Dov Charney, the founder of America Apparel and—until Thursday—its chairman, president, and CEO, was fired by the company's board after an internal investigation cited unspecified allegations of misconduct.
One of the new co-chairmen appointed to run the company and search for Charney's replacement is board member Allan Mayer. He told CNBC by phone that "The board was apprised of certain facts earlier this year," which led to the investigation. The results uncovered "misconduct which would do material damage to the company."
Mayer would not characterize the nature of the misconduct, or whether it was related to past allegations of sexual harassment. There have been numerous lawsuits filed against Charney accusing him of various misconduct. Some cases have been dismissed. None have gone to trial.
Mayer said, however, that the misconduct uncovered by the board had "nothing to do with the company's performance."
The termination of Charney could be considered a default on a credit agreement American Apparel has with Lion Capital, which invested $10 million in the company. Mayer said the company is talking with Lion, and he does not expect the firm to consider the firing a default. If it does, however, he said American Apparel has the money to pay off the debt.
Even so, American Apparel continues to lose money, though losses are narrowing. Mayer said Charney's departure will make it easier to attract new capital if needed.
"We are happy with the trajectory" of the company's turnaround, he said.
When asked if Chapter 11 was an option, he replied, "It is so remote I wouldn't even consider it a possibility."
Mayer has known Charney for years, and said many board members have an emotional attachment to American Apparel's volatile, passionate founder.
He said Charney "obviously saw things very differently" during Thursday's board meeting, but the long meeting was conducted professionally and calmly.
"He did not want to do anything to harm the company," Mayer said. However, if Charney, who is also American Apparel's largest shareholder, attempts to fight his termination, "We're prepared."
—By CNBC's Jane Wells