Record scratch: Vinyl Me, Please fires and sues CEO, CFO over RiNo plant

The Denver file firm Vinyl Me, Please has ousted its high executives and sued them for allegedly funneling firm funds to their pricy pet undertaking in RiNo.

Vinyl Me, Please was based in 2012 and has turn out to be a well-liked record-of-the-month subscription service within the dozen years since, with 20,000 subscribers at present, it stated. CEO Cameron Schaefer and Chief Monetary Officer Adam Block led the corporate lately.

However the firm’s board fired them, together with Chief Technique Officer Wealthy Kylberg, in March. And on Wednesday, all three have been sued by the corporate they led.

The said trigger for his or her ouster is a brand new 14,000-square-foot vinyl file manufacturing plant at 4201 N. Brighton Blvd. That plant, which began urgent data this yr, has been hyped by nationwide and native media, in addition to Schaefer, Block and Kylberg, since 2022.

“It’s purely as a result of we love Denver,” Schaefer stated that yr of the choice to press data in RiNo. “Individuals may chuckle at that, however it’s actually true. We undoubtedly had individuals pushing us like, ‘There are cheaper locations you might construct this.’ However that wouldn’t be as enjoyable.”

Behind the closed doorways of Vinyl Me, Please, the plant shouldn’t be seen as such a enjoyable success.

“Thus far, the urgent plant has not demonstrated the flexibility to press vinyl data in a well timed or skilled method,” in response to the corporate’s lawsuit in Denver District Court docket.

In 2020, because the pandemic pinched international provide chains, VMP’s suppliers positioned limits on the variety of vinyl data it might purchase. That’s when Schaefer, Block and Kylberg “seized on the order cap and the worry of potential additional disruptions in VMP’s provide chain as a chance that they may exploit for his or her private profit,” the corporate says now.

The three executives determined to begin a vinyl urgent plant that may provide data to Vinyl Me, Please straight. They got here earlier than VMP’s board with a proposal in late 2021.

In VMP’s recollection, the plan was for the manufacturing facility to be independently owned and independently funded, save for some minor expenditures and VMP employees time. The seven-person board was divided, 4-3, with Schaeffer casting the deciding aye vote, the corporate stated.

Vinyl Me, Please accuses Schaefer, Block and Kylberg of violating that plan earlier than it was even accepted, by spending $200,000 in firm funds on tools for the plant in mid-2021. They’d additionally spent tons of of firm hours on the plant by then, VMP alleged.

And when it got here time to rent a supervisor for the plant, it was VMP that paid the “substantial wage, advantages and bonuses” of business veteran Gary Salstrom, the lawsuit alleges. 5280 journal reported final yr that Salstrom was made an fairness associate in VMP.

“Defendants didn’t open up to the board that that they had directed tons of of hundreds of {dollars} of VMP cash to pay the wage and bonuses for a VMP worker that labored virtually completely for the urgent plant,” the lawsuit stated Schaefer, Block and Kylberg.

Earlier than lengthy, Vinyl Me, Please’s high executives have been spending a majority of their time on what was purported to be an impartial facet undertaking, and convincing different VMP staff to do the identical, in response to the corporate. “As a direct results of defendants’ devotion” to the plant, “VMP’s working outcomes declined all through 2023 and into 2024,” it alleged.

In the meantime, outdoors funding for the manufacturing facility fell by way of, so VMP’s executives spent tons of of hundreds of {dollars} of firm funds on tools for it, “together with a specialised sound system that was not vital…however was relatively an amenity,” VMP stated. They allegedly spent tons of of hundreds of {dollars} on leases too, and hid that from the board.

In March 2022, two years earlier than the manufacturing facility was useful, VMP’s executives signed an settlement that made VMP a buyer of the plant, at an upfront value of $1.5 million, the lawsuit alleged. Additionally they despatched out advertising and marketing supplies “implying the 2 entities” — VMP and the manufacturing facility — “have been one and the identical, creating confusion amongst prospects,” VMP stated.

“When, by late 2023, the urgent plant was nonetheless not capable of press data or fulfill orders, the board started to analyze the connection and enterprise dealings between the urgent plant and VMP,” in response to the lawsuit. Schaefer, Block and Kylberg “didn’t present a candid or truthful accounting or rationalization to the board,” in order that they have been fired in March.

Vinyl Me, Please is suing the trio of ex-execs for breaching their fiduciary responsibility to the corporate. Its legal professionals are Chad Nitta and Shelby Morbach within the Denver workplace of Kutak Rock. The corporate and its attorneys didn’t reply to interview requests this week.