American Apparel is heading straight for its own hip and self-consciously sexy/sloppy Gotterdammerung at a clip with a shareholder’s lawsuit just filed against the company in Los Angeles. Shareholders claim Dov Charney and several members of his board of directors committed acts of mismanagement, misled them and damaged the company image in general. The plaintiffs in this case also note the massive crash in American Apparel share prices, from $16.80 in 2007 down to $1.03 a share at the close of business Tuesday. Other problems listed in the complaint:
- American Apparel laid off 1,800 employees who couldn’t produce the proper papers when the feds began an immigration investigation, seriously damaging its manufacturing output.
- Deloitte & Touche has stated that American Apparel didn’t control accounting and financial practices for the last two years. Deloitte broke with American Apparel last July because it doubted “the reliability of American Apparel’s 2009 financial statements.”
- Dov Charney’s baby hasn’t filed any financial statements for two quarters and is about to be delisted from the NYSE.
Shareholders are looking for control over at least 3 seats on the board, damages and other corporate reforms.
All of this is on top of the multiple lawsuits already pending against Dov Charney for sexual harassment. As Reuters reported yesterday, American Apparel “may not have sufficient liquidity to continue to operate through next year.”