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Dov Charney wants back at American Apparel

Charney was removed in 2014, and the clothing company filed for Chapter 11 bankruptcy in October, but in a recent bankruptcy hearing he insisted that he should return to his position as CEO.

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Gary Friedman/AP/Los Angeles Times/File
Dov Charney, founder of American Apparel, is photographed at the company's factory in downtown Los Angeles (April 3, 2012).

Dov Charney, American Apparel’s former CEO, wants back at the company he founded.

The controversial Montreal native, who came up with the idea that would become American Apparel while a student at Tufts University, said during the company’s bankruptcy hearing on Thursday that it was the wrong decision for American Apparel’s board to remove him in 2014.

“There was a plan behind the scenes to steal the company from me,” Mr. Charney said. “Since then, it’s been a constant hide-the-ball.”

American Apparel’s board of directors orchestrated to remove Charney from his position as CEO in June of 2014.  An internal investigation revealed allegations of misconduct and misuse of company funds. The Securities and Exchange Commission later completed a formal investigation on the matter. Charney continues to deny the allegations.

Thursday’s hearing revolves around the question of American Apparel’s future, which is still in limbo after the company filed Chapter 11 bankruptcy in October.

American Apparel wants to reorganize and remove its debts by relinquishing control to the hedge funds that hold its bonds. Charney wants to save the company through a $300 million takeover plan, which was backed by two hedge funds but rejected by American Apparel’s board.  

During his lively testimony at the hearing, Charney suggested that it was “coercion” that had forced him American Apparel and prevented him from coming back. He made a similar pronouncement in a lawsuit filed in June of last year, suggesting that forces at the company conspired to remove him.

But Paula Schneider, who took over as CEO in early 2015, indicated just the opposite. She said in her testimony that American Apparel needed dramatic restructuring that could only come if someone new stepped in.

“You really had one decision maker in the company when Dov was there,” she said. “There were 70 people who told me they reported to Dov.”

After taking the helm, Schneider has been working to restructure American Apparel by moving away from the suggestive ads that once dominated its brand and cutting operational costs. Despite these moves, the company’s revenue growth declined by 3.95 percent in 2015, and American Apparel stocks continue to value at well under a dollar.

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