Tattered Cover CEO will be paid $120K despite predecessor’s protests
Tattered Cover’s current CEO can be paid a salary of $120,000 this year, a U.S. Bankruptcy Court judge ruled Monday, despite the objections of its former CEO.
Kwame Spearman, who owns a minority stake in the company, led Tattered Cover between early 2021 and early 2023, when he stepped down following an aborted mayoral bid to focus on running for Denver school board, ultimately unsuccessfully.
His successor is Brad Dempsey, a bankruptcy attorney who took over soon before the company filed for Chapter 11 in October and has led it through the bankruptcy process. Tattered Cover’s board of directors wants him to stay on through 2024 in exchange for $120,000.
That salary had to be approved by a bankruptcy judge. Spearman objected to it.
“We have not seen any official plan for the reorganization of the business and there is concern that a compensation for Mr. Dempsey at $10,000 per month might be extraordinarily excessive,” Spearman told Bankruptcy Judge Michael Romero at a hearing Monday afternoon.
Tattered Cover was scheduled to submit its plan by Jan. 16 but asked for and received a one-month extension instead. Gabrielle Palmer, an attorney for the bookstore chain, said Monday that Tattered Cover will likely need another extension this week.
“If the plan shows merit that Mr. Dempsey should be making $120,000 annually, we’re all fine with this,” Spearman said, before again criticizing Dempsey for not crafting a plan.
“Moreover, I have not heard (about) the net income situation. I have heard that, allegedly, sales were slightly up from 2022, but as we’re all aware, sales are not the determinant, net income is the determinant. As a creditor, I think there is strong suspicion to believe that the business is actually in a worse financial situation under Mr. Dempsey’s leadership,” he added.
Palmer defended Dempsey’s tenure as CEO, noted that the company’s six-person board of directors wants him to stay on, and called his proposed salary “fair and reasonable.”
Tattered Cover is being propped up financially by a $1.3 million loan from Read Colorado LLC, a company formed by local philanthropists. That loan requires Dempsey to remain as CEO and states that Tattered Cover will be in default of the loan if he leaves the company.
“It doesn’t make sense to change from Brad Dempsey now or to not allow Brad Dempsey to be paid. We are at a critical time,” said Tim Swanson, a lawyer for Read Colorado.
“It can’t be lost that the lone objector to Mr. Dempsey’s continued employment is someone who is seeking to try to purchase the company,” Swanson said of Spearman.
Spearman countered that he hasn’t made a bid for the company but acknowledged he has requested Tattered Cover’s financial reports in order “to evaluate the terms of a potential offer” to buy it. At one point, he repeatedly used the word “we” to describe people who doubt “the viability of the (company’s) board of directors and Mr. Dempsey’s leadership.”
“Who’s ‘we?’” Romero asked. “You’re the only one who filed an objection, Mr. Spearman.”
“I have been in conversation with other individuals, including people who might want to be putting in bids to acquire the company,” Spearman told the judge.
“From the financial information that has been available, this is not a profitable business,” Spearman said of the internal reports that he has received, “and it is adding on increased debt (and) adding on another $10,000 a month for Mr. Dempsey when, quite frankly, we have no indication that net income from the business is going in the right direction.”
Romero took no position on whether Tattered Cover “is going forward or going south,” as he put it, but said he is “hesitant to interfere with the business judgment” of Tattered Cover’s board of directors. With that, he approved the $120,000 salary request for Dempsey.
“Let’s just see where this goes,” the judge said, and then adjourned the hearing.
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Tattered Cover’s current CEO can be paid a salary of $120,000 this year, a U.S. Bankruptcy Court judge ruled Monday, despite the objections of its former CEO.
Kwame Spearman, who owns a minority stake in the company, led Tattered Cover between early 2021 and early 2023, when he stepped down following an aborted mayoral bid to focus on running for Denver school board, ultimately unsuccessfully.
His successor is Brad Dempsey, a bankruptcy attorney who took over soon before the company filed for Chapter 11 in October and has led it through the bankruptcy process. Tattered Cover’s board of directors wants him to stay on through 2024 in exchange for $120,000.
That salary had to be approved by a bankruptcy judge. Spearman objected to it.
“We have not seen any official plan for the reorganization of the business and there is concern that a compensation for Mr. Dempsey at $10,000 per month might be extraordinarily excessive,” Spearman told Bankruptcy Judge Michael Romero at a hearing Monday afternoon.
Tattered Cover was scheduled to submit its plan by Jan. 16 but asked for and received a one-month extension instead. Gabrielle Palmer, an attorney for the bookstore chain, said Monday that Tattered Cover will likely need another extension this week.
“If the plan shows merit that Mr. Dempsey should be making $120,000 annually, we’re all fine with this,” Spearman said, before again criticizing Dempsey for not crafting a plan.
“Moreover, I have not heard (about) the net income situation. I have heard that, allegedly, sales were slightly up from 2022, but as we’re all aware, sales are not the determinant, net income is the determinant. As a creditor, I think there is strong suspicion to believe that the business is actually in a worse financial situation under Mr. Dempsey’s leadership,” he added.
Palmer defended Dempsey’s tenure as CEO, noted that the company’s six-person board of directors wants him to stay on, and called his proposed salary “fair and reasonable.”
Tattered Cover is being propped up financially by a $1.3 million loan from Read Colorado LLC, a company formed by local philanthropists. That loan requires Dempsey to remain as CEO and states that Tattered Cover will be in default of the loan if he leaves the company.
“It doesn’t make sense to change from Brad Dempsey now or to not allow Brad Dempsey to be paid. We are at a critical time,” said Tim Swanson, a lawyer for Read Colorado.
“It can’t be lost that the lone objector to Mr. Dempsey’s continued employment is someone who is seeking to try to purchase the company,” Swanson said of Spearman.
Spearman countered that he hasn’t made a bid for the company but acknowledged he has requested Tattered Cover’s financial reports in order “to evaluate the terms of a potential offer” to buy it. At one point, he repeatedly used the word “we” to describe people who doubt “the viability of the (company’s) board of directors and Mr. Dempsey’s leadership.”
“Who’s ‘we?’” Romero asked. “You’re the only one who filed an objection, Mr. Spearman.”
“I have been in conversation with other individuals, including people who might want to be putting in bids to acquire the company,” Spearman told the judge.
“From the financial information that has been available, this is not a profitable business,” Spearman said of the internal reports that he has received, “and it is adding on increased debt (and) adding on another $10,000 a month for Mr. Dempsey when, quite frankly, we have no indication that net income from the business is going in the right direction.”
Romero took no position on whether Tattered Cover “is going forward or going south,” as he put it, but said he is “hesitant to interfere with the business judgment” of Tattered Cover’s board of directors. With that, he approved the $120,000 salary request for Dempsey.
“Let’s just see where this goes,” the judge said, and then adjourned the hearing.
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