Charles W. Knapp, an early model for the high-flying thrift executives of the 1980s, was sentenced Tuesday to 61/2 years in prison for defrauding a Phoenix thrift of $11 million.
Knapp also was ordered to pay that amount in restitution to taxpayers.Knapp, whose American Savings & Loan was the largest thrift ever to fail, was convicted of lying to obtain a loan from Western Savings & Loan in Phoenix, which failed in 1989.
The loan was made after thrift regulators chased Knapp out of American and its parent company, Financial Corp. of America, and he was attempting to build an investment banking empire under the umbrella of a company called Trafalgar Holdings.
U.S. District Judge Stephen V. Wilson told Knapp to surrender Jan. 10 to the federal prison camp at Pleasanton, the northern California facility where junk bond financier Michael Milken served 22 months.
"This was a crime motivated in my view by defendant Knapp's desire to be a force in the financial world," said Wilson, who sentenced Knapp to the maximum permissible under federal guidelines.
Wilson said Knapp showed no remorse about using fraud to prop up his crumbling financial empire.
Knapp, 59, was known as a wheeler-dealer and jet-setter with a penchant for fast cars, fine wines, vintage airplanes and yachts. His former wife, Brooke, set around-the-world flight records in the 1980s. He later married actress Lois Hamilton, who looked on as he was sentenced.
Hamilton and Knapp filed for bankruptcy protection last year, citing millions of dollars in debts and civil judgments. However, prosecutors Carolyn J. Kubota and David J. Schindler say they believe Knapp's net worth remains in the tens of millions of dollars.
Knapp's financial adviser, Anthony C. Sarno, was sentenced to five years and three months in prison and ordered to pay $500,000 restitution for preparing the phony loan documents and assisting in the fraud.
Wilson postponed sentencing until Dec. 21 for a third defendant, Knapp's outside accountant Joseph V. Nash. Nash already is imprisoned for defrauding other banks. He acted as his own attorney at trial and has told Wilson he was denied adequate access to a law library.
All three were accused of devising schemes to inflate the balance sheet of Trafalgar Capital Corp., a subsidiary of Trafalgar Holdings, so it would qualify for a $15 million loan from Western Savings.
The charges included staging phony sales and writing a $1 million rubber check to make it look like Trafalgar had an interest in a Texas ranch. Only $4 million of the loan was recovered by Western.
In earlier years, Knapp had transformed a collection of small financial institutions into Financial Corp. of America, the nation's largest savings and loan holding company.
In 1984, regulators forced him out as head of FCA and its chief subsidiary, Stockton, Calif.-based American Savings & Loan Association.