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Charney Battling American Apparel Over Firing

Dov-charneyYou didn't think it would be that simple, did you?
Suspended and soon to be former American Apparel CEO Dov Charney (pictured at right) is reportedly mounting a legal battle to retain his position in the company he founded despite being suspended with the intent of termination last week. Given the choice of remaining as a consultant or being fired, Charney chose to be severed from the company. His attorney immediately sent a letter to the company which board co-chairman Allen Mayer called "...exactly what we’d expect to get from Dov’s lawyer in a situation like this. We continue to believe we did the right thing, for the right reasons, in the right way. We are very confident we are on very strong legal ground."

Charney's firing was specifically with cause, meaning that according to his contract, he will be ineligible for the multi-million dollar "golden parachute" severance package he would otherwise be entitled to. While the board has been vague about exactly which cause led to their actions, new reports suggest that, among other things, Charney independently authorized the release of nude photos of one of the former employees who was suing the company as well as the creation of a fake website that could be considered defamatory of her. This may have been the proverbial straw that broke the camel's back amidst a series of similar lawsuits that the company settled combined with the entire company's poor performance over  the past few years. As predicted, the weekend press has included a detailed recounting of Charney's sordid history of harassment lawsuits and his defiant refusal to admit wrongdoing amid reports of asexually charged workplace atmosphere under his stewardship. In addition, an explicit video of a nude Charney dancing around while talking on a phone surfaced on the internet for the benefit of those who needed to see every (and we mean every) last detail. It couldn't help his case much, but the incessant rehashing reflects poorly on the brand in general just as it may have the opportunity to finally leave its shady behind-the-scenes reputation behind. The board's biggest risk, however is not renewed discussion of corporate scandals, but the fact that Charney's firing may have triggered a default under its credit agreements that could a bankruptcy if lenders do not provide waivers for the brand to proceed with re-organization. This could set the company up for an acquisition which in turn could put in jeopardy the label's core value of exclusively manufacturing its goods in the United States. Wall Street, however, responded favorably to Charney's removal, however with the company's stock rising 6.7% upon the news of his firing. It looks like the business world as has a it more faith in the brand without its controversial mastermind than it dis with him in place. More to come on this story as the 30-day suspension period plays out.

Dov Charney Said Plotting Legal Counterpunch (WWD)
Inside the American Apparel Revolt (Wall Street Journal)


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