The founder and chief executive of American Apparel, Dov Charney, was fired this week because an internal investigation found that he had misused company money and had allowed an employee to post naked photographs of a former female employee who had sued him, according to a person with knowledge of the investigation.
The board offered Charney the opportunity to remain at the company as a consultant in a creative role, so long as he resigned as chief executive, said two people with knowledge of the situation, who spoke on condition of anonymity, and that a news release had already been written that mentioned an amicable, voluntary parting.
He was told he had to make his decision that day. If he stayed on, he would be paid about $4 million, the person said. If he refused to step down, he was told he would be fired. Charney refused.
The company’s board learned early this year that Charney knew of an employee’s plans to publish naked photographs of a former American Apparel worker, Irene Morales, on the Internet. While Charney did not publish the photographs himself, he did not try to stop them from being published, said the person, who spoke on condition of anonymity because of the sensitive nature of Charney’s dismissal. Morales sued Charney in 2011, claiming he had forced her to perform sexual acts over a period of several months. He claimed that the photos showed that she had pursued him.
In March, after learning that Charney was aware of plans to publish the photographs, the board decided to conduct an investigation into his behavior.
The investigation, led by the law firm Jones Day, also found that Charney had used the retailer’s resources for his personal use. According to the investigation, he bought plane tickets for his parents with company money, and he and his friends used company apartments while not on official business.
A person close to Charney said that his use of company money and apartments had been appropriate. The person also insisted that because Charney had not created the blog on which the photographs were posted, he should not be held responsible for its content.
For years, Charney has been trailed by accusations of sexual harassment and stories about his behavior that, at a minimum, seemed like a lurid distraction for the chief executive of a publicly traded company. He was sued by employees who said he had created an unsafe work environment rife with innuendo and sexual misconduct.