American Apparel (APP) Probe Finds Charney Misused Funds: Report

American Apparel

According to a Saturday Reuters report, an internal investigation at American Apparel Inc. (APP) has found that Chief Executive Dov Charney violated company policies, ranging from misusing company funds and failing to stop a smear campaign against a former employee who had accused him of sexual harassment.

The investigation led by law firm Jones Day revealed that Charney was charging the company to book flights for his parents and sometimes provided corporate apartments to friends and stayed in them himself when he wasn’t on company business. The investigation’s findings also included that Charney didn’t stop a blog created by an American Apparel female employee at one of his Los Angeles area stores that displayed naked photos of former saleswoman, Irene Morales, who had sued him. Charney further infuriated the co.’s board when a web video, which was posted on viddme.com, surfaced of Charney dancing nude in front of two female employees.

American Apparel’s board voted unanimously this week to fire the 45-year-old Charney as chairman, citing unspecified allegations of misconduct.

“The company has grown a lot bigger than just one person and the liabilities Dov brought to the situation began to far outweigh his strengths,” said Allan Mayer, the board’s new co-chairman.

Exactly what prompted the decision to oust Charney was unclear. According to NYT a report that references people with knowledge of the situation, the company’s internal investigation had turned up “new details about Mr. Charney’s salacious behavior — only this time, they said, American Apparel could no longer afford the potential cost.”

Shares of American Apparel, which are down 65% y/y, posted a weekly gain of 11%.

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