Long before the board of American Apparel decided to fire founder and CEO Dov Charney for ethical misconduct (involving nude photos, no less), Fran Hawthorne had come to the same conclusion, saying that Charney’s “cavalier (or worse) personal attitudes toward sex and women have set the tone of the workplace” and that “To earn a social-responsibility badge, American Apparel would have to take a major step: dump Charney.” In the following excerpt from her award-winning book Ethical Chic: The Inside Story of the Companies We Think We Love, Hawthorne profiles the problematic former head of American Apparel, and the long history of ethical lapses that provided the framework for his latest fall.
The tales have been repeated in news articles and lawsuits for years and to some degree even confirmed by Dov Charney. Allegedly, he walks around nearly nude in the office and has held business meetings in a similar state of undress, calls employees “sluts” and “whores,” favors staffers who sleep with him, hires young women on the basis of their looks, screams at employees, grabs their hair, describes graphic sex to them, and more. [A] Portfolio article talked about a half dozen male employees in their twenties who lived with Charney in his mansion, including one “loud, pear-shaped” PR apprentice who called the boss “Daddy.” New York Times Magazine consumer columnist Rob Walker wrote in his book that he was in the CEO’s office with one male and two female staffers while “Dov Charney was naked from the waist down”—but the punch line is that Charney was trying on prototypes of a new line of men’s underwear. He has certainly dated female staffers, at least three of them seriously. Most notoriously, writer Claudine Ko, in the June–July 2004 issue of Jane magazine, described a female employee presumably performing oral sex on Charney in a hotel room in front of Ko. A week afterward, the article continued, Ko was in a corporate apartment with Charney while the CEO masturbated and “we casually carry on our interview, discussing things like business models, hiring practices and the stupidity of focus groups.”
Nine female employees or ex-employees have filed lawsuits or legal complaints officially asserting sexual harassment. One was dropped, one was settled, and the rest were pending at the time of this book’s publication, one of them for years.
Nikky Yang—a former girlfriend of Charney’s who, according to her lawyer, Keith A. Fink of Los Angeles, helped found the clothing chain—charged that the company had created “a hostile work environment based on sex.” For instance, “while working naked Mr. Charney grabbed his penis and stated to Ms. Yang, ‘pet my dick.’ ” In another situation, Yang’s lawsuit accused Charney of “forcing Ms. Yang to sit and watch him shower to discuss business.” (The lawsuit includes nonsexual issues, as well, alleging that the CEO screamed at her, physically abused her, and cheated her out of pay.) Although Fink would not discuss a second client, Mary Nelson, whose case was still pending, published reports have mentioned claims that Charney made sexual advances and inappropriate comments to her and “wore a skimpy thong that barely covered his genitals.”
Yet more Fink clients have filed cases that include sexual angles almost as a side charge. In December 2008, Bernhard-Axel Ingo Brake, who was hired to set up American Apparel’s retail operations in Europe, sued the company and Charney mainly for issues relating to wrongful termination, breach of contract, failure to pay bonuses and commissions, and emotional distress. However, he also claimed that “American Apparel employs many women who have had sex with Mr. Charney. These women are commonly referred to as ‘Dov’s girls,’ his ‘girls,’ ‘lovers of Dov,’ or ‘F.O.D.’ (meaning ‘Friends of Dov’). ‘Dov’s girls’ receive preferential treatment from American Apparel due to their ‘special relationship’ with American Apparel’s largest shareholder.”
Brake said that Charney would send these women to “take over management tasks [in Europe] despite their lack of qualifications,” leading to “mismanagement of the retail store operations to the financial detriment of American Apparel and its shareholders in the hundreds of thousands of dollars”—and, not coincidentally, making it difficult for Brake to do his job. The lawsuit further alleged that Charney “purchased hundreds of sex videos using company funds,” saying they were for research, and “attempted to charge his payment for the services of a prostitute at his hotel to American Apparel.”
