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American Apparel founder seeks $40m compensation for sexual harassment dismissal

Dov Charney, the founder and former chief executive of fashion chain American Apparel, is seeking $40m (£26.8m) in compensation after he was sacked for allegedly misusing funds and spreading nude photos of three women on the internet.

In 2011 Charney was also sued by a former store manager who claims she was "held prisoner in his apartment" and "forced to perform additional sex acts" on him.

Charney was initially suspended before being dismissed last year by a “suitability committee”.

However, he has always denied the allegations and is now claiming a breach of contract.

The Times reports that he is seeking $6m (£4m) in severance fees, $1.3m (£0.9m) for holiday pay, at least $10m (£6.7m) for “emotional distress”, and 13 million shares in American Apparel, currently valued at about $9.2m (£6.1m)

The filing was made as the Securities and Exchange Commission – which investigates the financial conduct of companies and executives – opened an investigation into “matters arising from the review” of the committee.

Keith Fink, from Charney’s law firm Fink & Steinberg Attorneys, said in an emailed response to newspaper that he was going to be “filing several additional lawsuits in the coming weeks”.

“We intend to bring a derivative action based on the sham of an investigation the suitability committee engaged in.”

Meanwhile, an American Apparel spokeswoman told The Times that Charney’s claims were “baseless”.