Free

Reading between the lines at American Apparel…

images-2.jpegRetailer American Apparel (APP), which is usually described as being edgy and which since going public via a special purpose acquisition company in mid-December has fallen sharply, had more than a few sharp edges in the 10K it filed on Monday.

Controversial CEO Dov Charney is currently dealing with one lawsuit alleging sexual harassment and wrongful termination. According to the filing, the lawsuit has been stayed, but a potentially bigger problem is that the company that provides D&O insurance is saying it’s not obligated to cover the lawsuit because it alleges that American Apparel provided “false representations” when it took out the insurance policy. While the dispute with Navigators Insurance had been disclosed in the past, there’s greater details in the current filing.

The K also discloses three additional complaints with the EEOC and various state and local agencies, but provides few details to really assess the severity of the claims. For example, the filing notes that “Mr. Diorio claims that the Company unlawfully discriminated against him based upon his race, sex, gender, color and/or national origin” on Feb. 15 and gives a file number, but doesn’t say whether Diorio is an employee, a customer, or someone else. That’s also true for the two other new complaints: names and file numbers are provided, but not much else.

But it’s the last disclosure under legal proceedings that leaves us with even more questions: “On Feb. 4, 2008, the Company received a request from the Securities and Exchange Commission to voluntarily provide certain information for the period between the announcement and the closing of the acquisition.” That kind of sounds like an informal request for information, but it’s hard to be sure from the disclosure on what the SEC is looking for. In any event, it’s clearly another distraction for the company.