American Apparel ousts CEO/chairman Dov Charney on misconduct allegations

Los Angeles -- Apparel retailer American Apparel Inc. has fired its controversial founder Dov Charney as chairman, effective immediately, and has moved to fire him as CEO and president. The actions come on the heels of an ongoing investigation into alleged misconduct by Charney, who has been targeted in sexual harassment lawsuits and charged with allegations of misconduct for years.

"Charney will be terminated for cause after a contractual 30-day cure period,” the Los Angeles-based company said in a statement.

According to the Los Angeles Times, Charney’s behavior problems involved his personal conduct with women and poor judgment.

American Apparel has named CFO John Luttrell as interim CEO and has hired a firm to search for a permanent replacement. The retailer also appointed Allan Mayer and David Danziger as co-chairman.

Mayer, who has been a member of the board since American Apparel  went public in 2007 and has served as its lead independent director for the past three years, said the board's decision to replace Charney grew out of an ongoing investigation into alleged misconduct.

“We take no joy in this, but the board felt it was the right thing to do," Mayer said.

Interim CFO Luttrell said American Apparel would remain committed to its sweatshop-free, Made in USA manufacturing philosophy.

“We have one of the best known and most relevant brands in the world, with employees who are second to none; I believe we have a very exciting future," said Luttrell. "Our core business — designing, manufacturing, and selling American-made branded apparel — is strong and continues to demonstrate great potential for growth, both in the U.S. and abroad. This new chapter in the American Apparel story will be the most exciting one yet."

Charney founded American Apparel in 1998, building a company that became known for its racy advertising and unorthodox business practices. He himself also developed an unorthodox reputation, and was reported to conduct interviews and company meetings in his underwear.

The Los Angeles Times quoted an unnamed source who said Charney was “totally taken by surprise, which is part of the problem,” adding that he will “fight like hell to get this company back, but he won’t succeed.”

American Apparel has struggled in recent years amid sluggish sales and manufacturing and financing problems. It reported a net loss of $37.3 million loss in 2012, and a net loss of $106.3 million in 2013. It was recently in danger of being delisted by the New York Stock Exchange.