The board of American Apparel has ousted founder Dov Charney, moving to replace the controversial chairman and CEO for an unspecified reason. Charney, who founded the company in 1998, building an operation that was famous for its often controversial advertising campaigns, has been suspended effective immediately, the board said. The termination will go into effect in 30 days. The board voted and said Charney was removed “for cause.” Board member Allan Mayer said the decision to remove 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 in a statement. “Dov Charney created American Apparel, but the company has grown much larger than any one individual and we are confident that its greatest days are still ahead.” A company spokesman declined to provide more details on why Charney had been removed, but confirmed that chief financial officer John Luttrell will serve as interim CEO until a replacement for Charney is found.
Turns out, the Notice of Intent to Terminate addressed to Charney has surfaced, and along with it, the claims that have led to Charney’s ousting. They include …
1. Breach of Fiduciary Duty: “You have violated the fiduciary obligations owed to the Company in several material ways. For example, you were aware of, but took no steps to prevent an employee under your direct supervision and control from creating and maintaining false, defamatory and impersonating blog posts about former American Apparel employees […] We also recently learned that you presented significant severance packages to numerous former employees … to ensure that your misconduct vis-a-vis these employees would not subject you to personal liability.”
2. Violation of Company Policy: “You repeatedly engaged in conduct that violated the Company’s sexual harassment and anti-discrimination policy. In the recent past, you refused to participate in mandatory sexual harassment training and undermined the Company’s policies by interrupting employee sexual harassment training mandated under California law. […] You also violated the Code of Ethics by failing to stop your subordinate from posting false and defamatory blogs as discussed above. Furthermore, on several occasions you have made derogatory and disparaging remarks directed at persons of certain ethnicities or related to their gender, sexual orientation or religious persuasions that are discriminatory and offensive and are not in accordance with Company policies.”
3. Misuse of Corporate Assets: “You have used corporate assets in an inappropriate manner and for personal, non-business reasons without approval of the Board. For example, you continue to seek reimbursement by the Company for personal services such as legal consultation and certain property rentals and related expenses for various employees/consultants. You also have engaged in self dealing by purchasing travel for family members with Company funds […] In terms of finances, your conduct has required the Company to incur significant and unwarranted expenses, including expenses associated with litigation and defense costs, significant settlement payments, substantial severance packages that were granted to employees, and unwarranted business expenses that you incurred for personal reasons. The Company’s employment practices liability insurance retention has grown to $1 million from $350,000, causing an unacceptable level of risk for the Company, and the premiums for this insurance are well outside of industry standards.”