A few months ago, a private equity firm called Irving Place Capital offered to buy American Apparel for $1.40 per share. Which was odd, given that the stock was trading for less than half that price at the time, although it became less odd when it emerged that Irving Place Capital was Dov Charney’s latest ally in his battle to regain control of the company he sort of ran and sexually harassed into the ground. And now, even less odd still, since it appears that the offer was less a serious bid to take over a sinking company than part of Charney’s cunning legal strategy to sue his way back into power with the cunning legal argument: Standard General, the hedge fund that took control of Charney’s shares in AA promising to look into maybe letting Charney be CEO again before it decided, “No. That is an even worse idea than paying $1.40 per share for this P.O.S.,” is just running AA into the ground so that it can make a killing in bankruptcy.
Standard General has “positioned itself to make enormous profits should American Apparel fall into bankruptcy,” according to the complaint, which is filed by a former employee and friend of Charney’s, Eliana Gil Rodriguez. The hedge fund is an unsecured creditor and equity holder, according to regulatory filings, two classes that are often wiped out in bankruptcies.
Like the previous three other complaints — also filed by people close to Charney — it alleges proxy fraud against the previous board, in which shareholders were duped into re-electing three of five directors who suspended and then fired Charney in December.