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American Apparel drops chairman after lawsuits

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Ousted founder: Dov Charney, chairman and chief executive officer of American Apparel Inc

Ousted founder: Dov Charney, chairman and chief executive officer of American Apparel Inc

Ousted founder: Dov Charney, chairman and chief executive officer of American Apparel Inc

CLOTHING and accessories retailer American Apparel ousted its controversial founder Dov Charney as chairman effective immediately and moved to fire him as CEO and president following an ongoing investigation into alleged misconduct.

Mr Charney, pictured above, who has been repeatedly targeted in sexual harassment lawsuits, will be terminated for cause after a contractual 30-day cure period, the Los Angeles-based company said. The company, known for its bright 'Made-In-America' clothes, said it named CFO John Luttrell as interim chief executive as it works to look for a permanent CEO. The retailer also appointed Allan Mayer and David Danziger as co-chairmen.

"We take no joy in this, but the board felt it was the right thing to do," Mr Mayer said. Mr Charney (45), who founded American Apparel's predecessor companies in 1989, has been at the helm since 2007, when the company went public.

In 2011, a former employee had accused Mr Charney of keeping her as a teenage sex slave, amid fear she might otherwise lose her job. She also sued American Apparel and its directors for failing to stop Mr Charney from acting as a "sexual predator".

The company, struggling with weak sales and heavy debt, said the management changes may have triggered a default under its credit agreements, adding it will be in discussions with its lenders for a waiver of the default. In February, the company had tapped restructuring advisers after it had reached $240m (€176m) in debt and had come close to breaching loan covenants, debt terms designed to protect its lenders, according to reports.

The company's shares have lost over two-thirds of their value over the past year.

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