half a million bags for prices of up to $5,000. Fendi soon found itself in the sights of LVMH, Prada, and Gucci, who embarked on a bidding war for the house. Finally, Prada joined forces with LVMH to beat out Gucci by offering more than $1 billion for a label that had been virtually unknown outside of Italy two years earlier. It was a mind-boggling amount for a house that had just $150 million in sales and $10 million in profit.

  With their size and heft, LVMH, Gucci, and Prada raised the bar immensely for smaller independent fashion houses such as Versace. For instance, the fashion company troika demanded deep discounts from the fashion magazines by negotiating advertisement placements across all of their brands. In 2000, LVMH owned forty different brands and spent 650 million euros a year for communications. By negotiating in bulk for all of its brands, it enjoyed a 20 percent discount on ad rates, giving it an enormous edge over smaller competitors such as Versace.

  The rivals also spent huge sums to kit out a series of ostentatious new boutiques. Gucci poured $70 million into revamping its Madison Avenue flagship, while LVMH plunked down $150 million to buy the Warner Bros. store on Fifth Avenue for a new Louis Vuitton shop. Between 1999 and 2002, the top brands would spend a whopping $4.2 billion to open 1,400 new shops around the world.

  Versace was being outclassed on every front. The house’s boutiques looked tatty and dated next to other brands’ shiny new shops. Versace franchisees saw a sharp drop in sales after Gianni’s death, and worried about the future of the house, they stopped spending to refurbish the shops. While most fashion houses revamp their boutiques every three to five years, some Versace boutiques hadn’t been remodeled in nearly a decade.

  As their shoppers disappeared, the franchise owners put pressure on Santo to cut the royalties the house collected from the boutiques, and he had little choice but to cave. When sales deteriorated further, they then pressured Santo to cancel their contracts with Versace altogether. They knew that Santo had little choice but to follow the new industry trend of shunning franchise boutiques in favor of fully controlled shops, so it was an easy game. Many of them threatened to sue Versace if the company resisted. Santo couldn’t bear to see his brand disappear from important cities such as San Francisco, Brussels, and Berlin, unraveling two decades’ worth of work, so he spent huge sums to buy out the remaining years on the franchisees’ contracts. The company then had to spend additional millions to refurbish shop after shop, while at the same time open expensive new boutiques in hot new markets such as Russia and China, where rivals were planting their flags.

  Santo’s early 1990s drive to bump profits by signing a jumble of licenses was now also backfiring badly. Versace had nineteen licenses when Gianni died, for everything from plus-sized clothes to underwear, bathing suits, and children’s clothes, as well as several different women’s lines. All of the licenses confused shoppers and tarnished the Versace brand. Santo had to start closing them.

  As the new millennium drew near, Versace looked increasingly puny next to fashion’s new multibrand behemoths; it was missing out on the global bonanza in luxury goods. By 1999, Versace sales were just 404 million euros, down 11 percent from the year before. By contrast, LVMH had 8.5 billion euros in sales that year—twenty times as much as Versace—and was growing by double digits. Prada and Gucci, both smaller than Versace before Gianni’s death, raced past their old rival, fueled by the boom in sales of leather goods as well as their voracious corporate shopping sprees. Prada’s sales soared from 40 million euros in 1990 to 1.6 bil
lion euros ten years later. Gucci’s sales topped $2 billion.

  The question of the tax on Allegra’s inheritance also weighed on the company. While Versace lawyers pursued an appeal to lower the amount the little girl owed, Italian law required that the company set aside a large portion of that figure. The money had to come from the house’s profits, which meant Donatella and Santo had to approve an extra-large dividend of 58 billion lire ($30 million) to be paid to all three shareholders. It was money that Santo could have sunk into new shops, advertising, or factory space.

  Meanwhile, Donatella’s spending continued virtually unchecked. In 1999, she spent 9.6 million euros on runway shows, more than twice the amount Gianni spent the year before he died. The care and feeding of celebrities was also costing more and more as stars became more demanding. Donatella spent 2.7 million euros on free clothes, travel, accommodations, and gifts for celebrities, 40 percent more than the year before Gianni died. She also used the company as if it were her own personal bank account, spending the house’s money to cover personal expenditures, from private planes to the villa she rented for the month of August in St. Tropez. As a result, Versace’s 1999 net profit was less than 13 million euros, one-sixth the figure in 1996. Santo harped on his sister to cut her spending and had his finance managers come up with a plan to cut the company’s costs. Donatella ignored it.

  Santo began looking for ways to raise fresh cash to cover the house’s growing costs. In 1999, retail executives from LVMH came calling with an offer to pay Versace 15 million euros to vacate the shop that the company rented at Via Montenapoleone 2. The location was the best one on the street, tucked just inside a majestic courtyard with porticos on three sides. When Gianni first opened it eight years earlier, the boutique, with its etched glass windows, yellow and burnt orange marble, and trompe l’oeil ceilings, had been a glittering show-place on an otherwise prim street. But the shop had become a daily reminder of the company’s sagging fortunes. Santo had little choice but to accept LVMH’s rich offer. It pained him to stand by while workers pulled up the inlaid mosaic medusa heads from the floor of his brother’s store. The new boutique that opened a few months later was a key piece of LVMH’s plan to plant Vuitton shops in the best locations on the best streets around the world. For Santo and for Versace, the loss of the Via Montenapoleone shop would be the first step in the dismantling of the empire Gianni had built.