August 15, 2018


BY from

Sex, lawsuits, and the SEC! As the American Apparel saga continues to unfold, can retail vet Paula Schneider save the manufacturing giant before edginess drives it right over the edge?

The American Apparel factory in downtown Los Angeles is a massive building painted salmon pink-800,000 square feet sprawling over seven floors. In the lobby, there’s a neon silhouette of a woman bending over in a classic cheesecake pose. The freight elevator is wallpapered with photos of a blond Lolita in a leotard and a pink cotton button-down, her expression come-hither blasÌ©. On the second floor, Paula Schneider makes her way through rows of knitting machines and piles of fabrics, noting that the company-where she was installed as CEO in January following the departure of its famously libertine (some would call that description highly euphemistic) founder, Dov Charney-is the largest apparel manufacturer in North America. They make 900,000 garments per week.

Schneider alternates between saying “hello” and “hola” to passing employees. At 57, the self-described feminist and mom of two college-age daughters is tall and tan and blond and no-nonsense, both in her demeanor and in the simple white shirts, black pants, and red lipstick she favors. She is also impressively game. When Notorious BIG’s “Mo Money Mo Problems”-the one that samples Diana Ross singing “I’m Coming Out”-suddenly breaks the sound of whirring sewing machines, booming over the building wide intercom, Schneider doesn’t miss a beat. “Time to dance and stretch,” she announces, leading the way to a multi ethnic group of sewers who are halfheartedly stretching their legs at the once-per-shift 10-minute dance party. The company tradition predates her tenure, but Schneider follows along, kicking her long legs, maybe because a reporter is watching, or maybe because she’s trying to build morale. Or maybe she’s just a naturally enthusiastic person. One hopes so, given what she’s taken on: American Apparel, once a model of hip, forward-thinking ethical manufacturing that both outfitted and epitomized a generation, has arguably become the business world’s most well-documented soap opera, losing money and respect as lawsuits erupt, as Schneider puts it, “on a daily basis.”

A college dropout who once sold T-shirts from his parents’ basement, Dov Charney founded American Apparel in Los Angeles in 1997. It was, he said, an “industrial revolution”: cool, colorful superbasics made right in Los Angeles by workers paid well above minimum wage-“sweatshop free,” as the company slogan went-and marketed with a barrage of provocative imagery. “We hope to be the Microsoft of the shmatte business,” he told New York magazine in 2004, and indeed, American Apparel became a midsize brand with global recognition almost overnight. Fluorescent-lit, bright-white stores mushroomed-there are now 240 worldwide-from Manhattan to Santa Cruz, from Paris to Tel Aviv, peddling Easy Jeans (405,763 units sold to date at press time), Disco Pants (313,554), and High-Waist Jean Cuff Shorts (334,311) to the hipster masses.

Today, American Apparel has 5,400 industrial workers in the L.A. area, the highest paid in the world, they say, earning “as much as $18.50 per hour, or $36,000 per year” according to how much they produce. Plus there’s the on-site doctor’s office, weekly chair massages for all, a recycling program that makes yarn for their knits out of fabric scraps. From the get-go, the company rallied behind immigration reform with “Legalize LA” billboards calling for amnesty and, most recently, the Immigration Integration tee: Twenty percent of net proceeds go to foundations that work with illegal immigrants facing deportation.

Also from the get-go, Charney was hardly your typical CEO. But that wasn’t necessarily a negative to a generation of teens and twenty somethings who came of age in the era of political correctness: Here was a brand that was good, but not goody-goody; that sold basics, but wasn’t bland. It’s spelled out across one wall of the company HQ: “We’re not politically correct-but we have good ethics.” The company achieved instant notoriety with lo-fi, no-makeup, sexy-baby ads that borrowed from the aesthetic of Terry Richardson- they were mostly shot by Charney himself or his employees-and masterfully anticipated the advent of selfie culture: young, sexy girls with full bottoms and long, messy hair in thigh-high stockings and cotton tank tops, blowing bubbles at the camera; girls in sheer micromesh bodysuits caressing their ponytails; girls in cotton underpants, seated on a coffee table, breasts nonchalantly on display. The vibe was one outtake away from porn. (“It looks like they’re waiting for Liam Neeson in the bottom of a closet,” Amy Schumer joked on her show.) Casting calls for nonprofessional models drew teens lining up around city blocks. Groups of college students toured the factory like it was a chance to see Willy Wonka and his Oompa Loompas. And in a way, that’s what Charney was-a larger-than-life character often seen with a retro mus- tache and oversize glasses, known for spouting messianic diatribes on subjects ranging from the Berlin Wall to manifest destiny to getting naked.

