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11/12/2008
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American Apparel CEO Held Nude Staff Meetings, IT Worker Charges

A former tech staffer at the clothing retailer claims Dov Charney conducted business while naked and tried to cook the books.

Dov Charney, the controversial CEO of hip retailer American Apparel, held staff meetings while "completely naked" and "paraded in the workplace in his underwear," according to a sensational wrongful termination lawsuit filed last week by a former IT support worker at the company.

Ex-staffer Roberto Hernandez also charged that Charney tried to enlist his cooperation in a scheme to defraud investors by manipulating American Apparel's inventory records.

Hernandez, in court papers filed last week in Los Angeles County Superior Court, said he joined American Apparel in 1999 as a lowly accounts payable clerk but quickly rose to become an $82,000 per year IT worker responsible for handling a broad range of computer-related tasks.

But, Hernandez claimed, his career at the company was abruptly cut short in 2006 after he refused to participate in an alleged scheme to cook the books. Charney instructed Hernandez to electronically manipulate American Apparel's inventory records "in order to lure potential investors to put up capital in the hopes the inflated inventory would pass an audit by another investor," according to the lawsuit.

Hernandez said he was fired one week after refusing to cooperate.

Hernandez maintains that the scheme was just one of a string of misdeeds perpetrated by Charney. Among other things, Charney conducted business meetings at his home while naked, strutted through American Apparel's offices clad only in underwear, kept nude pictures of female employees on his computer, and brought workers to strip clubs.

Charney "subjected Mr. Hernandez and his co-workers to a hostile work environment based on sex," claimed Hernandez, who is seeking damages in excess of $50,000.

In a statement Wednesday, American Apparel denied the allegations and said it "will vigorously defend itself and its shareholders in this contemptible action."

The company described Hernandez as "a non-accounting employee in the information technology department who was terminated for legitimate reasons." American Apparel described Hernandez' charges as "fictional."

American Apparel on Monday reported that third-quarter net sales increased 45% year over year to $154.8 million, while net income, including stock compensation expenses, came in at $2.3 million.

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