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

by Deborah Ball

  An unlikely savior came in the form of a man named Leonardo Del Vecchio. The founder of the eyeglasses manufacturer Luxottica, Del Vecchio boasted a Dickensian story that was rare in Italy. Raised in an orphanage, he never finished high school, instead going to work as an apprentice to a craftsman at fourteen. Ten years later, in 1961, he founded his own company, originally a small manufacturer of simple eyeglass frames, which rode the wave of consumer interest in designer eyewear and ultimately bought the LensCrafters and Sunglass Hut chains. Del Vecchio spotted an opportunity in Versace’s troubles. In fall 2002, he lost his license to make Giorgio Armani—brand eyeglasses and thought Versace could be an ideal replacement. If Santo agreed to sign a ten-year contract to license its eyewear to him, Luxottica would pay 25 million euros up front for the renewal of the deal for a further ten years. Santo and Del Vecchio reached an agreement right around Christmas, saving Versace from default with just days to spare. It hardly solved Santo’s problems, but it bought him a little more time to stop his family company’s slide toward disaster.

  eighteen

  Breaking Down

  iN JANUARY OF EVERY YEAR FROM 1960 UNTIL HIS DEATH IN 2008, Richard Blackwell published a list of the worst-dressed celebrities. The list, laced with bitchy put-downs and high-camp commentary, mercilessly skewered the great and the good. The style guru once dubbed Barbra Streisand as “the masculine bride of Frankenstein.” The media, looking for an antidote to so much fawning celebrity coverage, gave Blackwell’s acid-tipped list ample play each year. In January 2003, Donatella Versace landed on Blackwell’s list, alongside Anna Nicole Smith and Princess Anne. Donatella, he wrote, “resembles a flash-fried Venus, stuck in a Miami strip mall. Time to toss the peroxide once and for all.” To the dismay of Versace’s press office, newspapers and magazines eagerly picked up the withering description. It was hardly the image that Donatella wanted to project for herself or for her business.

  As a young woman, Donatella had had an alluring prettiness, but by the time she landed on Blackwell’s list, sunlight had leathered her beautiful alabaster skin and plastic surgery had ruined her features, leaving her with an appearance so cartoonish it made her the butt of jokes. The heavy makeup she’d always worn to create a vampish image now looked like a painted mask. With her frozen face, odd-shaped nose, and lips collagen-injected into a “trout pout,” Donatella at forty-seven had become an outlandish camp goddess. Her legendary discipline at the dinner table was also crumbling. Instead of the sculpted physique she’d maintained in her thirties and early forties, rolls of fat now spilled over her waistband. She stopped sporting the ultra-miniskirts she’d worn for thirty years. She doubled up her efforts to lose weight, trying to subsist some days on just Diet Coke, strong espressos, and dozens of Marlboro Reds, stubbing them out distractedly in ashtrays the staff scattered for her throughout Via Gesù. But it didn’t work. When she emerged for her bow at the end of shows, looking dumpy next to a willowy model half her age, her forced smile was an expression of painful self-consciousness.

  Ironically, her shocking appearance increased her fame even more. But instead of projecting cool, Donatella was becoming a caricature representing the extremes of the fashion world. Her physical appearance and hard-living style had become so notorious that Saturday Night Live turned it into a recurring spoof. One of the television show’s lead comediennes, Maya Rudolph, played Donatella as a foot-stomping diva, cigarette and glass in hand. Following her everywhere was a clutch of hunky male assistants clad in leather trousers and stripped to the waist, gyrating flamboyantly. “I am Donatella Versace. Welcome to my show where I smoke and look good,” says Rudolph to open the sketch. The real Donatella was a remarkably good sport about Rudolph’s impersonation. She appeared with the comedienne at Radio City Music Hall for the VH1/ Vogue fashion awards, walking onto the stage and deadpanning, “What are you all doing in my bathroom?”

