His company's advertising favored provocative women, and so did he.
Now American Apparel Chief Executive Dov Charney's highly sexualized lifestyle has cost him stewardship of the company he founded — and may destroy it.
The company suspended Charney on Wednesday pending "an ongoing investigation into alleged misconduct," American Apparel said in a statement. A source familiar with the matter characterized the behavior as poor judgment and questionable conduct with women.
American Apparel filed documents with the Securities and Exchange Commission saying that ousting Charney from the Los Angeles retailer's top slot could trigger defaults on nearly $40 million in outstanding loans and force the company into bankruptcy.
The 45-year-old executive created American Apparel in his dorm room while a student at Tufts University and went on to move mountains of merchandise. But he's been dogged for years by allegations of sexual misconduct and harassment inside his innovative clothing company.
The allegations sometimes threatened to overshadow his commitment to producing quality products in America, using local labor, and his insistence on paying employees a living wage inside the "sweatshop-free" factory in downtown Los Angeles.
This week, they became his undoing.
The board decided Wednesday to replace Charney as chairman and terminate him as chief executive after 30 days. The unanimous vote suspended Charney immediately. The company's chief financial officer, John Luttrell, was named interim CEO.
Reached on his cellphone in New York on Thursday, Charney declined to comment, saying it was a sensitive time for him.
Charney's sudden firing probably will lead to drastic changes at the company, analysts said — layoffs, store closures, bankruptcy, a sale and even a shift away from the "made in America" manufacturing strategy Charney championed.
A night owl who obsesses about business, Charney is known to phone employees at all hours — and even to wake them with a knock on the door — to talk shop.
In his personal bio, Charney speaks nostalgically of his Jewish Canadian roots, of Montreal's famed "smoked meat" restaurants and its bagels. (He keeps dozens frozen at home, he has said.) Never married, the entrepreneur is known for his hipster style, which includes giant eyeglasses and tight shirts.
He lives in an 11,000-square-foot mansion in Silver Lake, having purchased the house and 82,000-square-foot hilltop grounds for $4.1 million. Named for a movie pioneer who built the bunker-like, concrete-and-steel structure in 1926, the eight-bedroom, seven-bath hilltop Garbutt House is now part of a private, gated community.
Tokiko Miyashiro, 42, an independent consultant who works with American Apparel and said she has known Charney for ten years, called the embattled executive "a good person."
"He feeds everybody. He's always there for everybody," Miyashiro said Thursday afternoon, standing outside the Charney home. "Without him, I cannot pay rent."
American Apparel was a hot Wall Street commodity before the 2008-09 market crash, with its stock trading as high as $15 a share in 2007.
Since then, shares have plummeted 95%, closing at 68 cents on Thursday, up 7%. Only one of the last 17 quarters has been profitable for American Apparel. The company has lost nearly $270 million in the last four years.
Charney's compensation package plunged from $14.5 million in 2012 to only $1.07 million in 2013.
Industry analysts said Charney, despite his peccadilloes, should get credit for building an iconic and socially responsible brand.
"Dov, for all of his misbehavior, was trying to do the right thing. He wasn't paying workers in Bangladesh $2 a day, he was paying $10, $15 an hour in Los Angeles," said Ronnie Moas, founder of Standpoint Research. "He's very stubborn, utopian, idealistic."