Months after his dismissal, American Apparel's board is still fighting back against ousted founder Dov Charney and his allies, telling employees in an internal memo last week that the former CEO is unfit to work for American Apparel — or any other company.
"It would be hard to find any board of any company (public or private) that would be willing to hire Mr. Charney," Colleen Brown, who chairs the American Apparel board, said in the memo, which was obtained by BuzzFeed News. "It would be a clear breach of any board's fiduciary duties to re-hire an individual with Mr. Charney's history of misconduct."
The harsh language reflects the frustrations of a management team who have spent months dealing with a campaign by Charney and his supporters that has included legal complaints, leaks to the press, an organizing drive among factory workers, and a barrage of disparaging emails sent to current employees. Confronting the campaign has become an ongoing distraction for management as it struggles with a turnaround effort that has so far failed to halt declining sales at American Apparel stores.
Brown sent the memo to employees on April 24, reiterating the new management's commitment to American Apparel and punching back at Charney's statements that he will find a way back in. The memo, included in full below, also addresses the continued distribution of pro-Charney emails to staff, which have slammed new CEO Paula Schneider and her management team.
"Many of you have expressed concern that Mr. Charney continues to claim he is returning to American Apparel," Brown wrote. "He is not."
The memo included Charney's initial termination letter from June 18 and highlighted allegations that the former executive "repeatedly violated the company's sexual harassment and anti-discrimination policy and used corporate assets for personal, non-business reasons." Brown said Charney requested a second, more comprehensive investigation after his June letter, which confirmed those allegations and barred him from returning. It also noted that as a consequence, "the SEC has notified the company that they have launched a formal investigation into possible violations of the securities regulations during the time that Mr. Charney was CEO."
Charney has vowed to return to American Apparel both in meetings with garment workers and in media interviews, though the road to reinstallation has been less than clear, given the agreement he made with Standard General last summer and the board's unwillingness to work with Charney. As part of the second investigation, Charney signed an agreement that said he will "not serve as CEO of the Company or serve as an officer or employee" until the investigation was completed and a committee cleared his return.
Keith Fink, a lawyer for Charney, has disputed the implications of that agreement, which is on file with the SEC, arguing in an April 21 letter to employees that American Apparel is "free to rehire Mr. Charney in any capacity now and in the future," and pointing out that Charney is the company's biggest single shareholder. He also called the sexual harassment allegations an "out and out lie" in an interview with BuzzFeed News today.
"They are desperate," he said. "What is the point in disseminating this letter? I ask this rhetorically. If new management is so good and magnificent to employees, working conditions are so great, they shouldn't be concerned that Dov may speak to the factory workers."
But the memo from Brown makes it clear that Charney will not be returning to the company under current management's watch.
The company's new management has also been looking to stem employee-wide emails slamming Schneider, other new executives, and Standard General. Schneider confronted the emails in a February message to staff, but they have apparently continued.
"Many of you have expressed concern and frustration that you continue to receive unwanted emails from other employees that attack Paula and the new management," Brown wrote. "We certainly understand how you feel and share your frustration. Unfortunately, labor laws arguably require us to allow many of these emails to reach you. However, labor laws do not require you to open, read or keep these emails. The choice is yours."
Brown also addressed the company's dismal first-quarter sales, which were leaked to BuzzFeed News earlier this month, blaming them on "the state of affairs that we stepped into before starting our turnaround." She added that "we look forward to seeing growth as we put that behind us." The sales data was shared by multiple current and former employees who sought to show the brand's struggles under new management.
"The company's approach has been and will be to take the high road when it comes to Mr. Charney," said the memo. "We do not intend to waste time responding to all of the meritless claims made by or on behalf of Mr. Charney through the media or in emails, when our time is much better spent helping the company to succeed."
Sapna Maheshwari is a business reporter for BuzzFeed News and is based in New York. Maheshwari reports on retail and e-commerce.
Contact Sapna Maheshwari at firstname.lastname@example.org.
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