American Apparel hopes to decide Charney's fate by mid-August
(Reuters) - American Apparel Inc's founder should know in the next few weeks whether he may return as an employee of the company, according to a source familiar with the situation.
The saga that began on June 18 when the retailer suspended its chief executive Dov Charney is drawing to a close, as FTI Consulting has nearly wrapped up its investigation into Charney's conduct, the source said. The board ousted Charney from the company for allegedly misusing corporate funds and helping to spread nude photos of a former employee on the Internet.
"The company, Standard General and Dov are all eager to get Dov's situation resolved by the middle of August, if not sooner," the source said.
Standard General is a hedge fund that specializes in distressed companies and recently helped American Apparel avoid default through a $25 million capital commitment.
The main task that FTI Consulting likely has left is to interview Charney himself, the source said. FTI Consulting, whose activities include corporate investigations and forensic accounting, was not immediately available for comment.
As it seeks to turn the page on the turmoil of recent months, the retailer plans to announce its new board of directors this week as well, according to the source. It will include the current co-chairmen Allan Mayer and David Danziger and most likely David Glazek, a partner at Standard General.
A reconstituted board was among the provisions of a broader agreement with Standard General since it acquired nearly 44 percent of the company's outstanding stock.
Once the board is announced, government regulations require the new directors to wait 10 days before beginning work on the company - and before figuring out Charney's future. A special committee of two independent directors and one co-chairman will review the findings of FTI's investigation.
Still, American Apparel faces tough prospects irrespective of Charney, as it must grapple with debt of more than $250 million, greater than its market capitalization of about $200 million. Standard General hopes to turn around the retailer's negative income by improving its e-commerce platform and by growing its store count at home and abroad.
American Apparel stock fell about 6 percent to close at $1.09 on Tuesday.