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Restoration Hardware chairman and co-chief executive officer Gary Friedman has reportedly resigned over an inappropriate relationship with a 26-year old female employee, whose ex-boyfriend first alerted the furnishings retailer of the allegation.

The New York Times reports that an ex-boyfriend of the female employee told the company about the employee's relationship with Friedman, divorced for seven years. An investigation ensued, though there were questions about the allegations because the boyfriend had a criminal record.

The company's board of directors had formed a "special committee" and hired the law firm Weil, Gotshal & Manges for an inquiry about the alleged relationship, the newspaper reported.

Restoration Hardware and Weil, Gotshal & Manges did not immediately return a request for comment.

Friedman, 54, is reportedly still in a relationship with the employee, who has also left the company, according to people who spoke on the condition of anonymity, the Times reported.

News of Friedman's resignation comes amid major changes in the company.

Earlier this week the company reported they were creating a new company to develop apparel and accessories, Hierarchy, with Friedman as founder, chairman and CEO. Restoration Hardware's co-CEO Carlos Alberini would become the company's sole CEO and J. Michael Chu, a managing partner at private equity firm Catterton Partners Corp., would become its new chairman, the Wall Street Journal reported.

Last month, Reuters reported that the company, which was once public but is now owned by two private equity firms, is discussing an initial public offering later this year.

Friedman has been chairman and co-CEO since June 2010 and was CEO since March 2001. Previously, he worked for Williams-Sonoma and Gap Inc.

C-suite inter-company relationships have become less tolerated in recent years. In April, Best Buy CEO Brian Dunn quit amid questions about a relationship with a 29-year-old female employee. Former Hewlett-Packard chief Mark Hurd was forced out two years ago after it was revealed that he had a relati0nship with a female contractor for the firm.