  Donatella’s appearance on Blackwell’s list kicked off a year in which she and the company would careen from crisis to crisis. Her life was going off the rails, but she didn’t have the courage to admit it. Inside her cocoon, she could blame everyone but herself for the chaos around her. As her failures piled up for all the world to see, she fell into a vicious cycle. The more things spun out of control, the faster she ran from her problems. Swinging from fits of self-hatred to stubborn displays of megalomania, she was at a loss about how to escape the painful loop. It took bigger and bigger hits of cocaine to maintain this state of denial. But time was running out.

  By the spring of 2003, the management of the company was breaking down completely. Executives were tired of fighting with her about her spending and watching the house lurch forward without a strategy for recovery. In short order, the house’s chief operating officer, chief financial officer, and two board members all quit. Versace was rudderless. As a result, it missed the rare opportunities for rescue that came along.

  At Versace’s show that March, Ron Frasch, the chief executive of Bergdorf Goodman, was pleasantly surprised with the collection, particularly a series of corsetlike evening dresses that tied up the back and came in soft pastel shades of green and pink. Bergdorf had long stopped carrying Versace, but the store was selling oodles of sexy designs by Cavalli and Dolce & Gabbana. Frasch thought Versace could provide a similar shot of excitement. Given the perilous state of the house, it was an enormous leap of faith on his part. He decided to stage a trunk show, a private viewing of a designer’s collection for a store’s regular clients. If the trunk show did well, Bergdorf would carve out a space for Versace on its selling floor. The store put Versace designs in its windows and featured them in full-page ads in the New York Times under the headline “Very Bergdorf.” At the trunk show, Bergdorf clients snapped up the corset dresses, as well as white moleskin coats, leather bags, and black leather jackets. In all, the store sold $620,000 worth of goods—far less than the $5 million the store pocketed for a Chanel trunk show around the same time, but enough to green-light a permanent space.1

  But by then the management vacuum in Milan had paralyzed Versace. When Bergdorf asked for help in designing the space, it couldn’t wrench a decision—or money—out of the house, so it built a simple white box. Requests to Donatella to schedule personal appearances in the store went unanswered. Disastrously, the store received very few of the pieces it ordered. Within a few months, Frasch filled the space with other brands.2 Other retailers took note, and faith in the house sank to a new low.

  In June 2003, Versace published the disastrous 2002 accounts. Sales were falling, net debt had risen from 100 million euros in 2001 to 130 million euros a year later, and the house posted a loss of 5.5 million euros. (The payment from Luxottica pushed the operating profit into the black, thus preventing Versace from defaulting on the bond, but it still had a net loss for the year.)

  But more embarrassingly, the company’s auditors finally called Donatella on her habit of using the house as a personal bank machine. Corporate auditors are independent watchdogs who have the responsibility of making sure the balance sheet conforms with accounting standards. For several years, they had stayed silent as Donatella’s expenditures grew. But in 2003, they finally objected to a series of costs on the company’s books that were clearly unjustified. They slapped a stern statement on the annual report demanding that Donatella reimburse Versace for her personal expenditures and warning that the house’s soaring costs threatened to destroy the company. Santo had battled with the auditors for weeks, trying to convince them not to attach the note, but the problems were too big for them to ignore. The warning was a serious blow to Versace’s corporate credibility. But Donatella still refused to reimburse the house for the expenditures.

  Versace’s creditors were also growing alarmed. In just a year’s time—in July 2004—Versace would have to pay back the 100-million-euro bond, but its finances were clearly falling apart. The search for an outside investor had been fruitless. The management vacancies at the top of the company were hard to fill; fashion�
�s best executives refused to risk going to work there. When the bond came due, Versace would need to convince its bankers to refinance the loan, but if the company remained in its current state, they would hardly agree. If the banks cut off new financing, Versace could go bankrupt.