In 2006, Charney sold the company to an investment firm for nearly $400 million, staying on as chief executive with the goal, the New York Times reported, of totaling 800 stores and competing with the likes of Abercrombie & Fitch and American Eagle Outfitters. Noting that Charney “is known for hiring employees, most of them women, on the spot during telephone calls or at parties,” the Timesdubbed him “the Hugh Hefner of retailing.”

Charney’s control over the look and feel of his empire was obsessive and intimate. (In 2010, Gawker would publish a leaked copy of an in-house memo dictating employees’ grooming habits: Liquid foundation was “prohibited”; full eyebrows “very much encouraged”; bangs, oddly enough, “not part of the direction we’re moving in.”) In the founder’s boundary-free universe, crossover was rampant: Shop girls modeled in the ads, and employees sometimes ended up his girlfriends. “I’m not saying I want to screw all the girls at work,” he told a reporter in 2004, “but if I fall in love at work, it’s going to be beautiful and sexual.”

But over the past decade, rumblings that the founder might be something far worse than a human resources nightmare grew too loud to ignore or laugh off. At least nine one-time female employees have filed suits alleging that Charney, among other things, asked them to simulate masturbation in front of him, commanded them to pose nude for photographs, and subjected them to “quid pro quo sexual harassment,” demanding sex for employment. None of these cases have gone to trial. One reason for that may be, according to one suit, that sometime after the first wave of lawsuits, American Apparel began requiring new hires to sign arbitration agreements, forgoing the right to a jury trial should any future conflict with the company arise (and forbidding them to discuss such disputes with the media).

Charney, who has publicly denied charges of sexual harassment, has all along maintained that the women in his world are playmates, not victims, and that they’re very much in on the fun. And he’s hardly secretive about his habits. In 2004, he famously masturbated in front of a writer from Jane magazine. And in a deposition for one suit, Charney stated, “There were months when I was in my underwear [at the office] all the time.” He also confirmed having worn nothing but a sock-and not on his foot-to a staff meeting held at his home.

Despite all of this, Paula Schneider’s primary concern, she says, is the simple fact that the company hasn’t turned a profit since 2009. Over the past five years, American Apparel has suffered $340 million in net losses (some due to legal fees), with stock prices sliding from $2.17 a share in 2013 to 55 cents at press time. In mid-May, the company reported first-quarter losses of $26 million. America’s biggest clothing manufacturer desperately needs a new narrative-if not a whole lot more-and the one it seems to have chosen for now is: Sensible, experienced, indisputably grown-up woman comes in and cleans up after boy-genius founder leaves in disgrace.

By June 2014, the board had had enough. A formal investigation into Charney’s behavior was launched, and the founder-who still retains the 43 percent stake he’s accumulated since the company went public in 2011-was suspended but kept on as a consultant. As such, he was involved in finding a new CEO. “Paula was on Dov’s list as someone he could quote unquote work with,” says board chairman Colleen Brown. Schneider met with Charney several times, an experience she describes as “…interesting.” (“Dov and I sat around talking about who’d play us in a movie. He’d say, ‘This is going to be a good part.’ ” Charney told Schneider that Adrian Grenier had expressed interest in depicting him. For the record, she wants either Diane Lane or Rene Russo-“somebody with a smaller butt”-to play her.)

Then this past December, court records show, the board issued Charney a termination letter, citing “overlapping sexual liaisons with numerous current and former American Apparel employees and models,” verbal and physical assaults to employees, and “efforts to delete, remove, hide or destroy evidence” of his misconduct. He was out and Schneider was officially named CEO.

Brown says Schneider won her over during a three-hour interview. “We had some feisty conversations about what needed to be done. I liked her resilience, that she wasn’t a prima donna,” Brown says. “We didn’t want a giant charismatic figure CEO-we had one of those already. We needed a practical, no-nonsense person. The fact that she was a woman was just the icing on the cake.”

Schneider grew up in Millbrae, a suburb of 20,000 near the San Francisco airport. Her dad was a fire chief, and her two older brothers had the very ’70s distinction of being ranked the numbers one and two Frisbee players in the world. She’d sling discs with them during Golden State Warriors basketball halftime shows (she claims she’s no longer good at the game), got voted Best Legs in high school, and went to California State UniversityÌ¢âÂÛÏChico, a legendary party school, where she majored in costume design for theater.

