Dov Charney, who was fired as chief executive of American Apparel in December after an internal investigation revealed personal and professional misconduct, plans to seek up to $35 million in damages from the company.
Those damages, being sought through an arbitration petition, include nearly $6 million in severance and $1.3 million for unpaid vacation days, according to a letter sent to the law firm representing American Apparel by Charney’s lawyer, Keith Fink.
Fink, who supplied the letter to the Los Angeles Times, said the “egregious facts” surrounding Charney’s firing could also result in a claim for $10 million or more for emotional damages. Charney, who founded American Apparel, is also seeking 13 million shares of the company that were tied to his performance, the letter said.
In addition, Charney wants the company to return “priceless” art, which could be valued at “tens of millions of dollars,” the letter said.
American Apparel said in a statement Friday that Charney’s “claims are baseless.”
“We are confident that Dov will lose on each and every one of these,” the company said.
The Los Angeles clothing manufacturer and retailer fired Charney after its investigation found evidence of inappropriate behavior with employees and misuse of company funds.
The company said Charney’s improper actions included staying in corporate apartments when he wasn’t on business, using company funds to buy airline tickets for his parents and allowing the online posting of nude photographs of a former worker who was suing him.
Charney’s lawyer at the time denied the allegations, accused the company of firing Charney without cause and filed an arbitration petition with the American Arbitration Assn. alleging wrongful termination, breach of contract and retaliation.
American Apparel disclosed Wednesday that the Securities and Exchange Commission was looking into issues that arose during its investigation into Charney’s activities. A person familiar with the matter said the SEC was examining Charney’s actions, not the company’s handling of the investigation or firing. But a second person with knowledge of the situation said the SEC examination involved the actions of all parties.
American Apparel also said Wednesday that Charney indicated he plans to reinstate his demand for arbitration and may file lawsuits regarding his termination.
The original arbitration demand was filed in June after the board ousted Charney as chairman and suspended him as chief executive.
American Apparel also said that it spent $10.4 million on its investigation into Charney’s activities.
American Apparel said it had borrowed $15 million from New York hedge fund Standard General to pay off hefty interest payments due in a few weeks. Standard General had previously agreed to lend the company up to $25 million.
Follow Shan Li on Twitter @ByShanLi