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L.A. Financier Is Resentenced in Arizona S&L Fraud Case


Los Angeles financier Charles W. Knapp was resentenced Monday to 5 1/4 years in federal prison and was ordered to report for incarceration July 8, three years and a day after he was convicted of defrauding an Arizona savings and loan.

Two others convicted in the case, Joseph V. Nash and Anthony C. Sarno, also were resentenced Monday, to 4 3/4 years and 4 1/4 years, respectively.

The three were found guilty of helping Knapp's company, Trafalgar Holdings, fraudulently obtain a $15-million loan in 1988 from the Phoenix-based thrift institution, Western Savings & Loan. The thrift collapsed a year later under the weight of bad loans.

The final sentencing in U.S. District Court in Los Angeles came after numerous delays. In December, a federal appeals court threw out Knapp's original 6 1/2-year sentence as too harsh and sent it back to District Court. Nash's and Sarno's sentences were similarly reversed.

The appeals court said the original sentences reflected the lower court's judgment that the defendants' actions had substantially increased Western Savings' risk of failure. However, the appeals court said that judgment was incorrect, given the numerous other bad loans on the S&L's books.

Knapp, 61, gray-haired, bespectacled and wearing a light green suit, said nothing as U.S. District Judge Stephen V. Wilson imposed the sentence in his second-floor courtroom.

"Obviously, we will appeal this [sentencing] decision," Knapp said afterward, noting that he already has an appeal of the conviction pending before the U.S. Supreme Court.

Knapp and Sarno have been free on bond since their convictions. The prosecutor, Assistant U.S. Atty. David Schindler, said he expects both to be incarcerated July 8. Both men asked to be assigned to "prison camps" in Southern California, but the location has not yet been determined. Nash is already in prison on a previous conviction.

The debonair and charismatic Knapp in the early 1980s headed Financial Corp. of America, once the nation's largest thrift holding company. But prosecutors said he qualified for the $15-million loan from Western Savings by inflating Trafalgar's financial statements. In fact, they charged, Knapp and his company were "flat-out broke" at the time of the loan.

Wilson's original order that Knapp pay $11 million in restitution--the amount the government says was lost on the loan--remains. Schindler said Knapp thus far has paid "not a dime" of the restitution.

Knapp's attorney, John J. Bartko of San Francisco, told the court that Knapp has placed certain assets, which he described as "expectancies and business opportunities," into an irrevocable trust for the benefit of the government.

Said Schindler: "I understand that the present value of the assets is minimal or close to nothing--certainly nowhere near the amount that has been ordered." He added that Knapp's chances of bringing the business opportunities to fruition would be significantly limited by his imprisonment.

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