Dov Charney: The hustler and his American dream

Dov Charney heads American Apparel, an ethical clothing firm and rampant success story. He is, though, a self-confessed, unrepentant sex addict. Andrew Gumbel charts his rise and rise

To call Dov Charney an unconventional company chief executive would be a woeful understatement. He doesn't so much as own a business suit. When he isn't conducting business meetings in his underwear - which is surprisingly often - he exudes the sweaty, sleazy image of a 1970s lounge performer, or even a porn entrepreneur. (And that's a description he's been known to enjoy.) For years, he sported mutton chops, not unlike Daniel Day Lewis's character Bill The Butcher in Gangs of New York, although these days he's grown out a full beard to go along with his outsize goggle-shaped Seventies sunglasses. He's short, hairy and absolutely unapologetic about loving sex - any time, anywhere, with anybody he comes across, up to and including his own company employees.

If that doesn't sound like the most promising of profiles for the Next Big Thing in global business, consider: Charney is also the presiding genius at one of the fastest growing companies anywhere, the casual clothing firm American Apparel, which wears its commitment to ethical treatment of its employees on its sleeve and proves, even in an age of race-to-the-bottom globalisation and cheap Chinese imports, that consumption without guilt can be a major money-spinner.

American Apparel is both manufacturer and retailer, churning out its line of t-shirts, sweat shirts, underwear, swimwear, jackets, dresses, baby clothes and dog clothes at a bracingly unorthodox factory on the edge of Los Angeles' garment district, then selling them through a chain of 143 retail outlets that have spread, in very short order, to 11 countries.

In London, American Apparel has set up shop in three locations - Carnaby Street, Portobello Road and Curtain Road in Shoreditch - and has plans to spread to many more. This week, Charney cut a deal with a venture capital company called Endeavor Acquisition Corporation, essentially agreeing to be bought out in exchange for $244m (£123m) in fresh capital.

The allure of sweatshop-free casual clothing is clearly contagious. The clothes themselves cost barely more than standard t-shirts and sweats from Gap, but get produced under very different circumstances. Workers on the American Apparel shopfloor get paid anywhere from $8 an hour - well above the going rate in LA's dwindling garment district - to more than $18, depending on their productivity. They are given full health benefits, paid holidays - both rarities at the bottom end of the US labour market - and a whole gift-basket of perks from subsidised lunches and bus passes to free English language classes (most employees are Mexican immigrants) and on-site massages and exercise bicycles.

At least 20 per cent of the cotton used in the clothes is organic, and Charney has ambitions to increase that quota to 80 per cent.The company recycles its fabric scraps. It has also installed a 146-kilowatt solar electric system on its factory roof to cut down on fossil-fuel consumption and save at least 20 per cent on its electricity bill.

Because Charney makes his own clothes, and makes them close to his biggest retail markets, he has a unique ability to increase production on a new line that takes off faster than expected, or cut off production of something that isn't working. His designers have been known to scribble an idea on a napkin, fax it to headquarters, and then see it on sale at American Apparel stores within a matter of days.

At the age of 37, Charney has been named one of the 100 most powerful people in Los Angeles. He's been profiled in Time and The New Yorker, and has caught the attention of business leaders everywhere for his ability to buck the globalisation trend and understand some special something about the youth market in the United States and the rest of the developed capitalist world. John Ledecky, one of the lead investors in Endeavor Acquisition, commented this week: "In my 25-year career, I've never seen the velocity of growth that he had accomplished there."

Nobody, though, could accuse him of being anything less than a highly complicated guy. Does ethical treatment of his employees extend to asking his assistants to pleasure him sexually, as he has happily acknowledged doing? Does it extend to picking young women off the street and inviting them to participate in a wet t-shirt competition in a company apartment? Perhaps no episode in the colourful history of Dov Charney matches his encounter with Claudine Ko, a reporter for Jane magazine, who spent more than a month with him in 2004 and produced perhaps the most unorthodox corporate profile in journalism history.

