JL,
Usually one person flagging an ad is not an effective objective as there needs to be more than one person to flag a post before it is taken off Craigslist. From what I know (not a lot, admittedly) it takes several in an organized manner to have a post deleted. However, for housing ads, I beleive it can take as little as 2-3 people from different IP addresses to flag a post and get it deleted.
I would have that manager email the administrator at This email address is being protected from spambots. You need JavaScript enabled to view it. and file a complaint. I don't know how receptive the admins are on CL, but at least it is worth a try. Then I would check the ads and make sure they are following the posting rules/terms of service. I know I inadvertantly posted a web address on an ad and it was flagged right away. Kind of embarrassing mistake .... I think I would try to post a similar ad but at a different time of day (like early morning or evening and skip posting all throughout the day for a couple of days.) I've been told that if you post your ad and then remove it right away, it won't show up in your list so that after a couple of hours you can repost it. I am not sure how the attorney can write a cease and desist letter - where do you send it? If this disgruntled individual is sitting at home all day with nothing better to do but flag your posts, I am not sure what you can do about that. It does happen - usually I see this in the Pet postings when people try to sell puppies. Are you sure this is not a disgruntled former employee?
Good luck and let us know what happens. Maybe someone else has some other ideas?