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Dov Charney
Dov Charney
Born (1969-01-31) January 31, 1969 (age 55)
Montreal, Quebec, Canada
OccupationEntrepreneur

Dov Charney (born January 31, 1969) is a Canadian-born artist and businessman. He is best known for founding American Apparel, where he served as the CEO from 1989 until 2014.

At American Apparel, Charney was involved in nearly every part of the business process from design and manufacturing to marketing.[1][2][3][4][5] At a time when the US garment industry had largely shifted to outsourced overseas manufacturing, Charney built American Apparel into a vertically-integrated fashion company—the largest clothing manufacturing operation in the United States -- where every aspect of the business, from design and manufacturing to distribution and marketing -- was done from American Apparel’s headquarters in Los Angeles.[6][7] Charney was also responsible for American Apparel to be an early adopter of RFID tags on garments in 2007 in an effort to reduce theft and improve inventory control.[8][9][10] In addition, Charney pioneered the Made in USA sweatshop-free model of transparency, fair wages and a refusal to outsource manufacturing. He is also a vocal advocate for immigration reform in the United States through the Legalize LA campaign, which was championed by American Apparel. [11][12][13]

Charney has also been associated with several controversial lawsuits, including a lawsuit from film director Woody Allen[14] and sexual harassment lawsuits involving ex-employees.[15][16][17] In 2014 the issues resulting from some of these led to his dismissal as the company's chief executive officer.

Early and personal life

Charney was born in Montreal, Quebec. His father, Morris Charney, is an architect, and his mother, Sylvia Safdie, an artist.[18] Charney is a nephew of architect Moshe Safdie.[19] He attended Choate Rosemary Hall, a private boarding school in Connecticut[20] and St. George's School of Montreal.[21] Charney grew up with, and was influenced heavily by, the culture of Montreal and his Jewish heritage.[19][22] As a teenager, he "fell in love" with the United States, and drew a sharp contrast between American and Canadian cultures.[19] "...when he was 15, and "had fallen in love with the U.S. in the way only a Canadian kid can – because Americans had the freedom to choose from hundreds more kinds of sugar breakfast cereals than us." As a teenager, Charney was an admirer of American-made products.[23] As a teen, he became disillusioned with Quebec nationalism which he felt was widespread during the 1980s.[24]

Charney's teenage infatuation with the US inspired the aesthetics and name of the apparel company he later founded.[19][23] His first ventures in fashion began in high school, when he started importing Hanes and Fruit of the Loom t-shirts across the border to Canadian friends.[25] At Choate, he claims to have shipped as many as 10,000 shirts at a time, using a rented U-Haul truck to transport the goods.[26]

In 1987, he enrolled at Tufts University. While at Tufts, he continued to operate his business, but dropped out by 1990 to pursue the apparel business full-time.[27] He borrowed $10,000 from his father and moved to South Carolina to transition from importing T-shirts to manufacturing them.[28] In 1996, Charney's company restructured when it was unable to cover its debt and filed for bankruptcy reorganization under Chapter 11.[20][29] On July 4, 1997, he went to Los Angeles.[30] By 2003, Charney had opened his first retail store and employed over 1,300 people.[31]

American Apparel

Building the brand

In 1991, Charney began making basic T-shirts under the American Apparel brand. The initial T-shirts were made of simple 18-single jersey and were positioned to compete with the Hanes Beefy-T.[32] The primary market objective was to sell garments to screen printers and wholesale clothiers in the United States and Canada.[33] In 1997, as his design, the 'Classic Girl', built momentum, Charney transitioned manufacturing to Los Angeles. In 2000, American Apparel moved into its current 800,000 sq ft (74,000 m2) factory located in Downtown Los Angeles.[34]

It was his aim in building American Apparel that it "live beyond [his] lifetime." According to Charney: "We'll be a heritage brand. It's like liberty, property, pursuit of happiness for every man worldwide. That's my America." [35]

Role as manufacturer/retailer/CEO

Charney is founder and former CEO of American Apparel, but formally went by the title of "Senior Partner".[36][37] He infused his personal progressive politics into the company brand paying factory workers between $13–18 USD/hr, offering low-cost, full-family healthcare for employees and taking a company position on immigration reform.[3][38][39] He claims to do this not for moral reasons but because it is a better business strategy.[40][41]

