American Apparel Names New CEO, Officially Ousts Founder

American Apparel Inc has officially fired its founder and former Chief Executive Officer Dov Charney, months after it suspended him for misconduct, according to a news release Tuesday.

The retailer said Paula Schneider, currently president of ESP Group Ltd, which owns brands such as English Laundry, will become its chief executive on Jan. 5.

The announcement followed months of investigation into Charney's conduct at the company, which found that he had misused company funds and helped spread nude photos of a former employee. Charney has served as a consultant to American Apparel since his initial suspension on June 18.

A source familiar with the matter said the company attempted to keep Charney on board as a consultant for his marketing expertise, but the deal fell through within the last two weeks.

"We were assuming that it was going to be signed and sealed in a few days, and then we never heard from Dov again. It was very odd," the source said.

"I fully expect him to (sue)," the source added, while noting that money was not the reason the talks fell through.

American Apparel stock rose 5 percent to trade at 61 cents after the announcement.

Representatives for Charney had no immediate comment.

(Reporting by Jeffrey Dastin in New York; Additional reporting by Nadia Damouni; Editing by Lisa Shumaker)