After graduating in the early ’80s, she stayed in Chico to get her teaching credentials and worked at a friend’s boutique selling prairie skirts and halter tops. She started buying for the boutique and realized she had a knack for it. So, in her mid-twenties, she made her way to L.A. and opened a wholesale showroom, Take Two, with $5,000 in savings; among the up-and-coming lines she represented was the nascent BCBG, which made sheer baby-doll dresses almost identical to the ones in American Apparel stores now. Schneider spent the next two decades working her way up the ranks-as president of sales at BCBG, then president of Laundry by Shelli Segal, and, starting in 2006, president of the then ailing Warnaco Group, the world’s largest swimwear manufacturer, which owns Speedo and produces swimwear and lingerie for Calvin Klein, Olga, and Warner’s. Schneider drove up the company’s direct operating profit by 25 percent, earning a rep as a turnaround whiz. “She’s a leader teams love to follow,” says Lana Todorovich, then Warnaco’s senior vice president, who describes her former boss as a “selfless” captain: “She doesn’t want to be the sole woman at the top; she likes to see her protÌ©gÌ©s succeed.”

Schneider showed up on her first day at American Apparel in jeans, ready to get her hands dirty. For a dollars-and-cents exec who sees her mission first and foremost as saving the bottom line, that meant revising the budget line by line, staffing up the planning department that coordinates the factory, changing the sale markdown signs so stores didn’t look like they were going out of business, and reorganizing the company top to bottom so that 40 people were no longer directly reporting to the top boss. She is “closing under performing stores as necessary”- three so far-but has plans to open shops in new markets. (She has her eye on Puerto Rico and Queens, New York.)

None of which is the reason starting the job felt “like I’d been shot out of a cannon.” Of course Schneider knew about the company drama; what she wasn’t prepared for was the press’s perpetual interest. “I’ve run prominent companies, but there hasn’t been controversy. You run them; they do well; it’s just business,” she says. “You know I had my face on a picket sign? I thought, ‘Oh, at least they used a nicely Photoshopped picture.'” That sign was calling out a rumored $350,000 performance bonus, which she’ll receive pending the results of her first year (and which she says is in shares and options and is actually “worth far less than that”), at a time when many factory employees were faced with a reduction in hours.

In her first week on the job, Schneider says she got a congratulatory call from Martha Stewart, whom she’d never met before. She also got a letter from the anti-porn organization Morality in Media (recently renamed the National Center on Sexual Exploitation), informing her that American Apparel’s hyper sexual ads had earned the company a spot on the organization’s “Dirty Dozen” list of “top contributors to sexual exploitation”: “I just handed it to my attorney with a note that said, ‘Great-I’m happy to be on the list,'” she says. If the response sounds flippant, that may be why Schneider was a Charney-approved candidate-as the current guardian of the American Apparel DNA, she has every intention of keeping things (profitably) risquÌ©. “I’m sorry if you’re offended by a girl wearing a thong, but we do sell thongs, so we have to show what it looks like,” she says.

That said, some of the ads have “stepped over the line,” she says. “I’ve always been a big supporter of I’d say 90 percent of what the advertising and marketing does.” As for that other 10 percent, she lists the offenders in the slightly impatient tone of someone who’s been asked the same question countless times: spread-eagle photos with tag lines like “open for business” or “back to school”-“where what looks like a schoolgirl has her crotch showing because she’s bending over a car”-or the ones where “it almost looks like she’s masturbating.” Schneider shakes her head. “I don’t think you need to go there-that’s not impressive.”

What seems to bother her most is a protest that happened last year in Stockholm, when a local blogger decried the company’s anything-but-neutral approach to marketing supposedly gender-neutral items, noting that the same plaid shirt shown buttoned up on a male model is advertised open and strategically mussed on women who “look like they’ve just had sex.” “In Sweden, we’ve had our windows broken in the store because American Apparel is considered a rape culture,” Schneider says. That kind of mentality, in Sweden and elsewhere, “is a problem.”

To help solve it, Schneider has a new senior vice president of marketing, Cynthia Erland, and a new mandate: to “mend and correct any previous negative perceptions of the brand,” Erland says. “It’s pro-female now, about empowering women, using real women.” Thus, for Valentine’s Day, the company hired photographer Danielle Levitt to produce a video called “It’s #Panty time!,” featuring the full rainbow of humanity as seen through the American Apparel lens: transgender people, plus-size ladies, voguers, older women, and young girls in thongs twerking. In April, they ran a photo collage of female employees in Vice that read, “In recognition of International Women’s Day we’d like to highlight the women that make up 55% of the American Apparel global workforce, and an even higher percentage of our leadership and executive roles. The ladies who make it happen everyday [sic].” In her office, Schneider pulls up the company’s most recent video, Hands, which focuses on each of the 86 hands that make one pair of jeans.

