In Bed With the Boss: Who's Really Under American Apparel's Sheets?

Last Updated Oct 8, 2010 6:40 PM EDT

The private equity group that currently controls American Apparel (APP) through a credit agreement appears to be in the process of installing adult supervision at the company: Its new president is Tom Casey, who just bailed as CFO of bankrupt video chain Blockbuster (BBI).

Casey will have his work cut out for him. To give you an idea of how immature CEO Dov Charney is, click to enlarge the image (right) of his latest ad which shows him in bed with two of his creative directors. The tagline: "In bed with the boss." Yes, that is what you think it is on the wall behind them. Remember, Charney is currently the subject of two pending sexual harassment lawsuit from former employees, according to AA's last 10-Q filing with the SEC. He has been accused several times of harassment previously. He's also appeared at least twice in his own ads apparently engaging in intimate acts with the models he employed (at right and below).

The Casey move comes after Lion Capital extended further credit to AA, which recently alerted investors it may not be able to generate enough cash to continue as a going concern. The press release announcing that credit extension was written as love-fest between Charney and Lion founder Lyndon Lea:
"Lion Capital has enormous admiration for both American Apparel and its founder, Dov Charney," said Lyndon Lea, Founder and Partner of Lion Capital. ... "We are particularly impressed by Dov's passion and energy, and have complete confidence in the American Apparel brand and its business model as an integrated manufacturer and retailer."
"We are grateful for this expression of continued support for American Apparel's mission by Lion Capital," said Dov Charney, Chairman, CEO and founder of American Apparel. "I am touched that Lion Capital is sensitive to the unique challenges that the company has faced in the past year. We look forward to continuing to work closely with Lyndon and Lion Capital over the next several years ..."
Note that although Casey formally reports to CEO Charney in today's release, the announcement was made with the Lion name in the first sentence. Lion and Charney "are working together" on bringing in new management and a new corporate strategy, it says. Translation: Charney is no longer in sole control of this company and Lion is the real entity that's in Charney's bed.

Given that the harassment suits could cost Charney and his company dearly -- imagine the kind of evidence about the workplace environment the plaintiffs would present to a jury just from AA's own advertising -- Casey's first task should be to cut off Charney's ad budget until he agrees to tone it down.

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