American Apparel details allegations of sexual misconduct by ousted CEO

LOS ANGELES (Reuters) - Clothing company American Apparel Inc APP.A has accused ousted founder Dov Charney of using ethnic slurs against workers and keeping videos on a company server of himself in sex acts with models and employees, recently filed court papers show.

American Apparel owner Dov Charney speaks during a May Day rally in downtown Los Angeles, in this file photo taken May 1, 2009. REUTERS/Mario Anzuoni

American Apparel’s board of directors suspended Charney as CEO a year ago, citing his misuse of company funds, violation of company policy and misuse of corporate assets, and in December the board terminated him.

Charney’s ouster was a dramatic fall from power for a clothing trend-setter who, early in his career, won acclaim for making apparel in the United States when the bulk of the industry was producing overseas.

The company, with a factory in Los Angeles, operates retail stores across the United States and in several other countries, including Germany and China.

Charney’s lawyer, Keith Fink, said in a statement many of the allegations presented by the company were false.

“The company has engaged in an invasion of Mr. Charney’s privacy in a shameful attempt to extort him and gain leverage over him,” Fink said.

American Apparel’s latest court filing presents previously undisclosed details of a misconduct investigation. The filing represents an effort, under California law, by attorneys for American Apparel board chairperson Colleen Brown and the company to swiftly prevail in a defamation lawsuit Charney brought against Brown and the company in May.

Company attorneys filed the court papers in Los Angeles Superior Court on Friday, the same day Charney opened a separate case by filing a $30 million defamation lawsuit against American Apparel.

In their court papers, American Apparel attorneys said Charney violated company policies prohibiting harassment and retaliation against former employees.

“The company discovered voluminous evidence of Mr. Charney’s sexual liaisons with employees and models,” the company’s court papers said, adding that at least one of these “numerous” encounters took place at his office.

Company investigators also discovered Charney had kept videos of these sex acts on a company server, the papers said. The company said he also sent employees emails with pornographic videos and photos, and accused him of using ethnic slurs against certain employees.

Charney had for years before his ouster faced highly publicized lawsuits accusing him of sexual harassment.

Through September 2014, the company incurred $8.2 million in insured litigation costs and $1.2 million in uninsured costs due to Charney’s sexual liaisons, court papers said.

Earlier this month, American Apparel was granted a restraining order against Charney preventing him, among other things, from making negative comments about the company in the press.

(This version of the story corrects paragraph seven to describe court filing as an attempt to prevail in one case, instead of to prevent Charney from filing future lawsuits against the company)

Reporting by Alex Dobuzinskis; Editing by Lisa Shumaker