American Apparel Eyed By SEC Over "Almost Bankrupt" Emails

(MoneyWatch)  American Apparel "almost went bankrupt" before Xmas according to internal emails allegedly stolen from CEO Dov Charney's porn-based advertising/clothing empire.

Now the SEC is eyeing the company, according to the New York Post, based on the emails.

Back on Jan. 15, BNET noted that American Apparel gave Q4 sales guidance of a 10 percent uptick in revenues and a 3 percent sales gain in December alone -- during a period when most other retailers saw painful sales losses. To defy a worldwide crash in consumer confidence was an astonishing achievement in the history of retail -- but that's what AA reported to the SEC, so it must be true.

BNET also suggested that "although American Apparel is growing fast, it doesn't make that much money." In addition, BNET noted its traditional skepticism of companies -- like AA -- that don't put their cashflow statements in their financial statement press releases. The company was actually $5 million cash-flow negative in Q3, according to its cashflow statements, buried with the SEC.

Gawker reports the content of the emails that are currently being considered by the SEC. This email is AA CFO Adrian Kowalewski explaining to AA pr man Ryan Holiday why he has been unresponsive to press requests for comment:

>----- Original Message ----- >From: Adrian Kowalewski >To: Ryan Holiday >Cc: Candace Keene >Sent: Wed Dec 24 13:33:04 2008 >Subject: Re: Solution > > >1. We almost went bankrupt last Friday. I'm sorry but I was busy with that >for the last several weeks. >2. I've been sick and occupied with other company matters since Friday >because we're hardly out of the woods on #1. >3. It's the holiday. > >If you want to handle these questions and it's only 15 minutes then please >go ahead.

Naturally, the SEC is interested in why a company claiming a 10 percent Q4 sales gain is also on the verge of bankruptcy. BNET readers should check out our previous coverage of why porn-based advertising is not a sound business model for a clothing retailer for details. The company told Reuters it has not been contacted by the SEC. "As far as we know we're not aware of any SEC investigation or even inquiry," AA said.

AA's Q4 results -- due in March, based on last year's reportng -- should make extremely interesting reading.