American Apparel's former chief financial officer allegedly schemed to oust founder Dov Charney last year as part of a plan to sell the company, a former senior manager claimed in a new lawsuit against the company this week.
The complaint, filed in Los Angeles on Monday, accuses former chief financial officer John Luttrell of mismanaging a bond financing and a new distribution center and claims that American Apparel's board supported Luttrell despite calls from Charney to remove the executive. The lawsuit was filed by David Nisenbaum, who says he was hired as director of manufacturing accounting analysis and audit at American Apparel in late 2012 and fired in June 2014. A lawyer for Charney, Keith Fink, is also representing Nisenbaum.
The complaint is the latest in a string of litigation that Fink promised to bring against American Apparel last month, and contains some cinematic allegations regarding the circumstances that led to Charney's suspension and official termination last year. For one, the suit claims that Luttrell gave a secret presentation to American Apparel's audit committee in February 2014, writing in a memorandum that the solution to the company's financial struggles was to "[ r ]emove CEO and replace with an interim replacement. Put the Company up for sale. Engage Peter Solomon." (Peter J. Solomon is a financial advisory firm that the retailer hired after Charney was served with a termination letter in June.)
Nisenbaum was fired before Standard General, the hedge fund that is now overseeing American Apparel, stepped in. Luttrell, who became interim CEO in addition to CFO after Charney received his initial termination letter in June, left the company in September.
"Generally, we don't comment on personnel matters, especially those that precede the current management team," an American Apparel spokesperson said in an email to BuzzFeed News. Luttrell didn't immediately respond to requests for comment.
Nisenbaum's lawsuit is the "tip of the iceberg of suits that are coming down the pike against the company" from long-term employees who say they have been fired "for no reason and in retaliation for complaining of harassment, discrimination and wage issues," Fink told BuzzFeed News in an email.
Broadly, the lawsuit represents a new chapter in efforts by Charney and former employees to oppose American Apparel's new management team and contest their narrative of the events that led to Charney's dismissal. Former and current employees have waged email campaigns on Charney's behalf, leaked sensitive nonpublic internal sales data to BuzzFeed News, and worked to organize the company's manufacturing workers, claiming that Standard General and its appointees are Wall Street interlopers who don't know how to run American Apparel or preserve its culture and ethos.
American Apparel's new management has shot back, saying it's treating workers better than ever, despite recent layoffs, and that the company was a loss-making operation run without order and discipline under Charney. It has dismissed long-time employees in connection with an overhaul of its creative department, as it works to create a less sexualized public image.
The lawsuit from Nisenbaum includes a string of wild accusations against the company.
Nisenbaum claims he was fired as retaliation for complaining about "discrimination due to his religious beliefs and/or for his complaints of accounting and cost control issues and his efforts to bring the company to a position of improved compliance with Sarbanes Oxley and improved profitability." He says those complaints were removed from his personnel file, and blames Luttrell for excessive costs tied to an April 2013 bond financing and a new distribution center, a customs overpayment issue in Germany, and "embezzlement rings involving several hundred thousand dollars of vendor kickbacks."
The complaint reads: "Mr. Charney was similarly fired because Mr. Luttrell wanted to sell American Apparel such that he could retire and cover up his violations of Sarbanes Oxley and fraud in running a publicly traded company."
After the alleged presentation to the audit committee, Nisenbaum claims that Luttrell "proceeded to dilute Mr. Charney's ownership in the company rather than engage in more debt and equity financing to resolve the deficiencies he created, and eventually completed his scheme by firing Mr. Charney on June 18, 2014."