American Apparel CEO Dov Charney was sacked last week

American Apparel CEO Dov Charney was sacked last week

American Apparel has dismissed accusations by the lawyer of ousted CEO Dov Charney that he was fired illegally, as the executive gears up for a legal battle against the apparel retailer.

Charney, the colourful American Apparel founder, was fired by the company's board of directors last week amid ongoing investigations into misconduct allegations.

He was the driving force behind American Apparel's early success, built on controversial but headline-grabbing advertising and an insistence on making its clothing in the US.

But Charney recently came under increasing pressure thanks to the company's poor performance and mounting debts, as well as a series of sexual harassment lawsuits from former employees - which he has publicly dismissed.

Last month the company reported net losses of US$5.5m and a fall in sales at its stores of 7%.

Following his dismissal last week, Charney has since sought legal advice, and a letter to the American Apparel board's counsel from lawyer Patricia Glaser accuses the directors of illegally firing its chief executive. It also claims Charney plans to pursue legal action against the Los Angeles based retailer unless he is reinstated.

The accusations, however, have been dismissed by American Apparel co-chairman Allan Mayer.

In a statement, he said: "It is exactly what we would expect to get from Dov's attorney in a situation like this. We continue to believe we did the right thing for the right reasons. We are very confident we are on very strong legal ground."

Charney is being replaced as chairman by Allan Mayer and David Danziger, and CFO John Luttrell will take over as interim CEO.

Despite some longer-term concerns about American Apparel's ability to sustain its brand with CEO Dov Charney no longer at the helm, analysts last week said they believe investors will view the news of his departure positively.