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Lawsuit Claims that Former American Apparel CFO Schemed to Get Dov Charney Fired

Another complaint from a former employee has landed in American Apparel's lap.
An American Apparel store. Photo: Andrew Burton/Getty Images

An American Apparel store. Photo: Andrew Burton/Getty Images

Just a few days after three former American Apparel employees sued the company, claiming that they weren't given sufficient notice before they were laid off, another lawsuit has landed on the company's doorstep. This time it's from a man named David Nisenbaum, who says that American Apparel wrongfully terminated him because he complained about religious discrimination from former CFO John Luttrell and reported cases of financial mismanagement on Luttrell's part.

According to the suit, Nisenbaum joined the company in November 2012 as its director of manufacturing accounting analysis and audit — basically it was his job to "help upgrade the accounting and finance department." In the course of his work, he discovered multiple instances in which Luttrell put American Apparel's finances in a bad position. Between 2012 and 2013, Luttrell undertook a distribution center project against then-CEO Dov Charney's wishes, which Nisenbaum says cost the company $30 to $40 million in direct and indirect losses; on another occasion he mismanaged a bond financing and didn't disclose the terms to Charney or the board until they were set in stone.

On top of that, the suit alleges that Luttrell made derogatory statements about Nisenbaum for being Jewish and that "on multiple occasions, when walking behind Mr. Nisenbaum, Mr. Luttrell would make mocking gestures, pretending that Mr. Nisenbaum smelled bad."

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In June 2014, Nisenbaum made a religious discrimination complaint to the company, followed by a report on Luttrell's financial practices. The following day, he says, he was told that his allegations of discrimination were "baseless" and was fired.

It's a damning and dramatic story, and it doesn't stop there. Nisenbaum believes that Charney was also fired "because Mr. Luttrell wanted to sell American Apparel such that he could retire and cover up his violations of Sarbanes Oxley [legislation protecting shareholders from fraudulent company practices] and fraud in running a publicly traded company." Luttrell wrote in a "secret presentation" to the audit committee that the solution for the company's financial problems was to fire Charney, who was indeed fired in June 2014. 

When asked for comment, a rep for American Apparel said, "Generally, we don’t comment on personnel matters, especially those that precede the current management team.”