The founder of struggling US clothing giant American Apparel, Dov Charney, has been accused in a law suit filed in Brooklyn Supreme Court of holding a young staff member captive and forcing her to perform sex acts.
American Apparel and the controversial Charney, who is known for attending meetings in his underwear and using sexually suggestive advertising to promote his brand, is being sued by a former female staffer who is seeking $250 million in damages.
American Apparel has denied all claims and has alleged the former employee’s lawyers are attempting to “extort” money from the company.
“Upon her resignation, [the employee] acknowledged in writing that she had no pending claims against the company and signed a severance agreement which included a full release of claims and an agreement to submit any future claims to confidential binding arbitration,” American Apparel said in a statement.
“The company intends to file a formal complaint with the NY state bar seeking disciplinary action against [the employee’s] lawyers who we believe are engaged in an illegal conspiracy to extort money from American Apparel.”
The claim comes after a terrible period for the company. There were reports in mid-2010 the former darling of the US retail market could be facing bankruptcy as it battled slumping sales and a mountain of debt.
The company has battled to keep the faith of lenders after breaching loan covenants, and even a probe into the company’s use of immigrant workers.
In late February, the company signed a deal with its lenders whereby it must meet profit targets or risk defaulting on its loans.
The law suit claims that the young worker was 17 when she was hired as a sales associate at American Apparel in August 2007.
Soon after, it is alleged that Charney visited the retail location where she worked, obtained her contact information and started repeatedly calling her. When she turned 18, it is claimed that Charney invited her to his apartment and sexually assaulted her.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
