Denver record company Vinyl Me, Please has ousted and charged its top executives for allegedly diverting corporate funds to its expensive pet project in RiNo.
Vinyl Me, Please was founded in 2012 and in the twelve years since has grown into a popular record of the month subscription service, with 20,000 subscribers today. CEO Cameron Schaefer and Chief Financial Officer Adam Block led the company in recent years.
But the company's board of directors fired them, along with Chief Strategy Officer Rich Kylberg, in March. And on Wednesday, all three were sued by the company they ran.
The cited reason for their ouster is a new 150,000-square-foot vinyl record production plant at 4201 N. Brighton Blvd. That factory, which started printing records this year, has been hyped since 2022 by national and local media, but also by Schaefer, Block and Kylberg.
“It's purely because we love Denver,” Schaefer said of the decision that year to press records in RiNo. “People may laugh at that, but it's true. There were certainly people urging us, “There are cheaper places you could build this.” But that wouldn't be much fun.”
Behind the closed doors of Vinyl Me, Please, the plant is not seen as such a great success.
“To date, the pressing plant has not demonstrated its ability to press vinyl records in a timely and professional manner,” according to the company's lawsuit in Denver District Court.
In 2020, as the pandemic squeezed global supply chains, VMP's suppliers placed limits on the number of vinyl records it could purchase. That's when Schaefer, Block and Kylberg “seized the order limit and the fear of possible further disruptions in VMP's supply chain as an opportunity they could leverage for their personal benefit,” the company now says.
The three executives decided to start a vinyl pressing plant that would supply records directly to Vinyl Me, Please. They submitted a proposal to the VMP board at the end of 2021.
According to VMP, the intention was for the plant to be independently owned and financed, apart from some minor expenses and VMP staff time. The seven-member board was split, 4-3, with Schaeffer casting the deciding vote, the company said.
Vinyl Me, Please accuses Schaefer, Block and Kylberg of violating that plan before it was even approved by spending $200,000 of company funds on equipment for the factory in mid-2021. They had also spent hundreds of operating hours at the plant by then, VMP claimed.
And when it came time to hire a manager for the plant, it was VMP who paid industry veteran Gary Salstrom's “substantial salary, benefits and bonuses,” the lawsuit alleges. The magazine 5280 reported this last year that Salstrom became an equity partner in VMP.
“Defendants failed to disclose to the board that they had allocated hundreds of thousands of dollars in VMP funds to pay the salary and bonuses for a VMP employee who worked almost exclusively for the press shop,” Schaefer, Block and Kylberg said.
It wasn't long before Vinyl Me, Please's top executives devoted most of their time to what was supposed to be an independent side project, convincing other VMP employees to do the same, the company said. “As a direct result of Defendants' commitment” to the plant, “VMP's operating results declined in 2023 and into 2024,” the company alleged.
Meanwhile, outside financing for the plant fell away, so VMP executives spent hundreds of thousands of dollars of corporate funds on equipment for it, “including a specialized sound system that was not necessary… but rather an amenity,” VMP said. They also allegedly spent hundreds of thousands of dollars on leases and hid it from the board.
In March 2022, two years before the plant was operational, VMP executives signed an agreement making VMP a customer of the plant at an initial cost of $1.5 million, the lawsuit alleged. They also sent out marketing materials “implying that the two entities” – VMP and the factory – “were one and the same, causing confusion among customers,” VMP said.
“When the press plant was still unable to print documents or fill orders in late 2023, the board began investigating the relationship and business transactions between the press plant and VMP,” the lawsuit said. Schaefer, Block and Kylberg “did not provide a frank or truthful explanation or explanation to the board,” so they were fired in March.
Vinyl Me, Please is suing the trio of ex-executives for breaching their fiduciary duty to the company. The attorneys are Chad Nitta and Shelby Morbach in Kutak Rock's Denver office. The company and its lawyers did not respond to interview requests this week.
Emails and phone calls to the listed numbers for Schaefer and Kylberg were also not answered or returned this week. Contact information for Block was not available.
VMP co-founder Matt Fiedler became interim CEO of the company last month, according to his LinkedIn profile, which states he previously served as CEO from 2012 to 2020.
According to the website, the company's plans cost $46 per month or $435 per year.
