Last week, a prominent local engineer and member of Honolulu’s Zoning Board of Appeals delivered a stunning guilty plea in federal court.
Frank James Lyon admitted paying public officials in Hawaii and Micronesia more than $400,000 in bribes that bought his firm more than $10 million in contract work over a decade.
Lyon’s company, Honolulu-based Lyon Associates, has been awarded numerous contracts from local public agencies over the years. The firm was originally launched by Lyon’s father more than 50 years ago, handling design and construction projects across the globe.
But the plea agreement raises a number of unanswered questions.
So far, federal authorities prosecuting the case have declined to publicly identify which Hawaii state officials Lyon admitted paying more than $250,000 to in order to secure a $2.5 million contract for Lyon Associates — or which state agency they worked for.
Nor have they identified Lyon’s co-conspirator in Hawaii who benefitted from the scheme — a budding public-corruption scandal that a local legal expert at the University of Hawaii’s law school says is certain to grow.
Prosecutors have further withheld the identities of two key players in the Federated States of Micronesia: A member of that nation’s Congress overseeing infrastructure projects and a transportation official who handled airport projects. Lyon bribed them with new cars, college tuition payments and a trip to Las Vegas to secure federally funded contracts in that Pacific nation, according to his plea deal.
Authorities in the U.S. Attorney’s office and prosecutors in the Lyon case have not responded to multiple inquiries from Civil Beat seeking the identities of those involved.
Meanwhile, gaps in the state’s procurement database, following a recent purge of data, have made it difficult to pinpoint which Hawaii state agency is involved.
However, the fact that federal investigators identified several co-conspirators is enough to show that more charges are on the way, said Kenneth Lawson, co-director of the Hawaii Innocence Project at the University of Hawaii William S. Richardson School of Law.
“This is the jumping off point,” predicted Lawson, who teaches criminal law and procedure.
He believes the court record shows that Lyon’s plea deal could be the beginning of Hawaii’s second major corruption scandal in recent years.
Federal law enforcement officials have been overseeing a years-long criminal investigation into former Honolulu police chief Louis Kealoha and his prosecutor wife, Katherine.
The Kealoha scandal began with a single guilty plea by a former cop and blossomed into a series of indictments and criminal investigations that have targeted some of the city’s top-ranking officials, including the chief, the elected prosecutor and the mayor’s top lawyer.
The brazen nature of the crimes Lyon pleaded guilty to — which includes the bribery of several government officials for multi-million dollar contracts — also indicates that the investigation will go beyond Lyon’s plea deal, Lawson added.
“If you’re an investigator, the questions you might be asking now are: How did you know who to approach in a state agency who would be willing to take a paper bag full of cash? What other corporations are doing this? And what other companies are getting contracts like this? It’s going to be huge,” he said.
Lyon faces up to five years and more than $250,000 in fines.
He faces additional legal trouble in state court, where a former executive and an equipment-leasing company are separately suing Lyon Associates for failing to pay them money owed, records show.
In his suit, the former executive also says he warned Lyon and Lyon’s father of criminal activity and fraud taking place at the company before they fired him.
State officials, from the governor’s office to the attorney general, also have had little to say about the guilty plea.
Jodi Leong, spokeswoman for Gov. David Ige, directed any questions about the bribery scandal to the Hawaii Attorney General’s Office, adding that it was unclear if the AG was privy to the identity of the former state employee and department involved in the scheme.
In an email to Civil Beat, Krishna Jayaram, special assistant to Hawaii Attorney General Clare Connors, said, “This is an ongoing federal matter, so even if we knew this information, we wouldn’t make it public.”
In its online database, the State Procurement Office lists four contracts awarded to Lyon Associates that date as far back as 2015. However, the $2.5 million Hawaii contract featured in Lyon’s plea deal was signed “in or around” 2012.
Much of the procurement office’s contract data was purged, agency officials explained, when they moved to a new system in 2017. Attempts to find any contracts that don’t appear there should be directed to the state agencies that issued them, they added.
Lyon’s most recent contract listed in the database was a nearly $2 million award issued by the state’s Department of Transportation to help manage construction at the Daniel K. Inouye International Airport, which has been undergoing a major, years-long renovation effort.
