American Apparel Ousted CEO Seeks Board Shake-Up

(RTTNews) - American Apparel Inc. (APP) founder Dov Charney, who was ousted as CEO last week, in a filing on Monday said he is in talks with supportive shareholders to bring changes to the board and management.

Charney said the Board's decision to fire him from his position as President and CEO is "without merit" and he "intends to contest it vigorously."

However, Charney has not made clear the percentage of equity holder who are supporting him. American Apparel's second largest shareholder FiveT Capital, a Swiss investment firm run by Minho Roth, has not made it clear whether it would support Charney. Reports indicate FiveT will withhold its support until it gets a clear picture of the allegations against Charney.

Last Wednesday, Board of American Apparel voted to replace Charney as chairman and to terminate his employment as president and CEO "for cause." The board had named CFO John Luttrell as interim CEO, and elected Allan Mayer as well as David Danziger as co-chairmen of the board.

The board suspended Charney from his positions as President and CEO, effective immediately and notified him of its intention to terminate his employment. His termination is expected to be effective following the expiration of a 30-day cure period required under the terms of Charney's employment agreement.

American Apparel's board said its decision to replace Charney were based on an ongoing investigation into his alleged misconduct. Allegations have been raised against Charney for misusing company funds and also an ex-employee has sued him for posting her nude photos in a blog. Previously, several female employees have accused Charney of sexual harassment.

Dov Charney has hired law firm Glaser Weil Fink Howard Avchen & Shapiro LLP to represent him. His attorney had on last Thursday sent a letter to American Apparel warning the company of legal action unless the retailer revoke its decisions.

In the letter, Charney's attorney Patricia Glaser, called the charges leveled against Charney as "completely baseless" and added that "most involve activities that occurred long ago (if at all) and about which the Board and the Company have had knowledge for years."

American Apparel, on Monday said it, has hired advisory firm Peter J. Solomon Company. "We believe the hiring of a financial and strategic advisor at this important juncture is in the best interest of our stockholders and will help maximize long-term shareholder value," said John Luttrell.

APP is currently trading at $0.68, down $0.01 or 2.03%, on the NYSE.