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SEC Probing Charney Firing

Nine months after American Apparel fired former chief executive and founder Dov Charney, the Securities and Exchange Commission is investigating the circumstances behind the ouster, according to a company filing.

The company noted in its 2014 annual report, released Wednesday, that the SEC informed the company last month it would be looking into matters arising from a company committee’s investigation into alleged misconduct by Charney.

The vague description of what prompted the investigation and exactly what is being investigated has led to speculation that the federal probe concerns company allegations that Charney had misused company funds. Charney denies all wrongdoing.

SEC investigations look into potential violations of federal securities law such as misrepresenting or omitting key securities information from SEC-required reports or manipulating securities prices.

Attorney Jason Gonzalez, partner in the downtown L.A. office of Nixon Peabody, regularly represents companies in government investigations, including those by the SEC. While not involved in American Apparel’s case, Gonzalez said the SEC will likely be investigating matters directly related to the company’s finances.

“What likely happened is that during the course leading up to his termination, someone came across something that gave them grounds to be concerned that their financial affairs weren’t in proper order,” Gonzalez said.

Company founders have been known to misuse company money, he added, speculating that the SEC’s probe into Charney and American Apparel could be related to improper expenditures. American Apparel’s board had accused Charney of using company money to pay the travel expenses of family members.

American Apparel wouldn’t comment about the investigation, saying it is private.

Editors note: A previous headline on this story incorrectly implied American Apparel was under investigation.

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