Bloomberg News

American Apparel Adds First Female Director in Shake-Up

July 24, 2014

American Apparel Founder Dov Charney

A file photo shows Dov Charney, founder of American Apparel Inc., standing for a portrait in a company retail store in New York, on July 29, 2010. Photographer: Keith Bedford/Bloomberg

American Apparel Inc. (APP:US), the controversial clothing chain that has battled sexual-harassment lawsuits, named the first woman to its board as part of a shake-up following the ouster of its founder last month.

Colleen Brown, 55, a longtime media executive who now serves as managing director of Newport Board Group, is one of four new directors named to American Apparel’s board, according to a regulatory filing yesterday. Joseph Magnacca, RadioShack Corp. (RSH:US)’s chief executive officer, also was appointed.

The move adds fresh perspectives to a company known for its racy advertising and sexually charged culture. American Apparel founder Dov Charney, who was replaced as CEO last month, has been sued for harassment and once engaged in sex acts while being interviewed by a magazine reporter.

Brown has had a long career in the media industry. She served as CEO of Fisher Communications Inc., a group of television and radio stations, for eight years through 2013. She led the sale of the company to Sinclair Broadcast Group Inc. last year for about $340 million.

American Apparel, already struggling to revive a business that lost $270 million since 2010, has been in turmoil since the board replaced Charney, setting off a battle for control of the company. The board reshuffling is part of an agreement with Standard General LP, a New York-based hedge fund that put together a rescue financing deal for the retailer. The two co-chairmen from the existing board are staying, while the other remaining directors are resigning.

New Directors

Under the agreement, Standard General had the right to name three directors, including an employee who turned out to be partner David Glazek. The hedge fund also chose Thomas Sullivan. He’s a long-time director who now serves on the board of Media General Inc. (MEG:US) Standard General CEO Soohyung Kim also is on Media General’s board, and the firm is its largest investor with a 30 percent stake (MEG:US). Standard General has the right to name one more director to bring the total to seven.

Brown and Magnacca, 52, were jointly chosen by Standard General and the board. Magnacca, Brown and Sullivan were deemed independent directors in the filing. Standard General also has a connection to Magnacca. The fund is the largest investor (RSH:US) in RadioShack, the electronics chain he’s trying to turn around, with about a 10 percent stake.

Charney’s Fate

Charney, meanwhile, has been fighting to get his job back, saying his termination was illegal and violated his contract. Though he forged an alliance with Standard General, the investment firm isn’t pushing for his return. His fate will be decided by a panel of three directors, who will make their decision about whether to reinstate him based on an investigation by FTI Consulting Inc. (FCN:US), which the board enlisted last month.

Charney, who also had served as the chain’s chairman, was suspended for misconduct on June 18. His alleged infractions included misusing company funds and assets and retaliating against a former employee who sued him for harassment, a person familiar with the situation has said. Charney’s lawyer has called the board’s reasons for his ouster baseless.

As part of the Standard General accord, the hedge fund committed as much as $25 million in capital, helping American Apparel pay off debt and improve its finances. Standard General already used $10 million of the money to buy a high-interest loan that was deemed in default by the lender.

Ad Criticism

Under Charney, the chain drew flak for ads showing half-dressed young women in alluring positions. One of the company’s New York stores recently featured mannequins with pubic hair.

The sexual imagery -- coupled with the company’s commitment to domestic manufacturing -- has set the chain apart from other brands, American Apparel Co-Chairman Allan Mayer said in a Bloomberg Businessweek interview.

“If you took out the sex, it would be kind of boring. And if you took out the idealistic component -- our commitment to the sweatshop-free, made-in-USA philosophy -- it would just be sleazy,” he said. “But you put them together, and you have something that’s interesting. It’s edgy, but it’s also strangely wholesome at the same time.”

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net


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Companies Mentioned

  • APP
    (American Apparel Inc)
    • $0.81 USD
    • -0.02
    • -2.47%
  • RSH
    (RadioShack Corp)
    • $0.91 USD
    • -0.05
    • -5.89%
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