Dov Charney accuses American Apparel investor of defamation

Dov Charney, the ousted chief executive of American Apparel Inc., is suing the New York hedge fund that failed to back his return to the company for damages of at least $30 million.

Charney accused Standard General of a host of misdeeds, including defamation and intentionally interfering with economic relations, according to a lawsuit filed Thursday in Los Angeles Superior Court.

The lawsuit is one of several filed recently accusing American Apparel and Standard General of unsavory activities before and after Charney was ousted. He was removed as chairman and suspended as chief executive last June after the company cited evidence of inappropriate behavior with employees and misuse of company funds.

Standard General helped Charney buy additional stock as he attempted a return to American Apparel. As result of the agreement between Charney and Standard General, the hedge fund and the former CEO both control Charney’s 42% stake.

But the hedge fund failed to back Charney as he vied for his CEO job. Instead, the company fired Charney as chief executive in December after a subsequent investigation and hired longtime apparel executive Paula Schneider to run the company.

Standard General said the facts will “speak for themselves.”

“Dov Charney and his associates continue to file frivolous, meritless lawsuits at a breakneck pace,” the company said in a statement. “We are confident that Mr. Charney will be held accountable for this knowing, intentional abuse of the legal system.”

But Charney says that investigation was solely intended to “manufacture” excuses to terminate him, the lawsuit says.

“The Charney ‘investigation’ was a sham, a witch hunt, a whitewash designed” by Standard General, according to the lawsuit.

Standard General told Charney that if he did not give up control and sign over his voting rights, the hedge fund “would destroy his character and ruin Charney,” the lawsuit says.

Instead of an independent investigation controlled by FTI Consulting, the lawsuit alleges that American Apparel’s law firm Jones Day actually oversaw and conducted the investigation. American Apparel ultimately paid Jones Day millions of dollars for handling the investigation, the lawsuit says.

The lawsuit said compensatory and punitive damages should amount to at least $30 million.

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