Until last week, American Apparel (APP) had a very, very expensive insurance risk on its hands.

That is, until the company, known for producing t-shirts and other inexpensive basics at its factory in downtown Los Angeles, fired its founder and CEO, Dov Charney, over claims of misconduct and mismanagement.

“[Y]ou have willfully and continuously failed to substantially perform your job duties… and you have engaged in willful misconduct that has materially injured the financial condition and business reputation of the Company,” American Apparel board members wrote in their termination letter to Charney, released this week. “[Y]ou were aware of, but took no steps to prevent an employee under your direct supervision and control from creating and maintaining false, defamatory and impersonating blog posts about former American Apparel employees.”

But Charney's borderline antics – generally centered around sexual harassment claims and inappropriate behavior in the workplace – have been well documented. Why fire him now?

Turns out, he just got to be too expensive to keep around.

According to the letter, American Apparel was paying $1 million a year for its employment practices liability insurance policy — a premium the company called “well outside of industry standards.” That figure had originally ranged around $350,000 a year.

Not surprisingly, Charney has said he plans to sue over the termination.

Special Reports /

You'll Never Believe How Much American Apparel's Ousted CEO was Costing the Company

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