Under Charney, American Apparel implemented "team manufacturing" as opposed to the progressive bundle system of apparel manufacturing.[42] After its implementation, garment production tripled and required a less than 20% staff increase.[42] He formed the company as a domestic vertically-integrated manufacturer,[43] making him the largest manufacturer still producing garments in America.[44] Because of its vertically integrated and domestic manufacturing model, American Apparel's gross margins are actually significantly higher than other basic apparel brands. According to the company, its blended margins are roughly 70% (while GAP averages about 30% and luxury brands like Prada are between 65 and 70%.)[45]

Initially, American Apparel was a wholesale brand that sold into the imprintable market, but in 2003 it expanded into the retail market. Its first stores were in Montreal, New York City and Los Angeles.[3][46] By 2005, the company had over $200M in revenue.[32] Retail operations have grown to include 260+ retail stores. In 2008, he was named Retailer of the Year at the Michael Awards, a fashion industry mainstay.[47][48] The award has previously gone to Calvin Klein and Oscar de la Renta.[49]

In December 2006, American Apparel entered into a reverse merger agreement valued at $360 million with the special purpose acquisition company (SPAC) Endeavor Acquisition as a way of taking the company public.[50] As a result of the agreement, Charney was named President and Chief Executive Officer of the publicly-traded company known as American Apparel, Inc. He remained the majority shareholder, and employees of American Apparel were given stock in the company valued at $39 million.[51]

Fashion and lifestyle

Charney is known for his fashion sense, which is geared towards "young metropolitan adults."[52] The "fit" of a shirt is something he often stresses.[53] He was named Man of the Year by both the Fashion Industry Guild and Apparel Magazine for his design work.[54] In 2008, The Guardian named American Apparel "Label of the Year".[55]

From the onset, Charney was known for producing clothing that is both logo and brand-free, which is considered important to younger consumers who are wary of corporate branding.[56]

Charney lives in the Garbutt House, a historic mansion atop a hill in Silverlake designed by Frank Garbutt, an early movie pioneer and industrialist.[32] The home is made entirely out of concrete due to Garbutt's deathly fear of fire. During his time at American Apparel Charney was consumed with work, often sleeping in his office at the company's factory, leaving little separation between his personal and work life.[32] The house often functions as a dormitory for out-of-town workers doing business at the company headquarters.[32]

Advertising and brand management

Until his recent ouster by American Apparel's board of directors, Charney was directly involved in his company's design, branding, and advertising. His print campaigns are award-winning and among the most followed in the garment industry.[57] Charney has promoted a branding strategy that spotlighted his treatment of workers as a selling point for the company's merchandise, promoting American Apparel's goods as "sweatshop free". A banner on top of the downtown factory states "American Apparel is an Industrial Revolution".[44]

The company is also known for its simple and provocative ads featuring women, including employees. The subjects are often not, but sometimes are, professional models, and often chosen personally by Charney from local hangouts and stores.[58] He shoots many of the advertisements himself.[59] His advertising has been criticized for featuring young, even teenage, models in sexually provocative poses. However, it has also been lauded for honesty and lack of airbrushing.[60][61] In 2005, Charney won the "Marketing Excellence Award" in the LA Fashion Awards.[62]

Dismissal

During its routine meetings in March 2014, American Apparel's board learned that an arbitrator hearing one of the sexual harassment cases against Charney and the company had reached a decision in the case. While ruling that the main harassment claim had not been proven, the arbitrator found against the company and Charney on a defamation claim, awarding $700,000 for that to Irene Morales, saying that Charney had failed to prevent a subordinate from posting naked pictures of her online. Up until then, the board had steadfastly maintained that all the allegations against Charney, most of which were likewise settled in confidential arbitration proceedings, were not factually sufficient to constitute misconduct requiring disciplinary action.[63]

They also had strong financial reasons for replacing him. AA had posted losses in all but one of the previous 17 quarters, including $106 million during the preceding year, and the company had become a penny stock. Its financial options were limited—Charney's own portion of the company had been diluted from 45% to 27% during one effort to raise cash, which made it easier for the board to take him on. Some lenders refused to deal with the company at all while Charney was in charge, and those that did charged dearly; the interest rate on one of its major loans was 20%.[63]

With this now "established legal fact" in hand, the board began to quietly investigate Charney and prepare for the possibility of firing him, a move they anticipated he would resist vigorously. They worked closely with the company's law firm, Jones Day, to interview employees without Charney finding out. When they were done in June, the majority of the board confronted Charney with a throffer: either he quietly resigned as CEO and took a multimillion-dollar long-term position as a consultant, or they would fire him and make public why. He chose the latter.[63]

