A technician inside one of Rackspace's data centers. (Photo: Rackspace)

A technician inside one of Rackspace's data centers. (Photo: Rackspace)

Jury Acquits Real Estate Developer Rackspace Accused of Fraud

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A jury has acquitted a Texas developer of all charges in a criminal lawsuit in which he was accused of swindling Rackspace and the city of Windcrest, Texas, of millions of dollars in a 2007 purchase of land and the former shopping mall that now serves as the hosting company’s headquarters.

Gary Cain, the developer, was faced with potentially spending the rest of his life in prison had he been convicted. Earlier this week, however, the jury in the three-week trial, which included testimony by Rackspace CEO Graham Weston, decided Cain was not guilty, San Antonio Express-News reported.

The defendant’s brother, former Windcrest city manager Ronnie Cain, has been accused of participation in the alleged embezzlement scheme. He is currently awaiting trial.

Gary Cain was accused of tricking Rackspace into paying $7 million more for the project to move headquarters to the site of the former Windsor Park Mall. His attorney argued that the case should have been a civil and not a criminal one.

Rackspace has an ongoing civil lawsuit against Cain and his partners, accusing them of stealing $2.8 million out of a $5 million city-operated and Rackspace-funded escrow created for infrastructure improvements at the former mall property. The company filed this lawsuit in 2009, starting what eventually became a tangled web of suits and countersuits involving the Cain brothers, Gary Cain’s partner Buddin Properties and the city of Windcrest.

In his witness testimony earlier this month, Weston said Gary Cain had refused to provide documents that detailed the nearly $26.9 million price of the property. “It looked like he was hiding something,” Weston said in court, according to Express-News.

Cain was facing multiple first-degree felony charges, a conviction for which could land him in prison for the rest of his life.

In 2007, Windcrest and Rackspace bought the property in question, Cain financing the acquisition and Rackspace reimbursing him. According to a state law enforcement affidavit, the $26.9 million price tag was $7 million more than the price documented in property deeds.

“They had basically ripped us off, and we were trying to get our money back,” Weston said.

Citing the same 2010 Texas Rangers affidavit, Express-News said Ronnie Cain, then city manager, also authorized a $2.8 million transfer from the infrastructure escrow to a bank account for which his brother had signatory authority.

There is a multitude of abandoned shopping malls around the country, some of them repurposed as office buildings and some even turned into data centers.

Rackspace recently agreed to establish another office building in a former mall in Texas. Austin Community College announced earlier this month that the company had agreed to move into the building that used to house Austin’s Highland Mall, which the college owns.

About the Author

San Francisco-based business and technology journalist. Editor in chief at Data Center Knowledge, covering the global data center industry.

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