* John Luttrell named interim CEO
* To hire investment banker in event loans default - source
* Shares rise as much as 22 pct
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By Lisa Baertlein and Ronald Grover
LOS ANGELES June 19 The board of hipster
clothing brand American Apparel Inc has ousted founder
Dov Charney as chairman and said it was preparing for the
controversial executive to fight his removal.
American Apparel replaced the 45-year-old Charney as
chairman late Wednesday, citing unspecified allegations of
misconduct. It also said it suspended him as president and chief
executive officer, and plans to fire him for cause, following a
30-day period stipulated in his contract.
"This is his baby, and he owns 27 percent, so we don't
expect him to just walk away," said Allan Mayer, American
Apparel's interim co-chairman, in an interview.
Charney "has always said he would never do anything to harm
this company, but his view of what's good or bad for this
company is very different from ours," Mayer added.
The usually outspoken Charney, who has been the target of
sexual harassment lawsuits, told Reuters on Thursday he was not
yet ready to speak publicly.
Charney's ouster, which followed the company's annual
meeting, came after a four-month investigation by the board's
five independent directors into a series of actions it
considered detrimental to the company, according to a person
with knowledge of the investigation.
The company is also expected to announce it has retained an
investment banking firm to provide capital if its lenders
declare the company in default on some of its debt, a source
said. The company said it may be in default as a result of
Shares in the Los Angeles-based retailer, known for its
often racy billboard ads that feature scantily clad young women,
rose as much as 22 percent on Thursday. The stock later eased,
adding 7.1 percent to 69 cents in afternoon trading.
"We believe investors will generally view this news
positively, given perceived prior mismanagement and the
potential for reduced future headline risk," Roth Capital
Partners analysts wrote in a note to clients.
SEXUAL HARASSMENT LAWSUITS
Charney started American Apparel's predecessor companies in
1989 and has been at the helm since 2007, when the company went
He has faced a series of sexual harassment lawsuits. In one,
former saleswoman Irene Morales claimed she was held as a
teenage sex slave, forced to perform sexual acts over eight
months, including oral sex in Charney's Manhattan apartment just
after she turned 18.
At the time, his lawyers said Morales was trying to "shake
down the company." A New York judge moved the case to
In a separate claim, Morales and several other woman also
said they were forced to pose nude in pictures that later
surfaced on the Internet.
American Apparel's U.S.-made, logo-free and comfort-oriented
wardrobe staples have a nostalgic aesthetic that has found a
following among fashionable urban dwellers.
While many U.S. clothing companies scoured the globe for
dirt-cheap labor, American Apparel has claimed it was
"sweatshop-free" and boasted its domestic garment workers can
earn annual salaries of $30,000 or more, plus benefits.
While the industry lauded Charney for his creativity, the
company was under fire for lax financial controls and a
perceived weakness on its management bench.
The board named Chief Financial Officer John Luttrell as
interim CEO. It also appointed Mayer and David Danziger as
The 250-store chain has reported losses in 16 of the past 17
quarters. Its long-term debt was $214.6 million as of March 31.
(Reporting by Lisa Baertlein, Ron Grover, Mica Rosenberg,
Jeffrey Dastin, Sampad Patnaik and Shailaja Sharma; Editing by
Jilian Mincer, Gopakumar Warrier, Maju Samuel and Jeffrey