The head of Lyon Real Estate, under criminal investigation for allegedly making secret videotapes of people in his homes, is severing his ties to the Sacramento company his father founded 64 years ago.
Michael Lyon, 54, is being replaced immediately as chief executive officer by industry veteran Larry Knapp, who led Coldwell Banker real estate operations in Sacramento in the 1980s.
Lyon, who has been on leave since news broke of the criminal investigation, is stepping down “because the issues related to his personal life have become a potential distraction to the company and its team of agents,” said Lyon Real Estate spokesman Doug Elmets.
Lyon will move out of his offices and will not return, even if no charges are filed against him, said Knapp, who met with the company’s top managers Tuesday and planned to meet with agents today.
Knapp said Lyon’s ownership shares will be transferred to a trust to benefit his children.
Jean Li, who temporarily took over Lyon’s CEO duties, will return to her previous post as president and chief operating officer.
Knapp said Lyon will be “focusing his energy on his personal issues, doing philanthropic work and working with other companies. He will not be involved with Lyon going forward.”
The scandal involving one of Sacramento’s most visible business leaders – which erupted amid Lyon’s bitter divorce from his wife – appears to have had a direct impact on company operations.
Elmets told The Bee last week that only one of the firm’s 950 or so agents had quit due to the allegations. However, Department of Real Estate records reviewed Tuesday show the company had 853 agents.
Elmets said Tuesday that the 950 number actually represents all employees, and said only a handful of agents and managers have departed due to the scandal.
Steve Galster of Realty Executives Galster Group, a Fair Oaks real estate firm, said he was not surprised to hear that Lyon Real Estate was losing agents.
“Every company is hitting ’em hard, recruiting,” he said. “That’s going to continue.” When agents leave, he said, customers go with them.
While the real estate company deals with the fallout, the criminal investigation continues into allegations that Lyon hid video recording devices in bedrooms and bathrooms and captured images of houseguests and others.
The subjects, of varying ages and sexes, allegedly were videotaped without their knowledge while they were showering or engaging in private acts, according to law enforcement documents reviewed by The Bee.
Sacramento County Assistant Chief Deputy District Attorney Jeff Rose confirmed Tuesday that the joint criminal probe with the Sheriff’s Department is ongoing.
“There are a lot of things to go through,” said Rose, who declined to offer specifics on any timetable.
Among the evidence under review are videotapes and equipment turned over to law enforcement officials by Lyon’s wife of 24 years, Kimarie, who had placed the materials in a rented storage locker three years earlier, according to law enforcement documents. On the advice of her attorney, she gave them to investigators, the documents say.
Lyon has been unavailable for comment since the allegations became public last month. His criminal attorney, Bill Portanova, was out of town Tuesday and could not be reached.
But Portanova has repeatedly stated that his client did nothing illegal. Portanova has noted that the FBI and U.S. attorney’s office “thoroughly investigated” his client and closed the case, without charges, before local authorities assumed their own investigation.
The company, whose red-and-white signs pepper lawns throughout the Sacramento region, appeared focused Tuesday on shoring up customer confidence. In a lengthy announcement of the changes, the company emphasized Knapp’s background and accomplishments – and included a statement from Michael Lyon, expressing gratitude to Knapp for stepping in to “ensure our company maintains its unparalleled performance and track record in California real estate.”
Knapp is well known in local real estate circles. He started his career here in 1969 as a 22-year-old agent with a family-owned firm called Jones & Brand & Hullin. That firm was acquired by Coldwell Banker in 1981, and Knapp was named the firm’s regional manager.
He moved to the Bay Area in 1985 to head Coldwell Banker’s Northern California operations and has since served as the regional boss of two other large real estate companies, NRT Inc. and Alain Pinel Realtors.
He said he has known Michael Lyon for nearly 40 years and has “always admired his business abilities.” Lyon’s mother and sister remain shareholders in the company.
Knapp said he’s been talking with Michael Lyon for several weeks about “being of assistance” to the firm. Those talks “got serious” late last week.
“Mike made the decision and approached me about becoming the CEO. I feel badly that he’s going through these difficulties,” Knapp said. “At the same time, because of my experience, I think I’m the perfect (choice) for coming in and moving this company forward.”
One well-known Washington, D.C., crisis management consultant said “companies recover from crises all the time.”
Eric Dezenhall said the fact that this scandal isn’t tied to business practices could help the real estate company get past this. He said it would be far worse if the alleged secret taping affected customers, which does not appear to be the case from law enforcement documents.
“A combination of good management, multiplied by time, can help companies survive,” Dezenhall said. “I know it doesn’t seem like that now.”
By Marjie Lundstrom, Bob Shallit and Dale Kasler: Sacramento Bee