Yes, there’s been yet another volley in the legal battle at downtown L.A. apparel maker American Apparel Inc.
The company’s founder and ousted former chief executive Dov Charney has been sued by New York hedge fund Standard General, a firm Charney turned to last year when he was trying to boost his stake in the apparel company but that later supported his ouster.
The lawsuit, filed Monday, claims Charney has not fulfilled promises he made to Standard General. The issue stems from an agreement between the two that was made a year ago in which Charney handed over his voting rights to Standard General in exchange for a loan that helped him boost his ownership in the company. Standard General alleges Charney never surrendered the new shares he bought as promised.
Since then, Charney was suspended as chief executive then forced out in December after being accused of misconduct, including violations of sexual harassment policy and misuse of corporate funds.
Charney’s attorney Keith Fink said Standard General’s lawsuit is merely a “smoke screen” to distract from a suit Charney filed in June, just one of several suits that have been filed by Charney, the company and shareholders in recent months.
“Standard General hasn’t even answered the fraud allegations from the other lawsuit Mr. Charney brought, which includes claims of proxy fraud and fraudulent inducement,” Fink said.
Representatives for Standard General declined to comment.