California brokerage navigates scandal under new leadership | Inman News

California brokerage navigates scandal under new leadership

Former Lyon Real Estate CEO pleads guilty to secret videotapings

By Matt Carter, Friday, March 18, 2011.

Inman News™

One of California’s largest real estate brokerages, Sacramento-based Lyon Real Estate, is moving forward under new leadership after its former CEO pleaded guilty to charges related to video recordings he made of encounters with four prostitutes without the women’s consent.

Michael Patrick Lyon, who stepped down as CEO of Lyon Real Estate in September, was sentenced to two years in prison Monday after pleading guilty to four felony counts of electronic eavesdropping. The sentence was suspended and he could serve a one-year jail term under house arrest or at the county jail, the Sacramento Bee reported.

Lyon, 55, took a leave of absence from Lyon Real Estate in September, amid allegations that he had made secret video recordings of guests at several properties he owns using hidden cameras in bedrooms and bathrooms.

Three weeks later, former Alain Pinel Realtors President Larry Knapp took over as CEO of the brokerage, and Lyon transferred his shares in the company to a trust benefiting his children.

Knapp, a veteran real estate industry executive and past president of the Sacramento Association of Realtors, said that Lyon hadn’t been involved in the company’s day-to-day affairs for some time when Lyon stepped down.

For the last several years, he said, Lyon Real Estate President and Chief Operating Officer Jean Li had been running the company. When Knapp stepped in as CEO, he said, he found he was taking charge of a well-organized and well-run organization.

"I have run large real estate companies for more than 25 years, and I was impressed what a great job Jean Li has done running this company for the last several years," Knapp said. "That’s why (Lyon’s departure) had as little impact on the company as it has. We work beautifully together — we think a lot alike — and the transition has worked out beautifully." 

The intensity of media coverage that erupted when the allegations against Lyon became public had a greater impact than Lyon’s decision to step down as CEO, Knapp said.

The Sacramento Bee and other local newspapers ran dozens of stories about the scandal, and the national news media picked up on the story. After he was arrested but before he was convicted, Forbes ranked the charges against Lyon and the ensuing controversy as one of the top 10 "CEO Screw-Ups of 2010."

Knapp said Lyon Real Estate lost about 45 agents as a result of the controversy, leaving the company with about 900 agents. Two Lyon Real Estate executives left to join a rival Coldwell Banker brokerage, and one of the executives brought along a number of agents, Knapp said.

But departures and doubts about the company’s future have largely evaporated since October, Knapp said, and Lyon Real Estate has been successful in recruiting new agents who are fully aware of the scandal.

Lyon Real Estate remains the dominant player in the Greater Sacramento market, he said, with the largest market share among area brokers.

The brokerage was the nation’s 37th largest in 2009 in terms of dollar volume, handling $1.9 billion in sales, according to statisics compiled by Realtor Magazine.

Distressed properties are a big part of the market, Knapp said, and the brokerage had the foresight to begin cross-training agents in short sales two or three years ago. Today, he said, 700 of 900 Lyon Real Estate agents have training in short sales.

Although Lyon "plays no role whatsoever" in guiding the company, Knapp said there are no plans to change the company’s name, which was founded in 1946 by William L. Lyon. 

"Any expert would tell you, ‘Don’t take a highly regarded 65-year-old brand name and play around with it too much,’ " Knapp said. Lyon Real Estate, he said, is "a hugely well-recognized brand in the Sacramento area. We think changing the name would be a mistake."

Knapp’s real estate career dates back to 1969, when he began as an agent and worked his way up to become president of Coldwell Banker of Northern California in 1985. He was named Western U.S. senior vice president for Cendant operating arm NRT Inc. in 1997, directing acquisitions and mergers of independent and boutique real estate brokerages in Northern California.

Knapp also served for seven years on the board of the National Association of Realtors (NAR), where he was appointed to NAR’s Executive Committee in 2008 and 2009.

Lyon hoping for detention

When Lyon cut his ties to the company last fall, the FBI and Department of Justice had just wrapped up a 16-month investigation into the allegations against Lyon first raised by his estranged wife, Kimarie "Kim" Lyon.

But the Sacramento County district attorney and sheriff launched their own joint investigation, which culminated in Lyon’s arrest on Nov. 10, when sheriff’s deputies executed a search warrant at his home, the Bee reported.

Investigators claimed Lyon made secret video recordings of friends and other visitors to properties he owns for at least two decades, but that in many cases the statute of limitations had run out for filing criminal charges. The criminal charges against Lyon related to video recordings dating back to March 2009, the Bee said.

A former employee and a family friend filed a civil suit against Lyon on Oct. 21, claiming he’d used hidden cameras to film them as teenagers while they were nude or partially dressed, the Bee reported.

Lyon originally entered a not guilty plea to the criminal charges on Jan. 12, before working out a plea bargain with prosecutors, the Bee said. The civil suit against him is still pending.

The Bee also reported that Lyon hopes to spend a year in home detention rather than jail as a part of a plea bargain with prosecutors.

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