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CEO of American Apparel, Dov Charney, is facing allegations he conducted meetings in the nude

American Apparel may be made in the U.S.A., but its chief executive is hardly America’s sweetheart at the moment.

Dov Charney, the embattled CEO of the hipster-retail empire American Apparel, is facing allegations in a lawsuit by a former employee that he held staff meetings in the nude, pranced through the office in his skivvies, and tried to pad the inventory numbers to mislead potential investors. And all of this for a clothing company that prides itself on good old fashioned American values.

In spite of American Apparel’s claims on Wednesday that the lawsuit was “frivolous and baseless,” investors sent its shares plummeting 35.2%, or $2.18, to close at $4.02. The company’s stock has fallen 73.2% since the beginning of the year.

A former information technology employee at American Apparel, Roberto Hernandez, filed the lawsuit last week in Los Angeles County Superior Court, claiming that Charney tried to lure him into a scheme to defraud investors by manipulating the retailer’s inventory records. After refusing, Hernandez said he was fired a week later.

Hernandez, who is seeking damages in excess of $50,000, has also claimed that 39-year old Charney kept naked photos of female employees on his computer and brought fellow workers to strip clubs.

In a statement released on Wednesday, American Apparel denied the lawsuit and called the allegations “fictional” and a “cynical attempt to extract phony leverage by Mr. Hernandez’s counsel, Keith Fink, who has been engaged with the company in other litigation for over three years.”

Fink also represents a client in a separate sexual harassment lawsuit, one of several that have been filed against the company.

“Mr. Hernandez was a non-accounting employee in the information technology department who was terminated for legitimate reasons,” the company added. “The facts are that Mr. Charney had no personal management responsibility nor influence over the work of Mr. Hernandez and played no role in his termination in 2006.”


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