American Apparel Exec Calls $250 Million Sex Harassment Suit 'Extortion'

March 9, 2011— -- American Apparel and its often-sued CEO Dov Charney have been hit with a $250 million suit by a teenage employee who claims Charney turned her into his sex slave, but the company is firing back by calling the young woman's suit "extortion."

Irene Morales, 20, claims that for eight months CEO Dov Charney, forced the former sales clerk into sex, sodomizing her just days after her 18th birthday and keeping her a sex "prisoner" for hours in his New York City apartment.

In a lawsuit filed Tuesday in New York, Morales, who began working for the clothing chain in 2007 when she was 17, claims Charney demanded Morales send him "sexually explicit photographs" of herself and told the high school student that he wanted to have sex with her as soon as she turned 18.

The suit alleges that soon after Morales' 18th birthday, Charney demanded she come to his apartment where he appeared at the door "wearing only underpants."

"He forced her to get down on her knees just inside the front door and perform [a sex act] upon him, then he dragged her into his bedroom, threw her on the bed, got on top of her and forced her to perform another [sex act]," according to the suit.

Morales claims in her lawsuit she was then "held prisoner in the apartment for several hours and forced to perform additional sexual acts upon Defendant Charney."

The harassment, Morales says, was not contained to Charney's home. At work the boss gave Morales a "sex toy and it was witnessed by fellow employees."

The woman's lawyer says the harassment continued for eight months in which she was "forced to… perform many more sex acts upon Defendant Charney with the clear understanding that failure to do so would result in the loss of her employment and failure to obtain advancement."

The woman claims the constant harassment drove her to verge of a nervous breakdown and she had to quit.

Another Suit for American Apparel

Morales never went to police to report the allegations, which if true would be tantamount to sexual harassment, rape and false imprisonment.

In a statement, American Apparel did not deny any of the allegations, but raised questions about Morales' motives and timing and accused the woman of attempting to extort the company.

According to American Apparel's lawyer, Morales "left the company without complaint and resigned with a letter of gratitude regarding her positive experience at the company."

More than a year later, the company says Morales violated a severance agreement in which she agreed to submit any complaints to confidential binding arbitration. The company said it is planning its own legal action.

"The company intends to file a formal complaint with the NY state bar seeking disciplinary action against Ms. Morales' lawyers who we believe are engaged in an illegal conspiracy to extort money from American Apparel. We are very confident that Ms. Morales' claims will be promptly referred by the court to confidential binding arbitration where her claims and the company's counter-claims will be resolved, we believe fully in favor of the company."

Neither Charney nor his company are strangers to controversy.

American Apparel has been criticized by women's groups since 1997 for its portrayal of scantily clad women, some of them barely of legal age and often depicted in suggestive poses.

Charney has been the subject of several sexual harassment claims and reports of lecherous behavior.

In 2008, Charney faced three separate sexual harassment cases. According to the Los Angeles Times, one was dismissed and the other two were combined and settled.

An earlier case from 2005, was settled for $1.5 million, according to the Los Angeles Times.

ABC News' Kirstin Buettner contibuted to this report