Judge allows RICO allegations to proceed in law suit against Peters & Freedman

June 20, 2003

By AHRC News Services
Copyright ahrc.com

Judge Luis R. Vargas in a ruling on April 18, 2003 has allowed a racketeering charge to go forward against the San Diego law firm of Peters and Freedman and another lawyer, Carlos Sosa.

This charge - potentially the most serious against these lawyers - is part of a lawsuit filed by Melissa Colburn against her homeowner association, Villas at Eastlake Shores, and the above lawyers. The case number is GIS 11535 in the South Bay Judicial District of San Diego County. She alleges in her lawsuit that her home was improperly foreclosed on without her knowledge for $5,150.15.

The suit alleges that it was sold to Carlos Sosa, and that the law firm of Peters and Freedman was the "trustee" on the sale. The suit alleges that at least 4 other foreclosure sales were handled in the same manner - Sosa buying, Peters and Freedman being the trustee.

Judge Vargas cited the provisions of the RICO statute (18 U.S.C. Section 1962). The RICO statute was originally implemented to tackle organized crime. Judge Vargas stated that it is unlawful under the RICO act to:

(1) use income derived from a pattern of racketeering activity to acquire an interest in or to establish or operate an enterprise engaged in or affecting interstate commerce;

(2) acquire or maintain an interest in such an enterprise through a pattern of rackeering activity;

(3) conduct or participate in the conducting of such an enterprise through a pattern of racketeering activity;

(4) conspire to do any of the foregoing.

Judge Vargas found that the plaintiff's complaint contained:

"allegations that Defendants engaged in multiple unlawful and fraudulent acts for their financial gain in connection with foreclosure sales of real property, that such acts could arguably give rise to disciplinary action by virtue of Defendants' status as California attorneys - -". The judge stated that he found "these allegations to be sufficiently specific to sustain a claim of RICO violations at this stage of the proceedings."

The homeowner association and its management company, Merit Property Management, have also sued Peters and Freedman for indemnification.

The name of Peters and Freedman is very familiar to many homeowners in Southern California homeowner associations. Elderly homeowners in Desert Crest Homeowner Association have been fighting Peters and Freedman for several years over efforts by the owner of an adjacent golf course to impose mandatory membership fees on them. Many homeowners have questioned the tactics of the law firm.

The Desert Crest retirement development did not have mandatory dues. It has no common area and the Davis Stirling Act did not apply to them. Some of the residents decided to form a voluntary association. Years later a new owner moved in, took control as board president and hired Peters & Freedman to change the CCRs and require manadatory dues payable to the adjacent golf course owner. Under the new CCRs the golf course owner would receive $521,000 a year.

The board president and his wife then went to work for the golf course owner reportedly earning $70,000 a year. Peters & Freedman also went to work for them as the collection lawyers . They filed several foreclosure lawsuits against the seniors but so far the judges have always ruled in favor of the seniors. Peters & Freedman have filed another appeal on one of the cases. A lawyer reviewing their brief said that Peters & Freedman have blantantly mistated several facts that could mislead the judges.

David Peters, a principal in the law firm, has had additional legal troubles. He sold the Palm Springs home of a New York lawyer to Carlos Sosa without the owner's knowledge. A federal judge in New York wrote to him forbidding him to appear in his court room without being represented by a lawyer. The judge accused David Peters of lying. Other lawyers who were apprised of the letter described it as being "unusual and significant". Government agencies in San Diego fined him $97,000 for illegally running a waste line from his Rancho Sante Fe home and polluting public waterways.

The Colburn case is only at the pleading stage, but some homeowners have voiced the opinion that the noose is beginning to tighten around the law firm of Peters and Freedman.