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Ousted American Apparel chief seeks $40M over firing

Dov Charney was suspended in June 2014, and later fired, over claims of sexual misconduct and misappropriating funds.

By Doug G. Ware
An American Apparel clothing store in Beijing, China, in 2014. Photo: UPI/Stephen Shaver
An American Apparel clothing store in Beijing, China, in 2014. Photo: UPI/Stephen Shaver | License Photo

LOS ANGELES, March 26 (UPI) -- The man who founded and was later ousted from clothier American Apparel is moving ahead with plans seeking $40 million with claims that he was illegally booted from the company.

Ex-CEO Dov Charney was suspended and then fired last year by the company, stemming from allegations of misconduct and misappropriation of corporate monies. He has been fighting the allegations from the start, attempting to get his job back, and Thursday Bloomberg reported he is now seeking millions in back pay, severance and emotional damages.

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"We are moving forward with Mr. Charney's employment claims," Charney attorney Keith Fink said in an email.

In addition to money, Charney is also attempting to retrieve priceless art that he used to decorate American Apparel's Los Angeles offices.

"While someone may be able to pencil the value of the art Mr. Charney accumulated over the years in the tens of millions of dollars," Fink said, "the sentimental value is priceless to him."

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Last year, American Apparel's board suspended Charney amid allegations of sexual harrassment on his part and misuse of company funds, and spent more than $10 million looking into the chief executive's conduct. The suspension led to his firing in December, but Charney said the dismissal amounted to a breach of contract.

Founded in 1989, American Apparel has struggled financially in recent years. The company reported just $8.3 million in cash at the end of 2014, despite generating $153 million in revenue. It has borrowed $15 million to keep it operating for at least the next 12 months, Forbes reported, and posted a $28 million loss in Q4 2014.

Despite Charney's denial of the claims against him, American Apparel said the former chief executive's position is without merit.

"These claims are baseless, and we are confident that [Charney] will lose on each and every one of these," the company said in an emailed statement.

New CEO Paula Schneider replaced him in January and has led efforts to turn the company's financial and public relations health around -- which included updating the company's ethics code when she came aboard.

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Charney's claim for $40 million reportedly includes $6 million in severance pay, more than $1 million in vacation pay, at least $10 million in emotional distress and the value of 13 million company shares Charney still holds.

Charney made a push to get his job back last year with the help of investment company Standard General LP, which ultimately failed. The firm's efforts did not allow him to return as CEO, but they did produce an opportunity for him to remain in an advisory role -- an offer Charney declined.

Charney first pushed his claims into arbitration last year, but suspended that effort to await the company's final determination on his employment status. Subsequent to the board's terminating him, Charney renewed his pursuit of arbitration.

The U.S. Securities and Exchange Commission on Wednesday began an inquiry into Charney's dismissal from the company he founded 26 years ago in Canada. The company, which is now exploring strategic options, like a sale, said it will fully cooperate with the SEC investigation.

Charney's management of the clothier has been criticized by some in the past for being too unconventional, controversial and offensive.

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