Dov Charney goes from CEO to paid consultant in American Apparel truce

Under a new deal, ousted American Apparel CEO Dov Charney will return to the company he founded as a paid consultant.
Under a new deal, ousted American Apparel CEO Dov Charney will return to the company he founded as a paid consultant.
(Gary Friedman / Los Angeles Times)

In just three weeks, Dov Charney went from chief executive of American Apparel Inc. to a paid consultant who is forbidden from accessing the company’s computer systems.

He now has no supervisory authority over the Los Angeles retailer’s workers, and must ask for a copy of his corporate email inbox instead of logging on directly, according to a securities filing detailing a deal struck by American Apparel.

American Apparel made that deal Wednesday with Standard General, a New York investment firm, and Charney, who was ousted last month as CEO and chairman.


The agreement throws the retailer a financial lifeline. Standard General will give the company up to $25 million, helping it avert a bankruptcy filing, pay off a persistent creditor and bolster its troubled finances going forward.

It also effectively quieted the ferocious battle between Charney and the American Apparel board -- at least for now.

The board replaced Charney as chairman and removed him as chief executive June 18 pending an ongoing investigation into alleged misconduct. The vote immediately suspended him as CEO, but a 30-day wait is required before he is fired.

Under the agreement, Charney and four other board members will resign as directors. Only Allan Mayer and David Danziger, the current co-chairmen, will remain on a new board, which will include three directors picked by Standard General and two others chosen by the retailer’s current board and the investment firm. Charney has agreed not to seek a board seat.

A committee of new and existing board members will also be created to oversee the investigation into Charney, which is being handled by FTI Consulting Inc. He will keep his base pay -- his salary last year was $832,000 -- while the company continues its investigation. Based on its findings, the committee will determine whether Charney can be reinstated as CEO or work at American Apparel in any capacity.

FTI will have “full and unrestricted access to relevant employees, servers and Company-owned equipment,” American Apparel said in its filing.


Charney has agreed to be interviewed as part of the investigation, and also will not interfere or try to influence the outcome. His arbitration petition alleging wrongful termination, retaliation and other issues will be put on hold until his fate at the company is decided.

Before a final decision is made , Charney and his lawyers will get two chances to ask the committee questions and respond to the evidence and findings, the filing said.

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