Dov Charney ousted as American Apparel CEO

Clothing retailer American Apparel’s board of directors voted to fire its founder and chief executive officer Dov Charney Wednesday evening, stemming from an ongoing investigation of alleged misconduct.

Mr. Charney’s termination will be effective after a 30-day period required under his employment agreement, according to a press release. John Luttrell, the current executive vice president and chief financial officer, will take Charney’s position temporarily while the board searches for a permanent replacement.

"We take no joy in this, but the Board felt it was the right thing to do," the company’s newly-appointed board co-chairman Allan Mayer says in the release. "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 still ahead."

During his tenure at American Apparel, Charney emphasized the company’s “sweatshop-free” and “made in the USA” philosophy for its products. He had also been a proponent for immigration reform. However, Charney’s advocacy took a backstage to the controversy that surrounded him during his tenure at American Apparel.

The company’s finances had been shaky in recent years – American Apparel had a net loss of $39.3 million in 2011 and $37.3 million in 2012, which more than tripled in 2013. So far in 2014, the company has had a net loss of $5.5 million, according to financial reports posted on the company's website.

Charney’s personal life has also been highly controversial. A number of sexual harassment lawsuits have been filed against the founder, many from  former American Apparel employees. In 2011, four female former employees filed a sexual assault lawsuit against Charney. American Apparel denied the claims, adding that the women had “colluded with one another to shake down Mr. Charney and American Apparel for money,” in the company’s statement to the Los Angeles Times.

In 2012, a former manager filed a lawsuit against Charney, claiming he allegedly called him derogatory names and asked if he was sleeping with a certain woman. Charney allegedly tried to choke the manager and rub dirt in his face, according to the lawsuit. The company also denied these allegations. 

American Apparel’s stocks jumped in early morning trading on the news of Charney's removal. The company’s shares spiked by almost 20 percent. but because of American Apparel’s low prices, that translate to just 11 cents.

At noon Thursday, shares of the company were up 7.7 percent. This time last year, American Apparel’s stocks were nearly $2 a share. Since the brand went public in 2006, shares have sunk from their initial $7.50 per share price and their all-time high of $15 in November 2007.

But American Apparel's financial outlook  may not remain so rosy. The board warned Thursday that Charney's removal could trigger defaults on two outstanding loans worth millions, potentially vaulting the company into bankruptcy, according to the LA Times.