Legal Issues

Ousted American Apparel Founder Dov Charney Seeks $40 Million in Damages

Ousted American Apparel Founder Dov Charney Seeks $40 Million in Damages
Image credit: dovcharney | flickr
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The former chief executive and founder of hipster clothing brand American Apparel Inc, Dov Charney, is claiming $40 million in damages for a breach of employment contract, his attorney said.

"There will be other lawsuits we will be filing against the company which they are aware of but have not revealed to the media," attorney Keith Fink said in an email reply to Reuters.

The company's board ousted Charney in December, six months after suspending him, for allegedly misusing funds and helping spread improper photos of a former employee.

The claims for damages, first reported by Bloomberg, include about $6 million in severance, $1.3 million in vacation-time pay, about $10 million for emotional distress and 13 million shares of the company.

American Apparel could not be reached for comment outside regular business hours.

The U.S. Securities and Exchange Commission has ordered an investigation into matters arising from the review by the board committee of American Apparel that formalized Charney's firing in December, the fashion retailer said in a filing on Wednesday.

American Apparel learned of the formal order of investigation on Feb. 5, but it was not immediately clear whether the probe related to Charney's conduct or to the board's review of him, according to the filing.

Charney, 45, started American Apparel's predecessor companies in 1989 and had been at the helm since 2007, when the company went public.

American Apparel, which reported a $28 million loss for the fourth quarter on Wednesday, said it incurred about $3.8 million in legal and consulting fees in the quarter related to its investigation into Charney.

(Reporting by Anjali Rao Koppala and Rishika Sadam in Bengaluru; Editing by Andrew Hay and Gopakumar Warrier)

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