Not everyone is on board with the cleanup effort. There was a minor uproar in the press in March, when women’s nipples and pubic hair were conspicuously erased from images on the website. So be it, says Erland: “We’re trying to sell product, not body parts.” But Schneider takes a more laissez-faire approach. “First of all, who cares? I don’t know how much it adds to have pubic hair, but I know that there are…challenges with having it,” she says. “And nipples…I don’t care. They can come back; it doesn’t matter to me.”

For now, she’s looking into new ways to attract attention. Over coffee the morning after our factory tour, she muses, “I’d love to get Bruce Jenner to model for us”-this was just before the debut of Caitlyn-“I think it’d be spectacular because, you know, that highlights his cause, and he is 65. I think it would be really interesting.”

Stay tuned on that one. In the meantime, Schneider is attempting to give the wagging tongues something novel to talk about: the clothes. With new hires on board such as Joseph Pickman, formerly men’s design director at Band of Outsiders, the company is releasing a cohesive collection for the first time this fall. Samples include a minimalist goatskin leather moto jacket, retailing under $500, and other pointedly grown- up pieces, including a midi skirt, a trench, and wide-leg pants, all in a color palette heavy on rusts and greens. Of course, there will still be plaid skirts that look straight out of Clueless and metallic bodysuits that will do well at Halloween. (Halloween, Schneider says, is American Apparel’s Christmas.)

Mood boards in Schneider’s office illustrate the three primary types they envision buying these items. There’s the Classic Girl (“We like to bake, stalk boys on Instagram, and take selfies :)”); the Party Girl (“I’m dreaming of the day I will host amazing dinner parties at my own place, where my friends and I will dance till the morning light”); and the Classic Woman (“I’m leaving for the Catskills with the girls for the weekend, Catherine booked this amazing Airbnb with a private river, beautiful garden and outdoor fire pit. My Etsy store is surprisingly doing well!! I have to run, my man is picking me up for dinner and we are trying this new Japanese sake bar”).

Schneider jokes that she already has a title in mind for her postÌ¢âÂÛÏAmerican Apparel memoir: You Can’t Make This Up. “The Wolf of Wall Street has nothing on this,” she says. One thing is certain: She’ll have plenty of material to work with.

Since December, Charney has sued American Apparel and Colleen Brown for defamation to the tune of $20 million; he’s also launched a defamation suit for $30 million against Standard General, the investment company that helped him buy his shares. And with the help of Charney’s lawyer, Keith Fink, a dozen labor board complaints have been filed on behalf of former factory workers alleging the company blocked them from unionizing-claims that American Apparel says Charney cooked up to aid his campaign to be reinstated to the board of directors.

In his efforts to that end, Charney has been anything but subtle-which has led American Apparel to file a breach of contract suit that lists trespassing on company property, meddling with conference calls, and threatening employees who don’t support the notion of his return with dismissal when he’s reinstated, among other allegations. In June, after Charney reportedly assembled a secret meeting to convince 200 staffers to rally behind his return, he was slapped with a gag order preventing him from publicly disparaging company execs and employees.

Still brewing: an ongoing investigation by the SEC into possible securities violations during Charney’s tenure; two suits filed by shareholders alleging the company failed to “prevent a sexually hostile and discriminatory work environment”; and, of course, Charney himself. In May, Fink told the Wall Street Journal: “Does Mr. Charney want to take back the company? You bet.”

When I visited American Apparel in late spring, the founder was still around. Not just in the photos on the wall of the factory or in his name etched on the awards in the lobby, but literally around. “Most days you’ll see him right outside,” Schneider said, gesturing from her office window to the parking lot and the street beyond. “He tries to talk to people. He can’t come in the building-he has his own agenda. All I’m trying to do is take care of the family and the kids, you know, and move this forward. Honestly, I have so much work to do that I can’t be bothered with all the noise.” So how does she tune it out? She smiles and laughs. “I just lower the curtains.”

Ì¢âÂÛ_Ì¢âÂÛ_This article originally appeared in the August 2015 issue of Ì¢âÂÛ_ELLE.ÊÊÊ

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