  Another deadline began to loom as well: Allegra’s eighteenth birthday. The young woman would finally come into her controlling stake on June 30, 2004, just days before the bond came due. Since Gianni’s death, Allegra had been a shadowy presence that haunted the house. She virtually never turned up in the Versace offices, although she did occasionally appear in the front row of her mother’s runway shows. Once, she was seated next to Mariah Carey, whose ample bust spilled voluptuously over the top of a Versace gown, making Allegra appear shockingly thin in contrast. She looked tiny and frail next to the hulking bodyguards who trailed her everywhere she went.

  During her rare public appearances, she seemed painfully uncomfortable. She rarely smiled, often wearing a wary, slightly wounded look when photographers jostled for a picture of her. Hawkeyed PR people kept curious journalists from even approaching the girl at the shows. Allegra’s anorexia was an open secret—just a glimpse of her rickety frame said it all—but the Versace press office convinced the media to refrain from writing about the young heiress as long as she was a minor.

  But despite her illness, Allegra was growing into that rare creature—a celebrity child who wears her wealth and extravagant upbringing lightly. She was raised among the offspring of the world’s most prominent celebrities, spending birthdays and holidays with the children of Madonna, Demi Moore, Sting, Eric Clapton, and Anna Wintour. As Donatella’s daughter and Gianni’s heir, she had lifelong membership in the rarefied world of the truly rich and famous. She traveled in private jets, learned to swim in the pool of the Beverly Hills Hotel, and spoke several languages; she seemed as comfortable in the celebrity hothouse of Los Angeles as in the Eurotrash circles of Milan or London. When she spoke English, she pronounced her words with a light British lilt that was a product of the expensive expatriate school she attended in Milan.

  As a child, there had been something special about Allegra, a poise and self-possession that made adults want to engage her. As she approached adulthood, she still had an aura that generated a great deal of fascination, fed in no small part by her reclusiveness. She could easily have been one of those heirs who grow into spoiled, petulant monsters and wind up in the tabloid gossip columns for their antics. Instead, she was growing into a remarkably unassuming, down-to-earth young woman, the trials of her family life and her illness having matured her beyond her years. She was more diligent than her mother in calling Zia Nora in Reggio, much to the delight of the old lady. With friends, who called her “Allie,” she never sought to be the center of attention or tried to exploit her status. She inherited her mother’s dry wit and sense of irony but not her grandeur or megalomania, and she was the first to joke about her surreal upbringing.

  Like Donatella, Allegra wasn’t a classic beauty but possessed a mysterious physical allure. Growing up amid people who spent much of their waking hours critiquing clothes and appearances, she was extremely fashion conscious but not ostentatious. While other girls her age struggled with grooming, makeup, and hairstyles, Allegra had a preternaturally mature sense of how to put herself together. She loved girly, colorful clothes, mixing H&M pieces with Miss Sixty denim or Versace slip skirts. But, despite her good looks—she had pretty, shoulder-length brown hair and dark brown eyes—she shied away from dating even as her peers began to break off into couples. In high school, she became interested in acting, perhaps as an escape from the tensions at home. She had a regal sense of presence that came from growing up in the limelight and being the constant center of attention. Years of dance training made her more graceful and refined in the way she moved, her extreme thinness adding an arresting sense of fragility.

  As she headed into her senior year, she applied and was accepted to Brown University, the Ivy League college in Providence, Rhode Island. It was a good fit for Allegra. Brown is a popular destination for celebrity children, from the scions of Hollywood stars such as Susan Sarandon to the likes of John F. Kennedy, Jr., and Amy Carter. The college is the most easygoing of the Ivy Leagues, with few core requirements and the option of taking classes on a pass/fail basis, and the school’s strong performing arts program is a big draw for artistically inclined students such as Allegra.

  Until 2003, Allegra’s youth, long absences, and precarious health left Donatella free to exercise her daughter’s share. But as her eighteenth birthday approached, Allegra took more interest, beginning to prepare for the day that she would control her uncle’s company. She started attending shareholder meetings, although she still said little. The enormous damage wrought to Allegra’s inheritance by devaluation of the company became steadily more evident. When Gianni died, the child was worth as much as $1 billion. When she was finally primed to take possession of her inheritance, it had shriveled to a fraction of that amount. The money gleaned from the sale of the Picassos, the Miami mansion, and other of Gianni’s assets had gone up in smoke.

