American Apparel Fires Dov Charney, Hires New CEO

Executive Shift

As of Friday, January 23, 2015

After months of deliberating, a special committee appointed by the American Apparel board of directors decided on Dec. 16 to fire company founder Dov Charney as its chief executive and president. He had been working as a paid consultant during the investigation, an arrangement that has been terminated.

Taking over the top chief executive spot on Jan. 5 will be Paula Schneider. She has been the president of Warnaco Swimwear Group, whose principal label was Speedo, and president of Laundry by Shelli Segal.

When The Gores Group purchased Los Angeles juniorswear maker Big Strike Inc. in 2011, the private investment group gave the top executive position to Schneider, where she remained for almost two years. Since then she has been running Paula Schneider Consulting.

“American Apparel has a unique and incredible story, and it’s exciting to become part of such an iconic brand,” Schneider said in a statement. “My goal is to make American Apparel a better company while staying true to its core values of quality and creativity and preserving its sweatshop-free, Made in USA manufacturing philosophy.”

In a press release, American Apparel said Charney was terminated for cause in accordance with the terms of his employment agreement. Most recently, Scott Brubaker has been working as the clothing maker’s interim chief executive. He will continue as chief executive until Schneider takes over in early January.

Brubaker will stay on as a consultant to ensure a smooth transition.

“The company needs a permanent CEO who can bring stability and strong leadership in this time of transition, and we believe Ms. Schneider fits the bill perfectly,” said David Danziger, co-chairman of the board.

Charney, who founded American Apparel in the late 1990s, was suspended as the company’s president and chief executive on June 18 for alleged misconduct and violations of company policy, a company statement said.

Under terms of an agreement signed by Charney on July 9, a special committee of the board oversaw an internal investigation conducted by FTI Consulting. Based on the investigation, the special committee said it decided that it would not be appropriate for Charney to be reinstated as CEO or an officer of the company.

Charney issued his own statement. "I‘m proud of what I created at American Apparel and am confident that, as its largest shareholder, I will have a strong relationship with the company in the years ahead. Naturally, I am disappointed with the circumstances and my over 25 years of deep passion and commitment for American Apparel will always be the core DNA of the company.

"I would like to thank the city of Los Angeles and the entire American Apparel family of employees worldwide - from corporate and retail, the factories and suppliers as well as our investors and customers for their incredible loyalty and support. I wish the company continued success," he wrote.

For years, American Apparel has been losing money, with net losses totaling nearly $300 million in five years.

For the first nine months of the fiscal year ending Sept. 30, net sales were $455.4 million with net losses totaling $40.8 million.

The company is the largest apparel factory in the United States, employing more than 3,000 workers at its downtown location. With 245 retail stores, it employs a total of 10,000 people in 20 countries.