Michael Dally Arrested in Wife’s Slaying

VENTURA —  Three months after charging his lover with murder, the Ventura County Grand Jury indicted Oxnard grocery clerk Michael Dally on Friday for the kidnap-slaying of his wife, and police arrested him within hours.

Dally, 36, was quietly taken into custody at his Ventura home about 4:45 p.m. after being awakened by police three hours after the grand jury indicted him on charges of murder, kidnapping, conspiracy to commit kidnapping, and murder with the special circumstances of lying in wait and financial gain.

His longtime girlfriend, Diana Haun, 35, was reindicted on the same charges. She had been charged with most of the same offenses in August, but the conspiracy and the special circumstance of financial gain are new.

Calmly smiling at news photographers, the casually dressed Dally was taken from the Ventura Police Station to the Ventura County Jail, where both he and Haun are being held without bail for the grisly slaying of Sherri Dally.

Both would be eligible for the death penalty if convicted.

The 35-year-old homemaker and child-care center operator was abducted May 6 from the parking lot of a Ventura department store, and her slashed and bludgeoned body was found June 1 in a ravine north of Ventura.

“The investigation never really closed, so we kept at it,” said Ventura Police Lt. Don Arth, whose detectives joined district attorney’s investigators in piecing together the complicated, circumstantial case over 6 1/2 months. “[We’re] all happy.”

The arrest came three months after grand jurors initially declined to indict Dally. Sources said prosecutors finally persuaded the secret panel this week that there was probable cause that both Dally and Haun conspired to kill Sherri Dally so the lovers could marry and raise the Dallys’ two young sons.

Collection of a life insurance policy and avoiding a financially ruinous divorce and child support were also suspected motives in the killing, the sources said.

Attorney James Farley, who represents Dally, said his client will plead not guilty at his arraignment Monday afternoon.

“I don’t believe Mike was involved in this crime,” Farley said. “They decided he was guilty, and they wanted to try to prove it.”

The prosecution’s strategy since Haun was indicted, Farley said, has been to get her to testify against Dally in exchange for not asking for the death penalty in her case.

Dally’s arrest caps a period of turmoil for the family of Sherri Dally, who married Michael Dally, her high school sweetheart, 14 years ago. She suffered through a turbulent marriage marked by at least two lengthy affairs by her husband, including a two-year relationship with Haun.

Sherri Dally’s family and friends refused comment. And Haun’s family expressed relief that Dally was finally behind bars.

“I just knew he was involved, I believed my sister was innocent,” said James Haun of Oxnard, speaking on behalf of his family. “I think she was set up.”

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Sherri Dally’s grandmother, Claris Guess, said the family did not want to comment on the case. “We just heard about it, and the family is not going to make any statements at this time.”

The Dallys’ two sons--Devon, 8, and Max, 6--were being cared for by family members, she said. Arth said the boys were with Michael Dally’s elderly parents, Yaeko and Lawrence Dally, who live near their son on Channel Drive.

Sherri’s parents, Ken and Karlyne Guess, could not be reached for comment.

“They heard this afternoon and I’m sure they are not making comments either. We feel it’s the best policy at this time,” Claris Guess said.

Authorities were not saying what new evidence led to Dally’s arrest.

“We have a gag order, so all I can tell you is that the grand jury reconvened this week and late this afternoon came back with the indictment against Dally in connection with the murder of his wife Sherri Dally,” Arth said.

“The district attorney’s office has put a lot of time into this investigation,” he said. “They put the case together and [since the Haun indictment] they have done the bulk of the work.”

Sources said prosecutors, including Dist. Atty. Michael D. Bradbury, were surprised and disappointed when the jurors failed to indict Dally in August when the grand jury heard 57 witnesses.

Transcripts of grand jury testimony, in fact, seemed to establish close ties between Dally and Haun in the days before and after Sherri Dally’s disappearance.

Witnesses testified that Haun came to the store where Dally worked twice in the week before the kidnapping during his 4 a.m. break. Uncharacteristically, they separated themselves from the other workers and talked privately.

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In the early morning hours before Sherri Dally’s 9:30 a.m. abduction at a Target store, Haun and Michael Dally were seen standing in the foyer of Haun’s house, Haun’s mother testified.

