American Apparel Burned Through Millions To Investigate, Fire Founder

The $10.4 million spent on the investigation is high given American Apparel only had $8.3 million in cash as of Dec. 31.

American Apparel

American Apparel burned through millions in much-needed cash last year investigating ousted founder and former chief executive officer Dov Charney. It's also facing an SEC investigation as part of that review.

The company said today that it spent $10.4 million on its internal investigation of Charney in 2014 and another $7 million on employment settlements and severance payments. Those are tremendous sums given American Apparel's size — while the company says it has enough financing for the next 12 months, it only had $8.3 million in cash as of Dec. 31. It also reported that sales for the year tumbled 4% to $609 million.

The company said in its annual filing that it's being investigated by the Securities and Exchange Commission in connection with its internal committee's review of Charney, a process that began in July. American Apparel said it received a formal order of investigation on Feb. 5 and "intends to cooperate fully" with the SEC as the regulatory body works to determine whether any laws were broken as part of the review.

American Apparel officially fired Charney in December after first serving him with a termination letter in June, citing a long list of alleged offenses from misuse of corporate funds to violating sexual harassment policies. Charney's lawyers deemed the investigation that followed the initial letter a "complete sham," and the former executive has been working to return to the company he founded in the late 90s.

American Apparel has a new slate of executives, mostly appointed by hedge fund Standard General, who are working to resurrect the money-losing brand. The chain's new CEO wants to tone down American Apparel's notoriously provocative advertisements and has fired a number of longtime employees from its creative team as part of a redirection.

The retailer is dealing with an insurgency out of current employees who remain loyal to Charney as well as grievances from its largely immigrant workforce. Employees have filed multiple complaints against the company with the National Labor Relations Board claiming intimidation while others are planning to file wrongful termination suits, BuzzFeed News has reported.

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