Business

American Apparel (APP) – Hey Dov Charney…Go Away

Hey Dov Charney…Go Away by Todd Sullivan, ValuePlays

In the latest barrage of litigation from disgraced former American Apparel CEO Dov Charney, he now claims Standard CEO Kim essentially began committing hari-kari in front of Charney over their deal (“scratched himself until he bled”) and that the only thing that stopped the eventual bloodbath was Dov Charney’s sympathy and relenting. Of course that this charge remained secret until now is by itself bizarre.

Let’s put all Dov Charney’s claims aside for one minute. Actually we can throw them all away but for the moment lets play the “they are all true” game. So what? In the USA the CEO of a company cannot dance naked in front of employees and send explicit “sexts” to others and expect to hold his job. Even if we for arguments sake assume all the other allegations against him are false, just those alone make it impossible for him to remain at the company. Think about it. His claims are the company is bad because they “leaked” the video of him dancing naked in front of employees… Dov Charney takes no responsibility that perhaps this showed poor judgement? Perhaps this was unacceptable? It didn’t violate just about every sexual harassment law on the books? Additionally he does not deny storing videos of him having sex with employees and models on company servers and sending them through company email, nor does he deny sending the sexts. He and his lawyers simply justify it as the messages “were welcomed”. Ok, again, let’s again say that is 100% true because we are gonna live in fairytale land for a little while. YOU STILL CAN’T DO THAT. You can’t hire a model for your company and then have sex with her. You then really shouldn’t video it and then store it on company servers.

Just one of these actions eliminate him from CEO…just one of them.  Standard and the Board had to get rid of him… they had no choice.

Dov Charney claims conspiracy and backroom dealing was his downfall. It wasn’t, it was the FACT he did what he did…..it is really that simple.

Everything after that is BS and a carnival side show designed to shake the company down for a few million just to make him go away.

The insinuation he cares for the company or the employees is disingenuous at best. His only aim now it shake them down or if that cannot be done, destroy the company. He will of course claim differently but actions speak louder than words and his every action the last several months has been to wreck it. He is acting in a “if I can’t run it no one will” mentality.

Inevitably he will lose these court cases and the company will be able to concentrate on selling clothes. In the USA you can virtually sue anyone for anything, you really can. Fortunately, despite what many people think, these frivolous suits are losers and Dov Charney’s here will be also.

It’s over Dov…….move on please

From The LA Times

By SAMANTHA MASUNAGA contact the reporter American Apparel

The yearlong battle between American Apparel Inc. and founder Dov Charney has taken another twist, with Charney filing a lawsuit accusing company officials and hedge fund Standard General of conspiring to push him out of the company last June.

The lawsuit, part of a flurry of legal actions by both sides, alleges fraud and conspiracy, among other things. Charney is seeking damages of $100 million and wants agreements rescinded that gave control of his American Apparel stock to Standard General and removed him from the company’s board.

The complaint, filed Wednesday in Los Angeles County Superior Court, lays out an effort by current company board member Allan Mayer, former Chief Financial Officer John Luttrell and former board members David Danzinger, Robert Greene, Marvin Igelman and William Mauer to trick Dov Charney into diluting his ownership stake in the company and then oust him.

In the lawsuit, Charney noted that the board filed a proxy statement with securities regulators praising his leadership ahead of last June’s shareholder’s meeting.

“Based on these statements of confidence,” the lawsuit said, Dov Charney voted to reelect “the very same board members filing that proxy statement, who, immediately after the shareholders’ meeting, voted to terminate him.”

Although Charney’s lawsuit echoes many of the allegations he has made in previous legal documents, it presents new details of the ousted CEO’s version of how events unfolded.

For instance, the suit said Standard General approached American Apparel in March 2014 with a financing proposal, but company directors rejected the New York investment firm’s money in favor of a financing arrangement that reduced Charney’s ownership stake to 27% from 43%.

The suit contends that American Apparel and Standard General subsequently worked together to ensure that Charney would be removed from company leadership and would never regain control.

It was Standard General that reached out to Dov Charney after his June termination and promised to help him get back his job and control of the company, the lawsuit said. Instead, the suit said, Standard General “fraudulently induced” him into giving the hedge fund control over his shares and “reneged” on its word.

