A Sonoma County jury Friday awarded $12.2 million in punitive damages to members of a Petaluma ranching family who sold land to help create Tolay Lake Regional Park and later lost their share in a shady real estate deal.
The award to Edward and Cathleen Cardoza came on top of an earlier $6.1 million verdict against defendant David H. Reed, the owner of a Santa Rosa high-tech optical firm formerly known as RPM OptoElectronics Inc.
Jurors found Reed intentionally defrauded the Cardozas when he sold them commercial property on Corby Avenue with a promise to remain as one of several tenants. Instead, Reed moved out after three months, eliminating the Cardozas’ investment income and forcing them to sell the buildings at a loss.
The Cardozas’ lawyer, Joseph Piasta, told jurors that Reed misled the unsophisticated, elderly couple in order to steal their inheritance. He urged the panel to send a message that fraudulent business practices won’t be tolerated.
“Mr. Reed knew they were weak,” Piasta said in his closing argument. “Mr. Reed knew they were vulnerable. (Yet) he took advantage of them.”
Reed, 54, who represented himself after firing his lawyer Friday at the start of closing arguments, denied he ever tried to swindle the Cardozas. He called the allegations “fantasy” and said he always carried through with his promises.
“I’m going to tell you I’m not a crook,” he said to the jury. “I never stole anything.”
But jurors who sat through the four-month trial and the punitive damages phase disagreed. A Santa Rosa woman on the panel said Reed came off as insincere and egotistical from the beginning.
“He was unbelievable from the start,” said the woman, who identified herself only as Becky.
The Cardozas were part of a longtime ranching family who in 2005 sold about 1,700 acres near Lakeville Highway to the county’s Open Space District for $18 million.
Edward and Cathleen Cardoza were forced to immediately invest their share to defer the payment of capital gains taxes, their lawyer said.
They looked at several properties before settling on Reed’s Santa Rosa buildings, which they bought for about $4.7 million. The deal included an agreement in which Reed and other tenants would fulfill the terms of a 10-year lease, providing the Cardozas about $30,000 a month in income, Piasta said.
But Reed reneged on the deal. And he and his real estate agent, Kevin Gonsalves of Leading Edge Properties, conspired to inflate the value of the buildings by raising rents before the close of the sale, the Cardozas alleged.
With their tenants gone, the Cardozas were forced to sell the property at a loss for $1.2 million, Piasta said.
Cathleen Cardoza cried Friday and shook hands with jurors after the verdict for punitive damages was read.
“They heard it all,” the woman said before leaving the courtroom.
The jury ordered Reed to pay $6.1 million and the company he owns to pay an additional $6.1 million.
But it was unclear if there is any money to collect. A forensic accountant said Reed is worth about $2.5 million. Reed, who once ran international business deals, said he’s now unemployed and living in a “300-square-foot granny unit” on the side of a garage.