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Dov Charney, founder of American Apparel, shown in 2012. Credit Gary Friedman/Los Angeles Times, via Associated Press
The founder and chief executive of American Apparel, Dov Charney, was fired this week because an internal investigation found that he had misused company money and had allowed an employee to post naked photographs of a former female employee who had sued him, according to a person with knowledge of the investigation.
The company’s board learned early this year that Mr. Charney knew that an employee was planning to publish naked photographs of a former American Apparel employee, Irene Morales, on the Internet. While Mr. Charney did not publish the photographs himself, he did not try to stop them from being published, said the person, who spoke on condition of anonymity because of the sensitive nature of Mr. Charney’s dismissal. Ms. Morales sued Mr. Charney in 2011, claiming he had forced her to perform sexual acts over a period of several months. He claimed that the photos showed that she had pursued him.
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In March, after learning that Mr. Charney was aware of plans to publish the photographs, the board decided to conduct an investigation into his behavior.
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American Apparel Milestones With Dov Charney at the Helm
The investigation, led by the law firm Jones Day, also found that Mr. Charney had used the retailer’s resources for his personal use. According to the investigation, he bought plane tickets for his parents with company money, and he and his friends used company apartments while not on official business.
Reuters reported on Saturday that Mr. Charney had discussed the pictures of Ms. Morales with company executives and felt they had approved of their being published online. The person with knowledge of the investigation disputed this, saying that while certain board members and executives had been aware of the photographs, Mr. Charney did not discuss any plans to publish them online.
For years, Mr. Charney has been trailed by accusations of sexual harassment and stories about his behavior that, at a minimum, seemed like a lurid distraction for the chief executive of a publicly traded company. He was sued by employees who said he had created an unsafe work environment, rife with innuendo and sexual misconduct.
But the problems at American Apparel, which Mr. Charney founded in 1998, extended beyond his personal behavior.
The company’s stock has plummeted about 80 percent in the last five years. Several financial institutions refused to work with American Apparel while Mr. Charney was involved with the company. And companies that provided financing demanded credit-card-style interest rates of up to 20 percent.
On Wednesday, just after the company’s annual meeting, Mr. Charney sat down in a conference room at the Times Square offices of the company’s outside counsel, Skadden, Arps, Slate, Meagher & Flom, and was fired by the board. A person with direct knowledge of the meeting said that Mr. Charney was shocked and that the meeting lasted more than nine hours.
The company has since received a letter from Mr. Charney’s lawyers saying he believes the termination to be unjustified, and people inside the company say they do not expect Mr. Charney to go without a fight.
Attempts to reach Mr. Charney on Saturday were not successful.
The firing of Mr. Charney may set off a default on some of the company’s credit lines, and the company has been in discussions to hire the Peter J. Solomon Company, an investment firm, to provide it with additional capital. A person with knowledge of these discussions denied that there were any plans to put the company up for sale.
Some details about the reasons for Mr. Charney’s dismissal were first reported by Reuters.
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