American Apparel boots CEO Dov Charney

American Apparel (APP) terminated CEO and founder Dov Charney "for cause" Tuesday and named veteran fashion executive Paula Schneider as the company's new top executive.

The California-based firm announced an internal investigation concluded that Charney — suspended by the board of directors in June for alleged misconduct — should not be reinstated as CEO, an officer or director.

The investigation focused in part on several lawsuits that accused Charney of sexual harassment. While his brash personality and championing of U.S. manufacturing won him headlines, the harassment cases and American Apparel's sexualized ads featuring young women brought Charney counterbalancing criticism that ultimately sparked a showdown with board members.

Charney had been serving as an American Apparel consultant during his suspension. That relationship was also terminated.

American Apparel said Schneider's appointment would take effect Jan. 5. She has previously served as president or senior officer of several retail and apparel firms, including Warnaco, Gores Group, BCBG Max Azria and Laundry by Shelli Segal, the company announced.

"We're pleased that what we set out to do last spring — namely, to ensure that American Apparel had the right leadership — has been accomplished," said Allan Mayer, the company board's co-chairman. "We are confident that Paula Schneider has the skills and background to lead the company to long-term success."

In a formal statement, Charney said he was "proud of what I created at American Apparel" and "confident that, as its largest shareholder, I will have a strong relationship with the company in the years ahead."

"Naturally, I am disappointed with the circumstances and my over 25 years of deep passion and commitment for American Apparel will always be the core DNA of the company," said Charney.

Shares of American Apparel closed up 3 cents at 58 cents in Tuesday trading. The shares were up an additional 3 cents in after-hours trading.