American Apparel announced Monday that it has filed for Chapter 11 bankruptcy as the fashion retailer continued to fight with its former chief executive officer, Dov Charney, who was fired in 2014 after an alleged sexual harassment scandal, reported
USA Today.
American Apparel said it has already reached agreements with 95 percent of its creditors in connection with the company's restructuring plan. The company, which owns 230 stores in the United States and 17 countries with 8,500 employees, would stay in business during the restructuring, noted USA Today.
The restructuring plan would still have to be approved by a bankruptcy judge, noted the newspaper.
"This restructuring will enable American Apparel to become a stronger, more vibrant company," Paula Schneider, American Apparel's current chief executive officer, said in a
company statement on Monday.
"By improving our financial footing, we will be able to refocus our business efforts on the execution of our turnaround strategy as we look to create new and relevant products, launch new design and merchandising initiatives, invest in new stores, grow our e-commerce business, and create captivating new marketing campaigns that will help drive our business forward," Schneider continued.
In June, American Apparel founder Charney sued the company in Los Angeles County Superior Court, alleging it and hedge fund Standard General orchestrated his departure, reported the
Los Angeles Times then.
Charney is demanding that agreements that gave control of his American Apparel stock to Standard General and his removal from the company's board be rescinded along with $100 million in damages, stated the Los Angeles Times.
Forbes reported that the American Apparel board removed Charney as chief executive in June 2014 over allegations that he violated the company's sexual harassment policy along with misuse of corporate funds charges.
American Apparel spent $10.4 million in legal fees on its own internal investigation, according to its annual report, stated Forbes, and formally fired Charney in December.
Forbes wrote that Charney's attorney Keith Fink called the investigation "a complete sham" last year and the charges against his client "baseless."
Schneider said in the company statement that the bankruptcy decision was about the future and survival of the company.
"This process will ultimately benefit our employees, suppliers, customers and valued partners," Schneider said in the statement. "American Apparel is not only an iconic clothing brand but also the largest apparel manufacturer in North America, and we are taking this step to keep jobs in the U.S.A. and preserve the ideals for which the Company stands."
Related Stories:
© 2024 Newsmax. All rights reserved.