Things seemed to quiet down for a couple of years, until, within less than three weeks in March 2011, five more women filed charges. Most dramatically, a New York City woman claimed that when she was only eighteen, she’d been “held prisoner” in Charney’s apartment for several hours and threatened with being fired if she refused to perform sex acts over the next eight months. [Editor's Note: This case eventually led to Charney's ouster.]
The fact that some of the women say they felt forced to have sex with Charney in order to keep their jobs ties in with the controversy over using employees in ads. Even without any sex, there’s always an implicit coercion when your boss asks you to do a task.
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If the charges focus on Charney, it’s impossible to separate him from the company. He founded it, nearly destroyed it, revived it, saw the potential of form-fitting and no-logo shirts, set the sexually charged mood, and still is the public face and ultimate arbiter of everything from designs to hiring to advertising to immigration advocacy.
As Charney himself lays out the history on the corporate website, he essentially launched the business through the back window while he was a high school student at the elite Connecticut prep school Choate Rosemary Hall. He would buy up huge numbers of “iconic” Hanes T-shirts when stores like Kmart had supersales, then load them onto trains bound for his hometown of Montreal for resale, undercutting the official Canadian distributors. He carried the business concept over to his dorm room at Tufts University, where a partner—a local Hanes wholesaler—conceived the name American Apparel. (That partnership didn’t last long. By Charney’s own admission on the website, the wholesaler “thought I was a little difficult to deal with,” and Charney had to return the man’s $16,000 investment.)
During Charney’s sophomore year, American Apparel began manufacturing its own unique garments in the barn of a South Carolina farm. Charney eventually dropped out of Tufts and moved to South Carolina to devote himself to the burgeoning business full-time. Already, the firm was becoming known for its fitted designs, in contrast to the standard unisex cut. At that point it was a wholesaler, not a retail brand, often selling to companies that would imprint their own logos.
However, in 1996, Charney filed for bankruptcy. This is one portion of his history that the CEO does not discuss on the website—although he manages to find space to muse about his mother’s Syrian roots and his favorite bagels. Outsiders have variously attributed the problems to low-cost imports and Charney’s disorganization, both of which would become recurring themes in his career.
In any case, by 1997 he was in Los Angeles, starting over, thanks to the financial backing of either one or two Korean partners, depending on who’s telling the story. The brush with bankruptcy apparently didn’t sober him. Airily, Charney wrote on the website, “The Korean garment community was vigorously supportive of my work . . . . Many suppliers extended me credit even after I bounced so many checks on them and continuously failed to pay them on time.” Still, the company seemed to do well enough—at least for a while—that in 2003 Charney decided to open his own stores, rather than sell through middlemen.
That decision changed everything: it made the chain famous, but it also opened the door to the notorious advertising and probably overexpansion that are among the company’s worst problems today.
Sexual or not, Charney is clearly a charismatic and hands-on (no double entendre intended) manager. According to published reports, he selects some of the employees to pose in those sexy ads and may even photograph them himself. (For that matter, spokesman Ryan Holiday said that Charney’s two dogs have been featured in spots.) During my visit, employees were constantly checking his opinion on things like a marketing plan, and the Portfolio article describes him striding through downtown Los Angeles handing out job fliers. Jason Coulter, the erstwhile union organizer, said that when he and his labor colleagues met with Charney, “he tried to seduce us”—not literally, of course.
Thus, nine lawsuits. That may not seem like a lot, within the context of 10,000 employees and 285 stores. Yet there are larger companies with fewer, or none.
Read more about American Apparel, Dov Charney, and other falls from grace in Ethical Chic: The Inside Story of the Companies We Think We Love.
Award-winning journalist Fran Hawthorne has been a writer or editor at Fortune, BusinessWeek, Institutional Investor, and other publications. She is the author of three books on health care and investing, including Inside the FDA and Pension Dumping. She lives with her family in New York City.