American Apparel shareholders class action lawsuit filed (immigration, hiring practices)

American Apparel is being sued in a class action brought on behalf of shareholders due to their allegedly not disclosing how their habit of employing illegal aliens could get them into trouble. In July 2009 their were raided by ICE, who found that one-third of their workforce might be illegal aliens. A couple of months later they laid off one-quarter of their workers. And, throughout it all, they've been "protected" by local leaders who don't see any problems with them employing illegal aliens. American Apparel went as far as hiring the Mexican government-linked Peter Schey to represent them.

From the Barroway Topaz Kessler Meltzer & Check, LLP press release (link):

The Complaint charges American Apparel and certain of its officers and directors with violations of the Securities Exchange Act of 1934. American Apparel describes itself as a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel based in downtown Los Angeles, California. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that they had made "diligent efforts" to comply with labor and employment regulations, when in fact they had not done so; (2) that they failed to disclose to investors, and made false statements regarding facts surrounding the Company's illegal hiring practices and its effect on the Company's operating costs and margins; (3) that they failed to disclose or indicate that the Company lacked adequate internal and financial controls; (4) that they failed to disclose that, as a result of the foregoing, the Company's financial statements were materially false and misleading at all relevant times; and (5) that they failed to disclose that, as a result of the foregoing, their statements regarding the Company's prospects were false and misleading at all relevant times... ...In July 2009, it was revealed that American Apparel was being investigated by United States Immigration and Customs Enforcement ("ICE") regarding the Company's compliance with U.S. immigration laws. Despite the concerns this raised, defendants continuously assured investors that they were making "diligent efforts" to comply with all employment and labor regulations, and that further, the investigation would not have a material impact on the Company's financial results or earnings.