During one of their interviews, Charney wiggled around his chair, pointed to his crotch, loosened his Pierre Cardin belt and asked: "Can I?" He then proceeded to masturbate in front of her, all the while carrying on a conversation about business models, hiring practices and the stupidity of focus groups. "Masturbation in front of women is underrated," he told Ko. "It's much easier on the woman. She gets to watch, it's a sensual experience that doesn't involve a man violating a woman, yet once the man has his release, it's over and you can talk to the guy."

In her article, Ko said she witnessed Charney masturbating at least eight times in the course of her research. She also saw him ask an assistant to perform oral sex on him. The assistant obliged, and Charney explained: "I'm not saying I want to screw all the girls at work ... but if I fall in love at work it's going to be beautiful and sexual." Ko didn't object to the peep show she was treated to - she kept thinking what great material it was for her article - and even professed afterwards to thinking fondly of Charney. "Dov Charney is a mad man and I like that," she said.

Not everybody feels quite the same way. Three former female employees have sued him for sexual harassment, two of whom settled for an undisclosed figure. The third, Mary Nelson, alleges she once attended a meeting in which Charney wore nothing but a sock over his penis. Her lawyer, Keith Fink, said of American Apparel: "The work environment there makes Animal House look like choir practice."

In his response to the accusations, Charney hasn't exactly been reassuring to anyone worried that he might one day get himself into really serious trouble. Like any other chief executive might, he has dismissed the plaintiffs as disgruntled former employees who produced substandard work. But he also said breezily in a deposition hearing: "I frequently drop my pants to show people my new product." His shamelessness is impressive, in its way. One of his publicity stunts was to offer himself in full-frontal nudity to the readers of Butt magazine, which caters to a counter-cultural gay crowd. In Vice magazine, he appeared with exposed buttocks and a t-shirt reading "Legalize LA".

Charney's attitude is that his libertarian attitude to sex is all part of his creativity, and part of the market he is trying to cultivate. The photographs that appear on American Apparel's website and in its print media advertising campaigns are deliberately not slick and professional but look like they have been snapped with a cheap instant camera - which they often have been, by Charney himself.

"Meet Melissa" reads the copy of one advertisement, featuring a picture of a young brunette wearing a see-through shirt in a shower. "She won an unofficial wet T-shirt contest held at the American Apparel apartment in Montreal." When it comes to provocation, Charney might be matching Oliviero Toscani and his infamous publicity shots for Benetton. When it comes to style, though, he seems to be taking his inspiration from amateur porn websites. Lurid sexuality is not only a feature of his company, it is in many ways the key selling point, which explains why numerous American Apparel stores have pin-ups from 1970s-era Penthouse and Oui magazines pinned to the wall next to the changing rooms.

What Charney's Jewish mother back in Montreal makes of all this is anybody's guess. Starting from his teenage years, Charney has always managed to combine what he calls his "Yiddish hustle" - his boundless entrepreneurial energy and appetite for the smallest details of his business - with his interest in non-committal sexual encounters. He first started making money by driving south of the border to the United States, buying up crateloads of Hanes t-shirts from discount stores - they were higher quality, better fitting t's than those then on offer in Canadian shops - and selling them at a premium.

When he first went into business, as a drop-out from Tufts University in Boston in the late 1990s, he took his prototype t-shirts into strip clubs to try them out on the different body types of the dancers. By the time he moved to Los Angeles, a couple of years later, he was focussed only on the wholesale end of the operation, selling to niche markets such as rock bands, museums, artists and designers.

American Apparel became a business phenomenon only after 2002, when Charney hired a savvy operations manager called Marty Bailey and turned his shopfloor into a streamlined, vertically integrated machine for churning out fashionable clothing on very short notice. The first store opened in 2003, and it's been a rollercoaster ever since.

American Apparel plans to double the number of its stores in the next three years, and investors seem to be in little doubt it can achieve that goal. On Tuesday, the day the deal with Endeavor was announced, Endeavor's stock climbed to its highest point since it began trading.

One has to wonder, though, at what point Charney will feel obliged to rein in some of his more eccentric behaviour. His attitude is that he won't. "We plan to continue to behave in a contrarian manner," he told The Los Angeles Times. "This creative environment is what got us to this point. We certainly aren't going to stop doing it now after we created a highly profitable company."