Dov Charney said he wants shake-up of American Apparel board
Ousted Chief Executive Dov Charney said he plans to talk to American Apparel about a shake-up of the company’s board and management as he “vigorously” contests his termination.
In a filing with the Securities and Exchange Commission, Charney said Monday he is already discussing his options with supporters who approached him after his surprise firing last week.
The board decided Wednesday, after the company’s annual meeting, to replace Charney as chairman and terminate him as chief executive. The 5-0 vote immediately suspended Charney, but under the terms of his employment, a 30-day period is required before termination.
Charney, who is the company’s largest shareholder with 27%, said some of these supporters own American Apparel stock, according to the filing.
Monday is also the deadline set by Charney’s attorney, Patricia Glaser, to meet with the board to discuss reinstating him. In a letter to the board on Thursday, Glaser said Charney planned to pursue legal action against the company unless he was put back in charge.
American Apparel has said the termination “grew out of an ongoing investigation into alleged misconduct.” A person familiar with the matter said the investigation found that Charney allegedly stayed in corporate apartments when he wasn’t on business, used company funds to book airline tickets for his parents, and helped leak nude photographs online of a former worker who was suing him, among other alleged improper decisions.
Charney’s lawyer said the allegations are “completely baseless,” according to the letter.
Also on Monday, American Apparel said it has hired advisory firm Peter J. Solomon Co. to ensure it has access to affordable capital.
The Los Angeles retailer has been struggling to turn around its fortunes after years of poor performance and high debt.
“We believe the hiring of a financial and strategic advisor at this important juncture is in the best interest of our stockholders and will help maximize long-term shareholder value,” John Luttrell, the interim chief executive, said in a statement.
The retailer’s financial position is precarious. It has lost nearly $270 million in the last four years and has more than $200 million in debt, some at interest rates as high as 20%. This year, it fought to retain its listing on the New York Stock Exchange while buried in negotiations over financing.
The company has warned that firing Charney could trigger defaults on nearly $40 million in outstanding loans and throw the company into bankruptcy.
Charney himself has been accused of inappropriate behavior with employees and has been the target of multiple harassment lawsuits, some of which have been settled.
Many industry watchers have speculated that American Apparel is now ripe for a takeover.
Some analysts say that Charney could try to take over the company with the backing of a private equity firm. If he can’t regain control, analysts have guessed that he would sell his 27% stake to another shareholder interested in taking over.
Luttrell has vehemently denied the possibility that the company would be interested in a takeover.
Follow Shan Li on Twitter @ShanLi
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