American Apparel fires founder Dov Charney after internal investigation

American Apparel, which suffered a summer of upheaval after suspending Chief Executive Dov Charney, officially fired him on Tuesday and announced a new CEO.

The Los Angeles company said the board terminated Charney “for cause in accordance with the terms of his employment agreement.” The company said Paula Schneider, a longtime fashion industry executive, will take over as CEO starting Jan. 5. The interim chief executive, Scott Brubaker, will remain as a consultant to help with the transition.

“We’re pleased that what we set out to do last spring -- namely, to ensure that American Apparel had the right leadership -- has been accomplished,” American Apparel co-chairman Allan Mayer said in a statement.

The company said the investigation has been completed. Based on the findings, the company “determined that it would not be appropriate for Mr. Charney to be reinstated as CEO or an officer or employee of the company.”

Charney issued a statement saying he was “disappointed with the circumstances.”

“I‘m proud of what I created at American Apparel and am confident that, as its largest shareholder, I will have a strong relationship with the company in the years ahead,” Charney said.

Charney wished the company “continued success,” striking an elegiac tone by noting that “my over 25 years of deep passion and commitment for American Apparel will always be the core DNA of the company.”

The firing of Charney signals the end of months of boardroom intrigue at the retailer, but could also kick off a protracted legal challenge from the founder and now ousted leader.

Charney was suspended as president and CEO by the board on June 18 for alleged misconduct and violations of company policy.

He had been serving as a special consultant to American Apparel while the board conducted an internal investigation into the allegations.

At the time of his surprise suspension in June, the company said it planned to terminate Charney for “cause.”

“This is not easy, but we felt the need to do what we did for the sake of the company,” Allan Mayer, the company’s newly appointed co-chairman, told the Los Angeles Times in June. The decision “was not the result of any problems with the company’s operations.”

Charney has been dogged by lawsuits and allegations of misconduct for years, but was considered an innovative and dedicated public face of the company.

Sources said the allegations involved his personal conduct with women and poor judgment.

Schneider, who has held senior executive positions at retailers such as BCBC Max Azria and Laundry by Shelli Segal, will have a long battle ahead to turn around the company’s fortunes.

Last month, the L.A.-based company reported a larger-than-expected loss in the third quarter. American Apparel said it lost $19.2 million, or 11 cents a share, in the three months ended Sept. 30.

In comparison, the retailer reported a net loss of $1.5 million, or 1 cent, in the same period a year earlier.

Sales fell more than 5% to $155.9 million, down from $164.5 million a year earlier. U.S. sales at both the retail and wholesale segments dropped, and international sales also slid.

Twitter: @byshanli