American Apparel Fires Charney; Names Paula Schneider CEO

(RTTNews) - Branded fashion apparel maker and retailer American Apparel, Inc. (APP) said Tuesday that it has terminated former President and Chief Executive Officer Dov Charney for cause in accordance with the terms of his employment agreement, following an internal investigation.

The Los Angeles, California-based company also said that it has appointed veteran fashion executive Paula Schneider as Chief Executive Officer, effective January 5.

Scott Brubaker, who has been serving as interim CEO since late September, will continue in the post until Ms. Schneider joins the company, after which he will remain as a consultant to ensure an orderly transition.

"We're pleased that what we set out to do last spring - namely, to ensure that American Apparel had the right leadership - has been accomplished," said Allan Mayer, Co-Chairman of the Board. "We are confident that Paula Schneider has the skills and background to lead the company to long-term success."

American Apparel shares are gaining 8.62% in after hours trading after closing the day's regular trading session at $0.58, up 3 cents or 5.45%.

Charney was suspended as president and CEO by the American Apparel Board on June 18 for alleged misconduct and violations of company policy.

Charney had been under the scanner over allegations of misusing company funds. An ex-employee sued Charney for posting nude photos of her in a blog, and several female employees have accused him of sexual harassment.

American Apparel said Tuesday a special committee of its board overseeing an internal investigation conducted by FTI Consulting into the allegations against Charney determined that it would not be appropriate for Charney to be reinstated as CEO or an officer or employee of the company.

Charney, who is also the founder of American Apparel, had been serving as a consultant to the company during his suspension. That relationship also has now been terminated, the company noted.

While suspending Charney from his positions as President and CEO in June, the company notified him of its intention to terminate his employment as president and CEO "for cause" following the expiration of a 30-day cure period required under the terms of his employment agreement. The company had said that time that as a result of the management changes, it may have been deemed to have triggered an event of default under its credit agreements and will hold talks with its lenders for a waiver of the default.

In July, American Apparel reached a deal with hedge fund Standard General and Charney over financing and board reconstitution.

Ms. Schneider, the incoming CEO, has served as president or senior officer of a number of retail and apparel companies, including Warnaco, Gores Group, BCBG Max Azria, and Laundry by Shelli Segal. She has an uphill task ahead to turn around the company's fortunes.

American Apparel last month reported a wider third quarter loss, reflecting lower sales and higher expenses in addition to one-time costs.