American Apparel CEO Dov Charney's termination letter reveals reason behind dismissal

American Apparel's Dov Charney speaks at the LA Fashion Awards at the Orpheum Theatre on October 21, 2005 in Los Angeles, California. (Photo by Stephen Shugerman/Getty Images)

In the unfolding saga of American Apparel CEO Dov Charney’s suspension and expected dismissal, Buzzfeed has released the official termination letter. The letter was allegedly leaked by an anonymous source attempting to prove that Charney’s suspension was not based on sexual misconduct but due instead to financial issues.

According to the anonymous source who leaked the full termination letter to Buzzfeed exclusively via anonymous social media site Whisper, the American Apparel board that was handpicked by Charney knew of his misconduct but did nothing about it until his actions began affecting the company financially.

Charney's termination letter outlines three major reasons for his termination.

1. Breach of Fiduciary Duty: According to the letter, Charney violated his fiduciary obligations, citing a specific incident where the 45-year-old former CEO was aware of an American Apparel employee posting and “maintaining false, defamatory and impersonating blog posts about former American Apparel employees.” Charney, the letter reads, allowed this behavior because he benefitted from it personally. As a result of this and other, unmentioned violations, the company became susceptible to “a significant punitive damages award.”

Charney is also accused of issuing significant, unauthorized severance packages designed to hush employees who could hold him liable for his unsavory actions.

2. Violation of Company Policy: The letter held that Charney failed to abide by and enforce American Apparel company policy, accusing him of harassment, discrimination and assault. He failed to attend mandatory sexual harassment training and also interrupted employee sexual harassment training.

“Furthermore,” the letter reads, “on several occasions you have made derogatory and disparaging remarks directed at persons of certain ethnicities or related to their gender, sexual orientation or religious persuasions that are discriminatory and offensive….”

3. Misuse of Corporate Assets: Highlighted by the anonymous source as the true reason for Charney’s termination, the final piece of evidence against Charney maintains that he damaged the company financially with his previously stated misconduct, resulting in a tainted financial and business reputation.

“In terms of finances,” the letter reads, “your conduct has required the Company to incur significant and unwarranted expenses, including expenses associated with litigation and defense costs, significant settlement payments, substantial severance packages that were granted to employees, and unwarranted business expenses that you incurred for personal reasons.”

According to the letter, insurance retention for American Apparel has nearly tripled from $350,000 to $1 million. In addition to significant severance payments, Charney also granted raises allegedly to protect himself from the possible consequences of his misconduct.

Prior to his termination, the board offered Charney a multimillion dollar severance pay if he agreed to resign reports the Los Angeles Times. The board presented this offer at noon on Wednesday and gave Charney until 9 p.m. to make his decision. He did not accept the deal and was issued the termination letter on Wednesday, June 18.

The next day, Charney’s lawyer Patricia Glaser stated in a letter to the American Apparel board that Charney was terminated illegally and planned to take legal action if he was not reinstated. American Apparel co-Chairman Allan Mayer dismissed the allegation.

“We’re very confident,” Mayer told the Los Angeles Times, “that we are on very firm legal ground.”

American Apparel is a retail company known for racy ads, controversial merchandising, colorful basics and vintage-style clothing for men and women.