Forgot to mention the previous post on Mickey D’s sales boost included references to new crew gear from Russell Simmons’ Phat Farm, Sean Combs’ Sean John and American Apparel. Um, isn’t American Apparel essentially out of business? The offerings from Simmons and Combs—combined with the pseudo-Black advertising that boosted sales—makes one wonder why The Golden Arches didn’t hire a minority shop as AOR.
This American Apparel window display announces, “Women represent only 12 percent of engineers in all major tech companies.” Um, American Apparel advocating for women’s equality is like the advertising industry advocating for diversity.
The New York Post reported ousted American Apparel CEO Dov Charney is staging a comeback. Meanwhile, plans are underway to add women to the company’s board of directors. Below are a few of the candidates being considered.
American Apparel may see women on the board
By James Covert
Dov Charney may soon be back at American Apparel — but if so, things will be different.
The retailer’s controversial founder, ousted two weeks ago in a surprise coup, would not return to the board or necessarily assume any executive role, sources told The Post.
Meanwhile, insiders said a new plan under consideration calls for American Apparel to add women to the board for the first time, including possibly the chairman’s seat.
That’s a bold counterpoint to longstanding criticism that Charney had created a hostile work environment for female employees.
These dramatic changes could come in the days following the flamboyant founder’s recent move to enlarge his stake in the company to 43 percent, putting him within striking distance of a majority.
Charney, whose chairman’s title was stripped while he was suspended as chief executive at a June 18 meeting, has agreed to hand over voting rights from his equity stake to investment firm Standard General LP, which has loaned him the cash to enlarge the stake, sources said.
That deal has enabled the New York investment firm to negotiate directly with American Apparel’s board, sources said. Last week, the board implemented an anti-takeover “poison pill” defense after Charney and Standard General disclosed their stock-buying deal.
In a Wednesday letter to its investors, the fund said it has “opened a constructive dialogue” with American Apparel’s current board to find an “amicable and expeditious resolution” to the crisis.
Standard General also said it is “prepared to lend its credibility and capital resources” to avert liquidity concerns, including a $10 million loan from Lion Capital that was thrown into default by Charney’s ouster.
Under the Charney-Standard deal, the company founder has agreed to let the firm call the shots at the retailer in exchange for promising to uphold his longstanding policy of manufacturing clothes in the US and paying workers at its LA factory a living wage, sources said.
Charney, who is expected to remain the company’s largest investor, likewise has no guarantees about his future at the company, as he and Standard General await the outcome of a board investigation into alleged willful misconduct, according to sources.
“No decision has been made [about Charney’s role] until we get through the investigation,” a source close to the situation said, adding it is of “utmost importance” that the board investigation be completed.
Last month, Charney got blitzed when the board moved to fire him, alleging a pattern of behavior that materially harmed the company. Among its key allegations were that he had allowed a blogger to post naked pictures of a former employee who had sued for sex harassment in 2011.
In addition to adding women to the board, Standard General is looking to add seasoned retail pros, sources said. The reconstituted board also may include members of the current board, according to a source.
The new board will “be able to quickly identify and empower a strong management team,” Standard General said in its Wednesday letter.
“This transaction is not about the founder, nor is it an endorsement of him,” Standard General wrote to its investors. “He will serve no role if he is deemed unfit.”
‘Sex slave’ led to ouster of American Apparel CEO
By James Covert
American Apparel moved to fire CEO Dov Charney over allegations related to the 2011 case of Irene Morales, a former employee who accused him of making her his “sex slave,” The Post has learned.
The clothing retailer’s board, which said in a public statement earlier this week that it was investigating unspecified “alleged misconduct,” resurrected the case in its surprise move to fire Charney at a Wednesday meeting, sources said.
Specifically, the board this week accused Charney of allowing an employee at the Los Angeles clothing chain to post nude photos of Morales on a blog that was purportedly authored by Morales, insiders said.
The board’s concern, according to sources, is that the blog not only harassed and defamed Morales, but also ran afoul of certain California laws that forbid falsely impersonating others online, as alleged in a suit at the time by Morales’s lawyer Eric Baum.
By knowingly allowing the blog to be posted, the board charged that Charney exposed the company to liability, according to sources close to the situation.
The lawsuit brought by Morales, who had sought $260 million, was thrown out by a Brooklyn judge in 2012 and sent into arbitration.
The suit appeared to have been complicated after The Post revealed in an exclusive March 25, 2011, report that Morales had allegedly sent dozens of nude photos of herself to Charney after she stopped working for American Apparel, coupling them with saucy come-ons.
“Daddy’s got a little naughty girl waiting for him,” Morales allegedly wrote, according to Charney’s lawyer Stuart Slotnick.
