American Apparel the clothing and accessories retailer has fired Dov Charney its controversial founder as its chairman. The firing was effective immediately. The company was also moving to end his reign as president and CEO following an investigation that is still ongoing into misconduct allegations.
Charney had been targeted repeatedly in lawsuits dealing with sexual harassment. He will be terminated for cause at the end of a contractual cure-period of 30 days, said the company that is based in Los Angeles late Wednesday.
The shares at the clothing retailer, which have lost over two-thirds of their overall value during the last year, were up over 20% in Thursday’s premarket trading. On the American Stock Exchange on Wednesday, the stock closed at 64 cents.
The apparel company is known to use racy ads and make bright clothes. John Luttrell, the CFO, was named as the interim CEO while it works together with a search company to find its permanent CEO.
David Danziger and Allen Mayer were named co-chairmen.
Mayer said no joy came from this change, but the board decided it was the correct thing to do.
Charney who is 45, found the predecessor companies of American Apparel back in 1989 and had been the CEO since 2007, when the business went public.
A spokesperson from American Apparel would not give more details on the decision and Charney would not respond to emails or phone calls.
In 2011, Charney was accused by a former employee of keeping her as a sex slave while a teenager, amidst fear she could otherwise be fired.
She sued American Apparel as well, along with its directors since they failed to stop the then CEO from being a sexual predator.
The business, which is currently struggling under heavy debt and weak sales, said the changes in management might have caused a default to be triggered under its current credit arrangements. It added that it would discuss with lenders the possibility of a waiver of default.
This past February the retailer had debt of more that $240 million and came close to breaching its loan agreements.
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