Dov Charney gets caught with his legal strategy exposed *

American Apparel founder and Silver Lake resident Dov Charney does not like to lose – even if victory, or at least the appearance of it, costs his company $1.3 million.

The Wall Street Journal reported that the richest man on the Eastside struck a secret deal early this year to settle a sexual harassment lawsuit filed by a former employee, Mary Nelson. American Apparel would pay her $1.3 million to settle the case but only if she agreed to keep quiet about the payment and then go through a legal arbitration hearing, which had been designed to come out with a ruling in Charney’s favor. The company, according to court documents, had even prepared a press release in advance declaring in part the ruling brought “clarity to the role of the First Amendment in the American workplace.”

Nelson and her attorney pulled out of the deal at the last minute and the $1.3 million was never paid. Yet, American Apparel, which says all this was Nelson’s lawyer idea, wanted to force the former employee through a second arbitration proceeding over her failure to appear at the first arbitration. An appeals court reviewing the matter didn’t like the original agreement, saying the goal seemed to be the “issuing a press release for the purpose of misleading journalists and the public.”

* Update: American Apparel spokesman Ryan Holiday sent the following company statement elaborating on the arbitration:

“It wasn’t American Apparel’s idea to stage [the] arbitration hearing. The idea was proposed by Mary Nelson’s lawyer, Kevin Fink when his client admitted the night before trial that she had never been subjected to any sexual harassment. Since we were not prepared to settle the case without a public admission from Ms. Nelson that her accusations were completely untrue, we agreed to his plan and a settlement to include a portion of his legal fees.”

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