The state DOT previously awarded Lyon at least one other contract that’s not included in the procurement database.
In 2014, Lyon received a $2.5 million award to help manage the airport’s “Taxiway Z” project, according to agency spokesman Tim Sakahara. The effort aimed to refurbish the airport’s main taxiway for international flights.
Lyon’s other awards listed in the database were for professional services contracts at the state departments of Hawaiian Homelands and Human Services, as well as for Maui County.
On Oahu, his company has done at least $400,000 worth of landslide monitoring for the city’s Department of Design and Construction, according to Lyon’s nomination form to serve on the zoning appeals board.
The company has also worked on Honolulu’s rail project — in December 2017 it was awarded a $60,000 “Kamehameha Highway Civil Design” contract. Lyon further worked as a subcontractor for rail. The company helped the joint venture Kiewit/Kobayashi build the system’s operations center in Waipahu.
Lyon’s plea agreement describes a decade from 2006 to 2016 in which the Honolulu engineer, with the help of an unnamed co-conspirator bribed Federated States of Micronesia government officials with trips to Las Vegas, tuition payments for a relative attending the University of Hawaii Manoa, new cars and rent payments in exchange for contract work there.
“This is an example of things (I) have to do,” Lyon wrote in an email to his alleged co-conspirator, an FSM resident, as he looked to purchase a new Ford truck for the Micronesia official who helped manage airport projects there.
“This is illegal. (I) can only do these things when people don’t know what I am doing,” Lyon wrote, according to the plea deal.
In December 2010, while arranging the Las Vegas trip for an FSM transportation official and his wife, Lyon’s co-conspirator suggested in an email that they conceal the charges in an airport-improvement contract with the Federal Aviation Administration, according to court documents.
“Please erase this entire email when you are done,” the co-conspirator added.
In all, Lyon has admitted to bribes of $200,000 which gained his firm $7.8 million in FAA-funded contract work in that Pacific nation.
Meanwhile, in Hawaii, Lyon started making payments in 2011 to the still-unnamed state official in order to secure the $2.5 million contract a year later, the plea deal states.
Those payments would continue through 2016, and they aimed not only to serve that state official, but also other “certain state agency officials” who had served on the contract’s selection committee and helped to influence its award, the plea deal further states.
Lyon’s father, Frank Emory Lyon, launched Lyon Associates in 1961 while working as a civil engineer in Japan, according to a 1998 Pacific Business News profile of the company.
“I always wanted to be in business for myself,” Lyon told the business publication. “For $80,000, I bought the company and took over a substantial amount of contracts.”
The firm moved its headquarters to Honolulu in 1974 and set up offices across the Pacific, Southeast Asia and the Middle East to work on infrastructure projects in those regions.
The senior Lyon told PBN that he was forced to sell the firm in 1983 after it lost money on a project at Tripler Army Medical Center. He then repurchased his company in 1997.
He died in December 2017.
Frank James Lyon, who goes by Jim, previously worked as a project manager at the company before becoming its president in 2007. He did not respond to multiple requests for comment through his attorney or through Lyon Associates’ Chinatown offices. The firm’s website and Facebook page aren’t currently active.
Lyon faces pending litigation in state court, as well.
In 2016, one of the company’s former presidents, Ronald Gonzales, sued Lyon Associates for failing to pay him a $113,000 severance agreement.
Gonzales’ suit also cites Hawaii’s Whistleblower Protection Act. He alleges that before he was fired, Gonzales had alerted Lyon to illegal activity at the company, including “criminal property damage, failure to pay wages and salaries, falsified and fraudulent official documents, sexual harassment of employees and terroristic threatening.”
Gonzales declined to comment on Friday, citing the pending litigation. His attorney did not respond to a request for comment. Lyon Associates contends in its court documents that Gonzales was fired for misconduct.
In a separate lawsuit filed last year, Troy, Mich.-based Leasing Corporation of America alleges that Lyon Associates defaulted on an equipment lease and still owes more than $233,000.
Court records show Lyon never responded to the suit.
That led to a default judgment against the company, plus renewed court action by Leasing Corporation in December to pursue Lyon’s holdings in local banks, court records show.
Read Lyon’s federal plea agreement here:
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