Knapp Gets 6 1/2 Years for S&L; Fraud : Thrifts: The once high-flying chief of American Savings is also ordered to pay $11 million in restitution.

Charles W. Knapp, the maverick money man who once headed the nation’s largest savings and loan, was sentenced Tuesday to 6 1/2 years in prison for duping an Arizona savings and loan into lending him $15 million.

Knapp, 59, was also ordered to pay $11 million in restitution--a sum prosecutors claimed was the amount Western Savings & Loan in Phoenix lost on the Knapp loan.

The stiff sentence, handed down by U.S. District Judge Stephen V. Wilson in Los Angeles, followed Knapp’s conviction in July on two criminal counts of making false statements and one count of conspiracy.

Knapp--wearing a gray suit, white shirt, maroon tie and wire-rimmed glasses--sat stiffly and showed no reaction as the sentence was read. He remains free on bail until he must surrender Jan. 18. Wilson, acting on a request by Knapp’s lawyer, recommended that Knapp be sent to a federal prison in Pleasanton, Calif. Knapp turned down Wilson’s invitation to speak to the court before sentencing. After the hearing, Knapp said he intends to appeal but declined to comment further.

Before issuing the sentence, Wilson chided Knapp for having “no qualms” about using crime “to salvage his crumbling financial empire.” The judge called it “an egregious offense that was callously committed by a sophisticated defendant.”

Bill Morgan, a former business associate of Knapp’s until they had a bitter falling-out and who testified against Knapp during his trial, said in an interview that Knapp “got exactly what he deserved.”

“When it comes to robbing banks, the only difference between Charlie Knapp and Jesse James is that Jesse used a gun and Charlie used a fountain pen,” Morgan said.

Mark S. Dodge, who worked with Knapp at Trafalgar Holdings, a Los Angeles investment firm Knapp formed, said after the hearing that he had mixed emotions about Knapp’s downfall. Dodge left Trafalgar before the Western Savings loan was made.

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“The years I was with him were beneficial to me in many ways,” Dodge said. “But I also feel he did take advantage of, and victimize, a lot of people when he became a desperate person. It was so needless. He had everything at one point in his life.”

Two of Knapp’s former business associates were also convicted in the case. One, Anthony C. Sarno, was sentenced Tuesday to 5 1/4 years in prison and ordered to pay $500,000 in restitution. The other, Joseph V. Nash, had his sentencing delayed a week.

Knapp becomes the latest major figure of the nation’s S&L; debacle to be sent to prison on criminal charges.

In July, Charles H. Keating Jr. got a 12-year, seven-month prison term for looting Lincoln Savings & Loan. But in Knapp’s case, his conviction was not related to his stewardship of Financial Corp. of America and its Stockton-based American Savings & Loan, which Knapp built into the largest U.S. thrift.

Regulators ousted Knapp from his job in 1984, and American Savings eventually collapsed because of a mountain of bad loans made during the Knapp era. But no criminal charges were ever filed in connection with the case.

Instead, Knapp got into trouble after forming Trafalgar.

He was found guilty of conspiring to concoct financial statements that grossly overstated the assets of one of his Trafalgar units so it could qualify for the unsecured loan from Western Savings in 1988.

The assistant U.S. attorneys who prosecuted the case, David J. Schindler and Carolyn J. Kubota, alleged that the loan was never repaid and that Knapp never intended to repay it. They also said the loan contributed to Western Savings’ 1989 collapse, which cost U.S. taxpayers about $500 million.

Knapp, a charming, flamboyant financier who piloted vintage airplanes and cruised on his yacht in the Mediterranean, had a free-wheeling style at American Savings that made him a role model for other executives who wanted to rapidly expand their newly deregulated savings and loans.

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After being ousted from American Savings, Knapp hoped Trafalgar could become a major force in financing corporate takeovers, but prosecutors alleged that by mid-1988, Knapp and Trafalgar were “flat-out broke” when Knapp secured the Western Savings loan and that at least $1 million of the loan went toward Knapp’s own expenses.

Trafalgar dissolved as Knapp’s personal financial problems began mounting three years ago, and he and his wife, actress Lois Hamilton, filed for personal bankruptcy protection in September, 1992. But prosecutors claim Knapp still has a net worth in the millions of dollars.

Knapp said Hamilton filed for divorce in July, near the time of his conviction.