Dov Charney is one of the most outrageous entrepreneurs that we’ve ever profiled here at YoungEntrepreneur.com. The founder of American Apparel has earned praise for his promotion of fair wage practices and keeping manufacturing jobs in America.

He has also been the subject of four sexual harassment lawsuits and injects all of his advertisements with sexual themes. He was the subject of our Entrepreneur Profile section in March, “Be A Contrarian - Dov Charney“, and I wanted to continue the story today by going into how Dov got his start.

“America doesn’t need another faceless, institutional apparel company,” says American Apparel founder Dov Charney. “They need an apparel company that gets it and does it right.”

When Charney was in prep school, he began bootlegging garbage bags of K-Mart t-shirts from the U.S. back to his native Canada. Today, Charney heads American Apparel, the brand-free, sweatshop-free, made-in-America clothing chain he founded in 1997 that is taking the world by storm. Charney was named Ernst & Young’s 2004 Entrepreneur of the Year and one of Details magazine’s 50 most powerful people under 42. American Apparel is now the largest t-shirt manufacturer in the U.S., but Charney’s mission goes beyond creating cool clothes.

Charney was born on January 31, 1969 in Montreal, Canada to Jewish Canadian parents. A self-described “hyperactive” kid, Charney says, “I think I was just born overcharged…I was such a crazy kid in elementary school I was almost kicked out.”

In an attempt to control his behaviour, Charney’s parents sent him away to Wallingford, Connecticut, where he attended the prestigious prep school Choate Rosemary Hall. But Charney’s focus was on anything but school. Instead, he wanted to get in on what he saw as a money-making venture. “My friends were selling these great bootleg t-shirts in front of the Forum,” he says. “I was going to prep school in the States at the time and the t-shirts there were a bit different, better for the silk-screening process. So I started buying t-shirts at K-mart and bringing them to Canada in garbage bags on the train.”

Charney’s new business was flourishing, that is until he was arrested in front of his school. “They took me down to Station 10, which doesn’t exist anymore, and after a couple of hours of me yelling, ‘Monsieur, monsieur!’ they let me out and gave me back my cash and my shirts,” recalls Charney. “So what did I do? Headed straight for the Cock ‘n Bull to try and unload the rest of them.”

It was in that local pub that Charney met a Brooklyn native by the name of Bernie. Bernie placed a large order for t-shirts with Charney, who began to ramp up his business. The deal went sour, however, with Bernie going out of business and Charney losing almost $100,000. “I was barely 18,” he recalls. “So that was the beginning and I guess because I lost money I felt compelled to keep hustling.”

Charney dropped out of Tufts University in his senior year and moved to Columbia, South Carolina to begin anew. In 1989, thanks to a $10,000 loan from his father, he created another t-shirt company. But as his competition began to outsource their operations and imported clothes started to flood the market at cheaper prices, Charney found himself out of business. He was forced to declare bankruptcy in 1996.

But Charney was not ready to give up on his dreams just yet. He hired Marty Bailey, an industry veteran who had worked with the likes of Fruit of the Loom, and through a standard Chapter 11 reorganization tried to bring his company back to life.

Charney’s dreams of running a clothing company crashed in the mid-1990s, along with much of the industry. Did he waste his father’s $10,000 loan, he wondered. Was his move to South Carolina pointless? Charney wanted to make sure that his venture down south was not in vain.

After filing for bankruptcy, Charney recognized that he could not revitalize his company all on his own. He needed someone who had experience, someone who had been in the industry for some time and knew what it would take to reorganize the company and make it profitable. Charney found that person in Marty Bailey.

“I called up a guy I trust and asked, ‘Who’s the best out there at organizing a factory?’” says Charney. “He said Marty. So I called him on a Saturday and said, ‘Dude, my name’s Dov and I need help.’ He started Monday; that’s the way I operate.”

With over 20 years experience in the garment industry, Bailey came on board and immediately began to reconfigure Charney’s factory. He dramatically improved its efficiency by organizing the sewing team into groups of eight to ten people, each of whom was assigned a different task to perform to create a single garment. “Team manufacturing,” he called it.

Charney’s first design was the Classic Girl line and despite being dismissed by the likes of Haines and Fruit of the Loom, it proved a success. With that, he decided to move his business to Los Angeles, California, where he began a new business model, something Charney calls a “hyper capitalist-socialist fusion.” Today’s American Apparel was born.

Initially, the company restricted its operations to manufacturing t-shirts for designers, rock bands, corporate customers and the like. Because Charney’s shirts could hold silkscreen designs well, and they fit better than his competitors, they started becoming successful. Added to that was the fact that all of his products were produced right there in his L.A. factory. That meant that not only were they high quality, but he could capture the latest trends and create a fast turnaround. A t-shirt could go from being a concept to being in consumers’ hands in less than one week.

Because of the high quality of Charney’s clothes, he was able to charge more for them than his competitors with their Chinese imports. His t-shirts went for an average of $4 each, more than four times that of his competitors. Slowly, Charney’s customers began to increase their orders and he used the higher revenues to reinvest back into the business.

Today, American Apparel operates 155 stores in 11 different countries. The company continues to sell simple cotton clothing aimed at the market Charney calls “contemporary metropolitan adults.” It has expanded its product line from t-shirts to include skirts, bathing suits, jackets and more. However, wholesale of black and white t-shits continues to dominate, making up nearly half of all sales.

Although it is still only a fraction of the size of the likes of The Gap, American Apparel has proven to be one of the fastest-growing companies in the industry, opening 90 new stores in under two years. Indeed, Charney plans to double the number of stores over the next three years. “It’s sickening money, man,” says Charney. “We’re minting money.”

Last year, a venture capital firm by the name of Endeavor Acquisition Corporation bought out American Apparel for $244 million in new capital, and is keeping Charney on as CEO.

Now, as the single largest clothing manufacturer in the U.S. with over 5,000 employees, Charney says his concept is simple: “It’s t-shirts that look good, t-shirts that feel good, and t-shirts that are made in a non-exploitative setting.”