This spring, however, the blog postings became a key sticking point in settlement talks, exposing American Apparel to damages, according to sources.
According to one source, a settlement was recently in the works for a dollar sum “in the low six-digits,” well short of the judgement Morales had sought. It wasn’t immediately clear whether a settlement has been finalized.
Nevertheless, the case has come back to haunt Charney, who was abruptly stripped of his chairman title and suspended from his CEO post for 30 days, pending a permanent ouster following the Wednesday board meeting in New York.
Reached Friday, American Apparel co-chairman Allen Mayer declined to discuss specifics of Charney’s alleged misconduct, but did say the board recently got new information that spurred the surprise coup.
“We have heard for years allegations and rumors in newspaper stories that were not sufficient to take action,” Mayer told The Post. “But what came to our attention was not allegations and rumors but established fact.”
On Friday, a Web video surfaced of Charney dancing nude in the presence of two alleged female employees.
The board also raised concerns about certain severance payments to former female employees that were authorized by Charney without the board’s consent, according to sources close to the case.
In addition, the board alleged that Charney improperly used company funds to pay for air travel for his mother, according to a source.
George Zimmer. Chip Wilson. Mike Jeffries. And now, Dov Charney. These guys are the Four Horsemen of the Apparelocalypse.
American Apparel boots CEO for being a pervert, stock surges
By James Covert
Dov Charney’s luck has finally run out — and American Apparel is likely headed for the sales block.
The controversial founder and CEO of American Apparel was ousted Wednesday by the retailer’s board, paving the way for a potential sale of the company, insiders said.
The board of directors cited “an ongoing investigation into alleged misconduct” that it initiated earlier this year, announcing that it had voted unanimously after its annual meeting Wednesday to fire Charney for cause.
While the board didn’t elaborate, sources said Charney’s personal conduct with women, which had been the subject of a string of sex-harassment suits by former female employees, was among the longstanding issues. The issues didn’t appear to be criminal or related to troubles with the company’s operations, sources said.
Shares of the struggling clothier surged as much as 22 percent to trade as high as 78 cents in early trades Thursday. Recently, the stock was up 7 percent at 69 cents.
Prior to the announcement on Wednesday afternoon, 45-year-old Charney didn’t respond to repeated messages from The Post, as unconfirmed speculation spread among insiders that a brewing conflict between him and the board might end with his ouster.
Another possible bone of contention, according to one source, was that Charney recently had been seeking ways to reverse the dilution of his ownership stake in the company, which had resulted from a March stock offering of $30.5 million to cover near-term debt payments.
“He was asking for advice on what to do about the situation,” according to one source, noting that the recent equity raise had diluted Charney’s stake in the company to about 27 percent — well below the minimum of 35 percent generally seen as necessary to retain control of a board.
Indeed, Charney’s dilution from the equity deal appears to have left him vulnerable in his final defeat after a string of close calls during previous liquidity crises for the company.
Charney, who founded American Apparel in 1998 as a T-shirt supplier, in some ways had been a retail visionary.
Courting controversy with smutty ads that featured young, scantily clad women in compromising positions, Charney produced his fashions at a factory in Los Angeles, championing “Made in the USA” clothing.
While Charney campaigned to legalize Mexican workers at his LA plant, the rest of the US clothing industry had moved its manufacturing to sourcing overseas.
But he was continually dogged by operational disasters, even as consternation about his personal behavior grew.
In 2009, American Apparel was forced to fire 1,500 undocumented immigrant workers at its Los Angeles factory following a federal raid, spurring manufacturing shortfalls that led to a major cash crunch. In 2013, the company’s loss widened to $106 million from $37 million a year earlier, partly because of software glitches at a new manufacturing facility.
“We take no joy in this, but the board felt it was the right thing to do,” said American Apparel director Allen Mayer, newly appointed as co-chairman. “Dov Charney created American Apparel, but the company has grown much larger than any one individual and we are confident that its greatest days are ahead.”
Firing Charney for cause will require a 30-day period to resolve under his contract, and could trigger defaults on debt obligations that could, in turn, force a sale of the company, insiders said.
Financial chief John Luttrell will serve as interim CEO while the company hires a search firm to replace Charney.
American Apparel only narrowly escaped getting taken over by lenders this spring, as a group of debt holders including Goldman Sachs demanded a $13.6 million interest payment on more than $200 million in obligations.
The racy clothing brand is now expected to attract a bevy of suitors, including private-equity firms as well as competing retailers.
“The only thing that’s been standing in the way of a sale has been Dov Charney,” according to one banker close to the situation. “People love the brand, and they hate him.”
In the latest issue of the Chicago Reader—sandwiched between the cover image and table of contents featuring a story on homeless prostitutes—is an American Apparel ad hawking the apparent wardrobe of prostitutes…?
