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"and told police he couldn't tell them because he was a SPY and it was top secret."

Oh no, that wouldn't have been a lie to police, would it? LE should have nailed and jailed his sorry butt on the spot for that one.

Of course. Just going 'over the top' late at night. I have to agree with Demsux on this one. It is more likely that there is more we don't know. That LE's may have found all kinds of things on his PC. They may have seen what appeared to be international links. That these may not have been 'spy' related, but INTERNATIONAL CHILD PORN RING related (see people arrested in CHILD PORN RING thread) is what concerns me. That this, if the case, was held back by MUDD would be a major concern.

Other than that, what kind of REASONABLE answer can anyone come up with for why the LE would ask that question?

Maybe Damon had all sorts of cameras, listening devices, microphones, sorts of things someone (a spy or FBI dude) would use for surveillance. Things that could be hidden so someone might not know know they were being filmed. He obviously lied and didn't want to admit that he's a pervert and the stuff was used for video's he sold on the internet.

"and told police he couldn't tell them because he was a SPY and it was top secret."

Depending on what VanDam's job was,I suppose it's at least theoretically possible he had a security clearance of some sort. Note:theoretically. I have no idea if this would be the case or not. And "clearance" doesn't automatically equate to "secret agent."