Prime Data Centers Sued Over Alleged Pervasive Fraud to Strip Employees and Business Partners of Value Worth Hundreds of Millions

DALLAS--(BUSINESS WIRE)--Seven former employees of Dallas, Texas-based Prime Data Centers have filed companion lawsuits in Texas, California, and New York against the company as well as subsidiary Data Realty Holdings Corp. and CEO Nicholas Laag and CFO Ulrich Pelz.

The former employees allege that Laag and Pelz carried out a fraudulent scheme to strip Prime’s employees and business partners of valuable equity by diverting hundreds of millions of dollars, and control of the company, to themselves. The lawsuits include causes of action for fraud, misrepresentation, and racketeering in violation of the civil RICO statute. The three Dallas plaintiffs are seeking $185 million in damages.

In an undisclosed transaction, Laag and Pelz allegedly took a co-owner's interest outright. Without his knowledge, they moved a property he co-owned into a larger, investor-backed platform and used unfunded paper "commitments" to reduce his ownership to a small fraction of what it had been, then bought out the rest with money raised against the very asset he co-owned. The same transaction stripped several employees of promised equity by carving their agreements out of the deal, conduct now the subject of the lawsuits.

Laag and Pelz recruited dozens of employees with contractual equity incentives and then systematically reduced those obligations by fraudulently engineering valuations that rendered their equity worthless, while insiders and Prime marketed and sold that same value to outside investors at valuations in the billions. The plaintiffs were core members of the team who worked to help Prime grow 4,000% into a global data center platform currently valued at more than $6 billion.

The seven former employees claim the incentives, including equity, in their original contracts, entitle them to combined compensation in excess of $400 million.

Dallas-based Rogge Dunn of the Rogge Dunn Group, attorney for the Texas plaintiffs said “As Prime’s value skyrocketed, instead of honoring its contractual commitments so employees who were instrumental in its growth could benefit financially from their work, company ownership looked for ways to take from them what they earned and were owed. Company leadership purposefully targeted key employees, pressuring them to sign new--much less favorable--agreements.”

Also representing the plaintiffs are Doug Lipsky and Lipsky Lowe LLP.

The cases are Natalie Funcheon, Chris Sumter, and Jeremiah Collins v. Prime Data Centers, LLC, Data Realty Holdings Corp., Nicholas Laag and Ulrich Pelz, No. CC-26-06214-B in Dallas County Court at Law No. 2, and James Maxwell and Joseph Patito v. Prime Data Centers, LLC, Data Realty Holdings Corp., Nicholas Laag and Ulrich Pelz, 1:26-cv-04493 in the U.S. District Court for the Southern District of New York, and Jonathan Falker v. Nicholas Laag, Data Realty Holdings Corp. and Prime Data Centers, Case No. 26CV015678 in the Superior Court of California.

Rogge Dunn Group is well known for successfully trying high-profile business, financial, and employment disputes. Based in Dallas, the firm tries cases in state and federal courts in Texas and throughout the United States. Learn more about the firm at www.roggedunngroup.com.