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American Apparel Fires Founder Dov Charney ... 5 Years Too Late

By William Peacock, Esq. on June 19, 2014 | Last updated on March 21, 2019

American Apparel tossed its founder and CEO Dov Charney to the curb this morning, blaming the move on "an ongoing investigation into alleged misconduct."

The move, which reeks of desperation, could mark rock bottom in a comeback. Or, more likely, it could be a precursor to the end: the press release notes that the change in management could trigger an event of default under its credit agreements. Add in five straight years in the red, and this could be the epitome of too little, too late.

Dov Charney's Greatest Gaffes

Though Charney is well-known for pushing the company's racy advertising strategy, and for the company's bold Made in America (no outsourcing) manufacturing, he's also known for a few less positive things. An article on Quartz, appropriately titled, "Five things American Apparel's Dov Charney didn't get fired for" is a recap of his greatest gaffes, including:

He'd also reportedly parade around the office in his underwear, demand oral sex, and ran the company into the ground: no annual profit since 2009 and a stock that "has rarely traded over $2 since April of 2013," reports Quartz.

So, like Quartz, we're wondering: if a failing company and the above misconduct weren't enough to get him canned, what is this ongoing investigation all about?

Call it a Comeback?

Stock analysts told Reuters that the move was good for the company (duh) and that now is a good time to buy stock. Investors apparently agree, as the stock, which has lost more than two-thirds of its value over the past year, was up as much as 20 percent this morning.

Too Little, Too Late?

While analysts approve of the move, we're still astounded that it took this long. Five years in the red. Lawsuit after lawsuit after lawsuit for sexual misconduct, not to mention the incident with the store manager.

The company is $214 million in debt, according to Reuters. Even though avoiding default and restructuring seems likely at this point (they've had restructuring experts from Skadden on hand for months, and likely wouldn't have made a default-triggering move like canning their CEO without figuring out the debt issue first), if the company does go under, the hesitance to part with Charney will largely be the reason why.

Good move? Bad move? Slow move? Let us hear your thoughts by tweeting @FIndLawLP.

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