American Apparel publicly suspended Charney on June 18, 2014, stating that they would terminate him for cause in 30 days.[64][65] The company's board claimed at the time that it had "new information" which led it to finally fire Charney. New co-chairman Allan Mayer said: "We have heard for years allegations and rumors in newspaper stories that were not sufficient to take action. But what came to our attention was not allegations and rumors but established fact." He declined to elaborate at that time. The board had just begun an investigation into how Charney responded to a 2011 lawsuit by a former employee who claimed he had held her against her will as a "sex slave", a suit settled in arbitration.[66]

Two days later, a company insider posted a "confession" to the social network Whisper asserting that the reasons for Charney's dismissal were "purely financial ... Everything else is bullshit. The board has nothing new." BuzzFeed got in touch with the poster through Whisper and was able to obtain the board's dismissal letter to Charney. It repeated the board's earlier allegation that he had allowed a subordinate to pose as Morales on a blog and make sexually provocative posts to him, which had apparently led to major punitive damages awarded to Morales by the arbitrator, calling this a breach of his fiduciary duty. Further in that vein, the board said, it head learned of an attempt to possibly suborn perjury in a "pending litigation matter". The letter also charged Charney with misusing corporate assets for personal gain, such as paying lucrative severance packages, bonuses and salary increases in exchange for silence from putative accusers as well as using corporate apartments himself and buying travel for family members with company funds, violating company policy by refusing to attend mandatory sexual harassment training sessions and disrupting them when others attended.[67]

As a result of Charney's behavior, the board claimed, the company's costs had increased unacceptably. "The company's employment practices liability insurance retention has grown to $1 million from $350,000 ... the premiums for this insurance are well outside of industry standards." His reputation had also hurt American Apparel's financing, as "many financing sources have refused to become involved with American Apparel as long as you remain involved with the company" and those that did had imposed "a significant premium for that financing in significant part because of your conduct." It gave him the 30-day suspension to "effect a cure" for these issues.[67] Charney demanded the board reinstate him, threatening to sue for age discrimination.[68]

In December 2014, Charney was terminated as a Chief Executive Officer after months of suspension. He was replaced by Paula Schneider, president of ESP Group Ltd, company of brands like English Laundry, on January 5, 2015.[69] In December 2014, Charney told Bloomberg Businessweek he was down to his last $100,000 and that he was sleeping on a friend's couch in Manhattan.[70] Following his suspension as CEO in the summer of 2014, Charney teamed up with the Standard General hedge fund to buy stocks of the company to attempt a takeover.[71]

Lawsuits

Charney has filed a number of lawsuits against American Apparel and Standard General in connection with his claim that he was fired illegally and disenfranchised a shareholder of the company. On March 25, Charney’s lawyer Keith Fink affirmed that Charney was suing American Apparel in private arbitration for $40 million in damages stemming from a breach of his employment contract.[72]

Additionally, on May 7, 2015, Charney sued Standard General (the hedge fund that took control of American Apparel following his 2014 ouster) for $30 million, claiming that Standard General's public statements that the investigation of Charney was "independent and carried out by a third party" was allegedly untrue, and as such was defamatory and an intentional interference with economic relations and prospective economic relations. In the same lawsuit, Charney claims the investigation of himself was a "sham" and he said American Apparel's board, controlled by Standard General, sacked him because he would not drop his fight to regain control of the retailer and accept the settlement that was offered to him (an alleged multimillion-dollar consulting—employment contract) and because he refused to release his claims as a shareholder against both the company and the investment firm.[73]

On May 12, 2015, Charney sued American Apparel and Colleen Brown for a 20 million dollar defamation claim relating to a written statement Brown make to employees whereby she stated Charney had signed a contract whereby he agreed in writing that "he would never come back to American Apparel", which Charney claims he never signed.[74]

On May 18, 2015, American Apparel sued Charney accusing him of running a "scorched earth campaign" as he tries to regain control of the company. Connected to that same litigation, on June 1, 2015, the Company obtained a temporary restraining order in Delaware Chancery Court preventing Charney from criticizing the company or seeking the removal of board members through July 16, 2015, the date of American Apparel’s 2015 annual shareholder’s meeting.