  At the same time, Donatella’s spiraling drug use was shredding her relationship with Allegra as well as with Daniel, then thirteen. Her mood swings—laughing one minute, sobbing the next—were terrifying to the children. Other times she screamed at them, and if they tried to reason with her, she refused to listen.3

  The confluence of the deadline for the bond and Allegra’s coming of age piled the pressure on Donatella. Allegra would effectively become her boss when the girl became an adult, free to challenge both Donatella’s and Santo’s decisions. How Allegra would exercise her power was a wild card—for Donatella and for the company.

  During the spring of 2003, Santo and a clutch of Versace executives made a last-ditch effort to salvage the company and soothe its bankers. They brought in Fabio Massimo Cacciatori, a consultant with an expertise in restructuring, as CEO, to see how the house of Versace might be cleaned up.

  When Cacciatori arrived, the company was halfway through the calendar year but its 2003 budget had yet to be completed. From the start, Cacciatori was a misfit at Versace, a company long driven more by the whims of the controlling family than by good management practices. He was the classic consultant called in to conduct a dry-eyed analysis of a troubled business. His approach was de rigueur in other businesses—measuring performance against competitors, looking for areas to cut waste, setting specific budgets for each department—but they were downright bizarre in the fashion world, where the suits are considered second-class citizens. At Versace, no one had ever taken a really close look at how the business was—or should be—run.

  Twelve consultants from Cacciatori’s firm set up camp inside the Versace headquarters that summer, sifting through the company’s contracts with suppliers and sales reports for the stores. They interviewed bemused employees on the workings of every department, filling out so-called activity efficiency worksheets that measured the performance of each one. Santo stopped in daily to greet the group and scan the thick reports they were compiling. Cacciatori presented Donatella and Santo with a twenty-page analysis that laid bare just how badly off the company was. The amount of unsold goods was rising alarmingly. Versace’s costs had been increasing 10 percent to 15 percent a year without a clear plan, even as sales fell. Business managers had very loose budgets—if they had any at all. The comparison of Versace’s performance to its best-run rivals was abysmal. The house had a huge staff but very small sales. Companies such as Gucci and Prada had three times the sales per employee that Versace did. Versace’s own shops were money pits; its rivals’ boutiques made seven times as much in sales per square foot of selling space as Versace’s. Within a couple of months, Cacciatori found five million euros’ worth of potential cost cutting.

  Cacciatori, with the reluctant assent of Santo and Donatella, fired hundreds of employees, closed the boutique in San Francisco, and shuttered part of Versace’s U.S. hea
dquarters. He saved hundreds of thousands of euros by striking new deals with Versace suppliers, some of whom had taken advantage of the chaos in the company over the years to overcharge them. But the bigger problem was Donatella’s spending. Cacciatori imposed a limit of one hundred thousand euros on any expense that Donatella or Santo could authorize autonomously. If they wanted to spend more—on the runway shows or to remodel a boutique—they needed his okay.

  For a while, Donatella, chastened somewhat by the public uproar over the auditors’ note on her spending that spring, fell in line. She gave up the private jets and ran the costs of her runway shows by Cacciatori. But the delicate détente lasted only until the October runway show. Within weeks, their relationship had crumbled. Donatella’s contempt for Cacciatori had grown steadily over his tenure there, as he barged through the company with his passel of consultants in tow. Donatella’s profligate ways were an enormous problem for the house, but her frustration was justified; Cacciatori was the wrong man to correct her course. He came from a world of Excel spreadsheets, financial analysis, and management techniques gleaned from business school case studies. He had no feel for the creative process at a fashion house. He applied cold cost-benefit analysis to the business as if it were a widget maker, failing to understand that designers have to shoot a lot of arrows before they hit the target with a blockbuster bag or dress. Cacciatori saw only the cost of the arrows.