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Am. Apparel Hit With Lawsuit

(Filed Under Fashion News). American Apparel, Inc. financial troubles have officially become a legal matter. On August 25 the Law Offices of Howard G. Smith in Pennsylvania announced that it had filed a lawsuit against the company on behalf of those who purchased American Apparel’s common stock between December 20, 2006 and August 17, 2010. The lawsuit was filed in the United States District Court for the Central District of California.

According to the lawsuit, American Apparel, along with some of its executives, violated federal laws by misleading investors to believe that the company was more profitable than it actually was by failing to disclose that many of its workers were illegal immigrants. The lawsuit also claims that the company announced in July 2008 that United States Immigration officials were investigating the company for hiring illegal workers, but continued to mislead investors on the impact this matter would have on its profitability. As previously reported in BODY and announced by American Apparel, last October the company fired approximately 1,800 workers at its Los Angeles garment factory after the government found unresolved irregularities in their identity documents.

The lawsuit also holds the company accountable for recent drops in its stock. “On August 17, 2010, the company reported a huge loss on its second quarter earnings report stating that the loss was as a result of ‘reduced labor efficiency,’ which the company defined as having to hire and train 1,600 inexperienced legal workers to replace its illegal workforce, but which also probably means having to pay the greater costs associated with having a legal workforce,” the Law Offices of Howard G. Smith said. “The company also announced, for the first time, that as a result of its workforce problems it was in jeopardy of going out of business. On this news, shares of the company’s stock plummeted.”

The firm is inviting those who purchased this stock between December 20, 2006 and August 17, 2010 to join the lawsuit.

This lawsuit came on the heels of American Apparel’s announcement last week that it had received a letter from the New York Stock Exchange stating that the company’s failure to file its 10-Q form on time is a violation of its listing agreement. The company is now in danger of being de-listed.

American Apparel said that was unable to complete the 10-Q-form because of a previously announced change in its independent accounting firm. “[Our] newly appointed auditors need sufficient time to complete their review procedures for the change in the company’s quarter ended June 30, 2010,” American Apparel said, adding that it hopes to file the 10-Q by November 15, but cannot guarantee it.

For further information, contact the Law Offices of Howard G. Smith by calling (215) 638-4847.

more Fashion News >>

Published 08-30-2010 by Amanda Torres Price

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