And less than an hour after a witness said she saw a woman in a blond wig, beige suit, scarf and pancake makeup persuade Sherri Dally to get out of her van, handcuffed her, then put her into the back seat of a rented sedan, Haun’s calling card was used to phone the store where Michael Dally worked.

Records also showed that Haun’s calling card was used to call Dally’s Ventura home shortly before 1 p.m. and then an hour later as well.

On the last day of the August proceedings, Bradbury told the grand jurors that prosecutors “have attempted to present to you virtually all evidence that would indicate guilt or responsibility on the part of Miss Haun and Mr. Dally.”

But he gained no indictment against Dally.

Sources said the grand jury, which had convened a month earlier and hearing its first criminal case, was forced to weigh a wealth of evidence against Haun with the less direct evidence against her lover, which seemed weak by comparison.

Among the evidence contained in the transcripts was that Haun sent a coded message to Michael Dally’s pager the morning after Sherri Dally disappeared that investigators interpreted as “Di-Di bad.” The message also contained Dally’s call sign, which was 666.

The transcripts provided snapshots of the bizarre relationships between Michael Dally and the two women he said he loved. His relationship with Haun continued even after her Aug. 1 arrest, with her often calling him from the county jail.

On Friday, Dally’s telephone answering machine had a recorded message saying: “I accept collect calls from Di-Di.”

But in his grand jury testimony, Dally said he had always loved his wife. “We were always loving and caring. I never harmed her in any way.”

Dally repeatedly testified that he and Haun were innocent.

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Dally said communications had broken down with his wife even as his relationship with Haun flourished. The two worked together at a Vons supermarket in Oxnard, and they lived together for five months in 1995. He later moved back in with his wife to be closer to his sons, he said.

At one point, Dally tried to explain that he was in love with both women and could not choose between them.

“It would be like if you had two children and both of them were drowning, and they were too far apart. . . . Which one would you save? They would probably both die because you couldn’t make the decision,” he said.

“I loved both of these women dearly,” Dally continued, “one because she was the mother of my children . . . and the other one brought me back to life.”

Dally explained that he and Haun would send coded messages to one another through their pagers. His code name was 666, which is the biblical sign of the antichrist, which was given to him because he was always getting in trouble, he said.

Almost from the day Sherri Dally was abducted, police have pursued the theory that her husband and Haun, whom he had dated for two years, plotted the kidnapping and slaying, with a disguised Haun committing the slaying.

According to an affidavit filed to justify the search of the Haun and Dally houses in May, police were suspicious partly because of Michael Dally’s “inappropriate behavior showing a lack of concern and a failure to act in assisting to locate his wife.”

Investigators also maintained that Michael Dally made conflicting statements about whether he knew his wife was going shopping the morning she was kidnapped, first saying he did and then later denying such knowledge.

Police concluded that only Dally would have known his wife’s schedule that Monday morning, allowing him to tip the kidnapper who may have lain in wait at the store. Investigators now say evidence indicates that Sherri Dally might have been followed from her house as she dropped off her boys for school then shopped for a Mother’s Day present at the Target store on Main Street.

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Friends and family also confirmed to police that Haun and Dally had known each other for 2 1/2 years and had been lovers for much of that time.

Just two days after his wife disappeared, Dally emerged from a bedroom at Haun’s home when police went there to question Haun at 9 a.m., the affidavit said.

Within a week of his wife’s disappearance, Dally had filed for legal separation and custody of their two sons, citing irreconcilable differences.

Interviews with co-workers and a former lover of Dally’s also led police to conclude that Dally had thought about divorcing his wife--or killing her--for years.

Dally once complained to a co-worker about the cost of child support and said he had “connections” to people who could “knock off” his wife, according to the affidavit.

And a woman who said she was Dally’s lover for three years beginning in 1989 told police that Dally wanted to divorce his wife even then, but that he felt stuck in the marriage by the birth of his sons.

Dally would tell the woman that he felt like a “trapped animal with no way out,” the affidavit said.

Kelley and Wilson are Times staff writers; Hadly is a Times correspondent. Correspondents Nick Green and Scott Steepleton contributed to this story.