American Apparel Subpoenaed Over Accounting Issue

Retailer American Apparel is famous for its hip clothes that are made in downtown Los Angeles by workers who are paid a livable wage. American Apparel's accounts have resigned, and the company has received a subpoena from prosecutors.

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The popular clothing chain American Apparel is known for its Made in USA T-shirts. But as NPR's Anthony Brooks reports, it's also in deep trouble, and says it may not be able to stay in business.

ANTHONY BROOKS: When more and more clothes are being made overseas, where labor is cheap, American Apparel made a name for itself producing clothes in its Los Angeles factory. The company is known for its bright T-shirts, leggings, and other stylish basics. It's also known for its suggestive advertising.

(Soundbite of song, "Modern World")

THE MODERN LOVERS (Rock band): (Singing) Well, there's sex in the sunny day.

BROOKS: This commercial shows two young women in a tangle of bare limbs, dressing in the back of a car, where they slip into pink tights and short dresses. It's an image that appeals to many younger shoppers, and it helped American Apparel expand quickly in just a few years, to 279 stores in 20 countries.

Mr. DOV CHARNEY (CEO, American Apparel): It's the fastest retail roll-out in American history.

BROOKS: This is Dov Charney, American Apparel's controversial CEO, describing his company three years ago to CBS.

Mr. CHARNEY: America doesn't need another faceless, institutional apparel company. They need an apparel company that gets it and does it right.

BROOKS: But since then, a lot has gone wrong. Last year, the company laid off 1,500 workers after immigration authorities found many of them were in the country illegally. That led to staffing shortages, higher costs, millions of dollars in losses, and forced the company to shut down some stores.

American Apparel did not respond to phone and email requests from NPR for a comment. But a statement posted yesterday on its website says sales slumped by 16 percent in this years second quarter. The company says it might default on its loans. And if that happens, it might run out of cash. Meanwhile, the value of its stock has been cut in half, and the U.S. attorney in New York is investigating its finances, after the companys accounting firm quit.

Anthony Brooks, NPR News.

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