American Apparel Board Votes to Oust Founder

The board of directors of Los Angeles–based American Apparel Inc. voted to suspend founder, President and Chief Executive Officer Dov Charney, naming John Luttrell as interim CEO.

The board also notified Charney of its intent to terminate his employment for cause. According to a press release issued by the company, “It is expected that the termination will be effective following a 30-day cure period required under the terms of Mr. Charney's employment agreement.” The board also intends to request Charney resign from the board, the release said.

Luttrell has been with American Apparel since February 2011 and currently serves as the company’s executive vice president and chief financial officer. Previously, he held the same titles at as Old Navy, The Wet Seal and Cost Plus.

Two other board members, Allan Mayer and David Danziger, were appointed as co-chairmen to replace Charney.

Mayer has been a board member since the company went public in 2007, and Danziger has chaired the board's Audit Committee since 2011

"We take no joy in this, but the board felt it was the right thing to do," Mayer said in the statement, which said the board’s decision stemmed from “an ongoing investigation into alleged misconduct.”

"Dov Charney created American Apparel, but the company has grown much larger than any one individual, and we are confident that its greatest days are still ahead."

Further, the statement said, the company is working with a search firm to identify potential CEO candidates.

According to the company, American Apparel may have “been deemed to have triggered an event of default under its credit agreements” as a result of it decision. The release said the company “will be in discussions with its lenders for a waiver of the default.”

“We have one of the best known and most relevant brands in the world, with employees who are second to none; I believe we have a very exciting future,” Luttrell said in the release. “Our core business—designing, manufacturing, and selling American-made branded apparel—is strong and continues to demonstrate great potential for growth, both in the U.S. and abroad. This new chapter in the American Apparel story will be the most exciting one yet.”

The release said the company will continue to “remain committed to its sweatshop-free, Made in USA manufacturing philosophy.”

Charney founded American Apparel in 1997. The company today employs about 10,000 people and operates nearly 250 retail stores in 20 countries, including the United States, Canada, Mexico, Brazil, the United Kingdom, Ireland, Australia, Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland, Austria, Japan, South Korea and China. The company also operates a wholesale business that supplies T-shirts and other apparel to distributors and screen printers.