NEW YORK, United States — An American Apparel Inc. investor, Bigger Capital Fund, says the company hasn’t revealed enough information about the saga surrounding the ouster of founder Dov Charney and is demanding to see documents.
There has been “systematic failure to provide full disclosure of material information,” Bigger Capital said in a letter to American Apparel that was obtained by Bloomberg News. The lack of communication by the board may have been a breach of fiduciary duties, the investor said. Bigger Capital said it owns about 2 million shares, which would make it the retailer’s sixth-largest holder.
Bigger Capital requested to see documents under a section of corporate law in Delaware, where American Apparel is incorporated, that gives shareholders the right to obtain information. American Apparel and Bigger Capital declined to comment.
The retail chain has been in turmoil since June, when the board suspended Charney — with the intention to fire him — citing allegations that he violated the sexual-harassment policy and misused corporate funds. While Charney’s lawyer has called the allegations “baseless,” the board completed his termination this week. American Apparel, based in Los Angeles, also named retail veteran Paula Schneider as its next chief executive officer.
Adding to the intrigue: American Apparel board recently received a takeover bid, according to people familiar with the situation. Irving Place Capital, a New York-based private-equity firm, has made an offer of $1.30 to $1.40 a share that would include bringing Charney back to the company in some capacity, one of the people said.
One of Bigger Capital’s main complaints is that the board didn’t disclose it was considering removing Charney as CEO before shareholders voted for directors on June 18. After the meeting, the board announced Charney had been ousted.
Separately, American Apparel said today that Schneider will be paid a base salary of $600,000. The 56-year-old will be eligible for an incentive award of $300,000 to $450,000, and a bonus of $100,000 when she delivers an operational plan for 2015.
By: Nick Turner; editors: Nick Turner and John Lear.