Prominent Millionaire Michael Lyon Arrested for Suspected Taping House Guests


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Michael Lyon Leaving Jail Wednesday after posting bond

By the time Sacramento sheriff’s deputies showed up at Michael P. Lyon’s front door Wednesday morning, he had known for 18 months that he was under investigation for allegedly making secret recordings of friends and houseguests.

But Wednesday marked the first time search warrants were executed in the case involving one of Sacramento’s most prominent businessmen, and his subsequent arrest on four felony counts marks the start of what promises to be a bruising legal fight.

“I can tell you right now, Mike Lyon is not in any mood to lay down and take this,” his attorney, William Portanova, said outside the Sacramento County Jail Wednesday morning, moments after Lyon posted his $60,000 bail. “He’s ready now for the fight.”

Lyon, who until recently was more likely to be seen hosting charity events or leading a Boy Scout troop than emerging from jail, faces four felony counts of recording confidential communications.

The Sacramento District Attorney’s Office and Sheriff’s Department Lyon filmed sexual encounters in 2008 and 2009 with three women without telling them they were being recorded.

According to a law enforcement source, all three women were working as prostitutes at the time of the recordings.

He also is being sued in civil court by a former employee and a family friend who, according to a federal investigation, were recorded on video as teenagers in bathrooms at his homes 14 years apart.

The recordings of the three women allegedly took place inside the gated Arden Arcade home Lyon shared with his then-wife and teenage son, some of them taking place around Christmas, court documents state.

The 54-year-old Lyon, once head of the 950-agent real estate firm that still bears the family name, was arrested at his Carmichael home about 7:45 a.m. Wednesday.

“He was caught completely by surprise,” said retired sheriff’s Lt. Craig Hill, who was brought back to work the case without pay. Hill rang the doorbell at Lyon’s home on a cul-de-sac off  Fair Oaks Boulevard, with eight detectives in tow.

“He thought that the investigation was over,” sheriff’s spokesman Tim Curran added later.

A woman Lyon was with at the time was released, and Lyon was booked into the jail, then released about 10:30 a.m.

He walked out of the jail lobby with his lawyer and publicist and made his first public comments on the scandal since word of it broke in August.

“Thank you for coming today,” a haggard and frail-looking Lyon said as reporters gathered around him. “I have a brief statement. These are all allegations and I’m intent on clearing my good name.”

Lyon, dressed in black jeans and a checked, long-sleeved shirt, referred further questions to Portanova and left in a waiting car.

Portanova, one of Sacramento’s  best-known attorneys and a former prosecutor, wasted little time in previewing his defense Strategy.

“These are women who were paid for their time, and now they’re being paid for their testimony,” he said, adding that he believes the women will be promised immunity from prosecution in exchange for testimony.

Portanova added that Sacramento District Attorney Jan Scully’s  office finally “scraped the bottom of the barrel enough to find somebody to say, ‘Yes, he filmed me without my permission.’ ”

“I don’t know how much money they’ve spent on something that does not appear to be the top priority of this law enforcement community, ” Portanova said. “But if bedroom behavior is now the highest priority of a cash-strapped county, well, then, that’s the district attorney’s decision to make, and she can spend your money as she sees fit.”

Court documents filed Wednesday do not identify the women, but indicate they were shown images and asked to identify themselves engaging in sex acts with Lyon.

At one point in a video, one woman sees an object she believes to be a camera, according to an affidavit filed in support of the arrest warrant by sheriff’s Sgt. Christopher T Joachim.

“She points to the camera that is recording her and Lyon with a surprised look on her face and asks what it is,” the document states. “Lyon tells her it is just equipment and it is nothing. She asks if it is a camera and Lyon told her it was not.”

At the beginning of longer videos of a second woman, Lyon is seen adjusting the camera, the affidavit states. That woman had placed an ad for services as an “escort” on an Internet site, the document states.

A third woman is depicted in at least six video files. At one point, Lyon can again be seen adjusting the camera, the document states.

“Therefore he is clearly aware the video camera is present,” the affidavit reads.

Portanova, who once worked with Scully and has contributed to her campaigns, said he could not recall “a time that anybody has been prosecuted for electronic eavesdropping in this county.”

“The idea that the Sacramento County District Attorney’s Office brought its immense resources to bear for as long as it has on a case where the allegation is that a prostitute says she was filmed without her permission is preposterous,” he said.

Lyon faces up to three years in prison and a $10,000 fine on each count. Portanova insisted that Lyon has never taped anyone secretly.

“Mike Lyon does not electronically eavesdrop on anybody without their permission, period, plain and simple,” he said. “And if there is somebody saying that he secretly filmed them, and that’s the basis of this charge, let’s look at their credibility and what they are getting for saying what they’re saying.”

Lyon has been under public scrutiny since August, when word broke that the FBI was investigating allegations that he had been secretly videotaping people inside his homes for years.

The allegations surfaced during a bitter divorce when Lyon’s then-wife, Kimarie “Kim” Lyon, went to authorities about her husband’s activities.

Lyon since has resigned from Lyon Real Estate and placed his interest in the firm in a trust for his two sons.

The federal probe ended in August with no charges being filed; sources told The Bee some of the allegations were too old and there were questions about the credibility of some potential witnesses. Sheriff’s spokesman Curran said the FBI was “looking for evidence that Mr. Lyon was involved with underage children” and child pornography.

“And they found no evidence of that, so when they turned over everything to us we looked at it with a different eye,” Curran said.

That led to Wednesday’s arrest, as well as searches at Lyon’s Carmichael residence, his ex-wife’s Arden Arcade home and the Lyon family vacation home near Lake Tahoe

Sacramento County Assistant Chief Deputy District Attorney Jeff Rose said a priority for investigators now is to examine the new electronic material seized from the homes, which may shed light on Lyon’s past as well as current activities.

Authorities already have reviewed recordings turned over by Lyon’s ex-wife and a former girlfriend.

“Now we have three sets of data,” said Rose.

However, the “voluminous” amount of material that Kim Lyon placed into storage in 2006 after an argument falls beyond the statute of limitations for prosecution, he said.

For the felony counts filed Wednesday, prosecutors have a three-year window in which to bring charges from the date of the incidents. Rose said older material could be used at trial, though, to demonstrate a pattern of conduct and an intent to secretly record houseguests.

Lyon told an investigator last year that his surveillance equipment was for security purposes.

The scandal has rocked the Lyon firm, which has touted its family values approach to business.

Company spokesman Doug Elmets appeared outside the jail Wednesday to remind reporters that “Mike is no longer associated with the company.”

“As it relates to the company, clearly there are challenges,” Elmets added. “But it is a strong brand … . It is a company that is well known throughout this region with 60 years of success … . The company and the brand will stay the course.”

State records show that about 30 agents, including some high-profile ones, have left the firm since August, but Elmets said the company has hired roughly the same number of replacements.

By Sam Stanton and Marjie Lundstrom/Sacramento Bee

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