On June 19, 2015, Charney sued American Apparel and a former board member, David Danziger, alleging that Danziger interfered with Charney's economic interests when in late June 2014, he spoke to the company's second largest shareholder in an alleged attempt to block Charney’s effort to gain shareholder support so he could take back control of his company. When the board realized that Charney was collaborating with the company's second largest shareholder, Five T to take control of the company and the board itself, Charney claims board member, David Danziger contacted Five T and told them that Charney was involved in acts which were criminal in nature, thereby preventing Charney from obtaining Roth’s support.[75][76]

On June 24, 2015, Charney sued American Apparel, the former CFO, John Luttrell, former board members David Danzinger, Robert Greene, Marvin Igelman, William Mauer and Allan Mayer. Among other things, Charney claimed the various defendants participated in a scheme to trick Charney into diluting his ownership stake in the company in early 2014 in an effort to sell the company in spite of his objections.[77]

Activism

Under Charney's stewardship, American Apparel took a leading role in the promotion of a number of prominent social causes:

Legalize LA

Main article: Legalize LA

Legalize LA was an immigration reform campaign conceived by Charney and promoted by American Apparel beginning in 2004. The campaign featured billboards and full-page ads in national publications as well as t-shirts sold in retail locations emblazoned with the words "Legalize LA." Proceeds from the sale of the shirts were donated to immigration reform advocacy groups. The campaign called for the overhaul of immigration laws so as to create a legal path for undocumented workers to gain citizenship in the United States.[78][79]

Legalize Gay

In November 2008, after the passing of Proposition 8, which banned same-sex marriages in California, Dov Charney and American Apparel created "Legalize Gay" T-shirts to hand out to protesters at rallies. The positive reaction led American Apparel to sell the same shirts at stores and online.[80]

Ethical views

In an interview with Vice.tv, Charney spoke out against the poor treatment of fashion workers in developing countries and refers to the practices as "slave labor" and "death trap manufacturing". Charney proposed a "Global Garment Workers Minimum Wage" as well discussed in detail many of the inner workings of the modern fast fashion industry practices that creates dangerous factory conditions and disasters like the 2013 Savar building collapse on May 13, which had the death toll of 1,127 and 2,500 injured people who were rescued from the building alive.[81]

Controversy

Charney has been the subject of several sexual harassment lawsuits, at least five since the mid-2000s, all of which have settled, dismissed, or remanded to private arbitration, with no harassment ever proven.[82][83][84][85][86][87][88][89]

Charney maintained his innocence in all the lawsuits, telling CNBC that "allegations that I acted improperly at any time are completely a fiction."[90] The company and independent media outlets have publicly accused lawyers in the lawsuits against American Apparel of extortion and of "shaking the company down."[32][91][92][93][94][95][96][91][97][98]

In 2004, Claudine Ko of Jane magazine[99] published an essay narrating multiple sexual exchanges that occurred between them while spending time with Charney.[60][100][101][102] The article's publication brought extensive press to the company and Charney, who later responded that he believed that the acts had been done consensually, in private and outside the article's bounds.[103][104][105][106]