The lawsuit said that Standard General never intended to help Dov Charney because its investors wouldn’t tolerate such a relationship. The suit recounted an early-morning “emergency” meeting on June 30, 2014, in New York’s Central Park between Charney and Standard General Chief Executive Soohyung Kim.

“Kim then made various representations that he was being ‘crucified’ by his limited partner investors who were reacting negatively to his partnership with Charney … and that he was on the brink of losing his hedge fund. Kim emotionally pleaded with Charney to help him save his hedge fund or they were all ‘going to die,’” the lawsuit stated, adding that Kim was so frantic, he scratched himself until he was bleeding.

Dov Charney felt he had no choice but to go along with Standard General’s plan to settle with American Apparel, rather than stage a hostile bid for control, relying on Kim’s promises that Charney would be reinstated at the company within weeks, the suit said. Charney agreed to relinquish his board seat as part of that settlement.

A Standard General spokesman said in an email that the filing was “yet another example of the frivolous, meritless lawsuits that Mr. Charney and his associates continue to file at a breakneck pace.”

He added, “The facts speak for themselves, and we are confident that he will ultimately be held accountable.”

According to the lawsuit, Dov Charney suffered emotional distress after he was suspended when the board of directors started a “negative and defamatory media campaign against him.” Company representatives leaked confidential information and a video of Charney dancing nude to drive away potential allies, the suit said.

The suit also said that Dov Charney had amassed hundreds of thousands of dollars in legal fees, which Charney had expected American Apparel to pay, and that those expenses had put Charney’s “personal finances in jeopardy.”

An American Apparel spokeswoman said in an email that Dov Charney’s lawsuit is “yet another example of the habitual nuisance lawsuits that Dov Charney and his lawyer continue to file, and which we continue to defeat.”

American Apparel filed court documents Friday that spelled out Dov Charney’s alleged misconduct at the company. Keith Fink, Charney’s attorney, said Wednesday’s lawsuit had nothing to do with this recent filing.

Among the graphic details described in the documents were allegations that Dov Charney stored footage on company equipment of himself having sex with employees and models and sent sexually explicit messages to employees. Fink said those were personal messages that were welcomed by the recipients.

The documents were part of an anti-SLAPP motion, intended to stanch what the company calls frivolous lawsuits.

The company’s Friday filing was in response to a defamation suit filed by Dov Charney’s team in May against the company and its chairwoman, Colleen Brown. The defamation complaint alleged that Brown falsely informed American Apparel employees that Charney had agreed in writing never to return to the company in any capacity.

Dov Charney filed an additional defamation suit against the company and Danzinger, alleging that they lied to prevent him from winning the necessary votes to reclaim control of the company.

American Apparel (APP) - Hey Dov Charney...Go Away

Get our newsletter and our in-depth investor case studies all for free!

  • Berri Jam

    I’ve been spending hours and hours reading documents and forum boards about the situation at American Apparel. I must say every one of your postings about what is going on at the Company is spot on. What seems to be mass protests against current American Apparel management on forums and youtube if inspected further just seems to be originating from the crazy rant and ravings of the one and only Dov Charney.

    Anybody falling into Dov’s camp of protesting, unionizing, complaining is either naive, or stupid. They are only making the situation worse for themselves. They post derogatory signs and yell derogatory comments of Paula Schneider, or Standard General and they still expect to have their jobs when they go back to work? I think they are as delusional as Dov and they should quit and go work for Dov who doesn’t know how to manage his cash.

    Standard General is the one in charge. They have board majority. Why is it that they aren’t doing much to defend themselves or Paula Schneider? It’s because they are in such strong position, they don’t care. In fact we should find out more details of the Dov Charney Standard General agreement. When and how much does Dov need to make his interest payments. It’s been just over a year, so I bet he’s already defaulted. That means Standard General gets to convert Dov’s collateral stocks as payment. That means the lower the stock price, the MORE shares Standard General gets. So Standard General doesn’t mind seeing American Apparel shares tank. Does Standard General just keep the shares at the current low market price or do they have to sell Dov’s shares in the market and collect the cash? Inquiring minds want to know!