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  84. ^ Brennan, Ed (May 18, 2009). "Woody Allen reaches $5m settlement with head of American Apparel". The Guardian. London. Retrieved May 22, 2009. Quote: "Charney has been involved in several highly-publicised sexual harassment suits brought by former employees, none of which were proven.”
  85. ^ Sefton, Eliot (September 3, 2009). "Dov Charney's LA-based clothing company loses 1,600 staff and sees yet another advert banned". The First Post. Archived from the original on September 8, 2009. Retrieved September 11, 2009. Charney has been the subject of several, unproven, sexual harassment suits and claims to have been victimised by the media in the past. He said that he used Woody Allen in his company's ads because he wanted to draw attention to the way he and Allen – both high-profile Jews – had been treated. {{cite news}}: Unknown parameter |deadurl= ignored (|url-status= suggested) (help)
  86. ^ "American Apparel CEO Dov Charney's 'Sex Slave' Lawsuit Thrown Out". The Huffington Post. March 22, 2012. Retrieved November 17, 2016.
  87. ^ Brennan, Ed (May 18, 2009). "Woody Allen reaches $5m settlement with head of American Apparel". The Guardian. London. Retrieved May 22, 2009. Quote: "Charney has been involved in several highly publicised sexual harassment suits brought by former employees."
  88. ^ [1][dead link‍]
  89. ^ Covert, James (March 28, 2010). "American Apparel Struggles to Stay Afloat". New York Post. Retrieved March 29, 2010.
  90. ^ American Apparel CEO: Tattered, but Not Torn Archived 2014-01-20 at the Wayback Machine CNBC.com Jane Wells 4/10/12 “The company is also trying to recover from a litany of lawsuits against Charney, including a sex slave lawsuit that was thrown out last month”
  91. ^ a b Nolan, Hamilton (April 2011). "American Shakedown? Sex, Lies and the Dov Charney Lawsuit". Gawker. Archived from the original on May 2, 2011. Retrieved May 2, 2011. {{cite news}}: Unknown parameter |deadurl= ignored (|url-status= suggested) (help)
  92. ^ NAKED SHAKEDOWN: DOV CHARNEY IS THE VICTIM! HollywoodInterrupted.com December 2008
  93. ^ Chaudhuri, Saabira (December 2, 2008). "American Apparel Aims to Bring Down "Celebrity Ambulance Chasing" Lawyer". Fast Company. Retrieved March 28, 2008.
  94. ^ Heller, Matthew (October 28, 2008). "Fashion Mogul 'Fakes' Arbitration in Harassment Case". On Point. Retrieved November 21, 2008. The 'confidential arbitration' was in fact a charade. One of Nelson's attorneys, the 2nd District said, later described it as 'a 'fake arbitration' designed to produce a press release calculated to blunt negative media attention.'
  95. ^ Slater, Dan (November 4, 2008). "The Story Behind American Apparel's Sham Arbitration". Wall Street Journal. Retrieved November 5, 2008. The court went on to say that 'the proposed press release is materially misleading — among other things, no real arbitration of a dispute occurred and [the] plaintiff received $1.3 million in compensation.'
  96. ^ Stein, Sadie (October 31, 2008). "Tangled Webs: Dov Charney's Court Case is Totally Complicated". Jezebel. Retrieved November 4, 2008. In response, Ms. Nelson's lawyer, Mr. Fink, devised a settlement agreement whereby his client would agree to certain stipulations amounting to a confession that her charges of sexual harassment were bogus, and that she had never been subject to any harassment or a hostile work environment.
  97. ^ "Money-hungry vixen sent me dirty emails', claims American Apparel CEO being sued". London: The Daily Mail. April 2011. Retrieved May 2, 2011.
  98. ^ "Ex-workers say American Apparel posted nude pix online". Reuters. April 2011. Retrieved May 2, 2011.
  99. ^ Nesvig, Kara (October 4, 2007). "Unkempt, Urban, Ubiquitous". Minnesota Daily. Archived from the original on April 20, 2008. Retrieved April 28, 2008. {{cite news}}: Unknown parameter |deadurl= ignored (|url-status= suggested) (help) Archived at americanapparel.net Archived 2011-11-18 at the Wayback Machine
  100. ^ "Sexy marketing or sexual harassment? - Dateline NBC | NBC News". MSNBC. July 28, 2006. Retrieved November 17, 2016.
  101. ^ "'Jewish hustler'—potty mouth and pervert—means no offense | The God Blog". Jewish Journal. June 3, 2008. Retrieved November 17, 2016.
  102. ^ "american apparel". Claudinenko.com. Retrieved November 17, 2016.
  103. ^ "The company calls it "a social situation which...unfortunately was exploited in order to sell magazines." American Apparel CEO Trial Starts Today Archived 2012-10-15 at the Wayback Machine CNBC. Margaret Brennan. February 28, 2008.
  104. ^ "I've never done anything sexual that wasn't consensual", Charney says. The reporter, Claudine Ko, confirmed his take on events to BusinessWeek." Living on the Edge at American Apparel
  105. ^ "Within the context of a flirtatious conversation about sexuality and the pleasure Charney derives from masturbation with a willing partner, he decided to demonstrate for Ko, and it became a repeated motif in their later encounters. The article left a lasting impression of him as a boss who can't keep it in his pants", The New York Times "And You Thought Abercrombie and Fitch Was Pushing It"
  106. ^ "I was a younger man" he says, wearily. "The lines were blurred between paramour and reporter." The reporter has said that her tape recorder or notebook was in full view at all times and that the relationship was professional." Portfolio profile of Charney Archived April 20, 2012, at the Wayback Machine
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