Knapp files for Chapter 11 shield against fed creditors.

American S&L ex-chief hit on loans to his group

Charles W. Knapp, best known as the flamboyant S&L chief ousted by federal regulators from American Savings & Loan, which later required a massive government bailout, has filed for Chapter 11 bankruptcy protection from creditors, Knapp's attorney said last week.

Knapp filed for Chapter 11 on Sept. 11 citing claims filed against him by the Resolution Trust Corp. and the Federal Deposit Insurance Corp. for loans made to him by a bank and a savings and loan which have since failed and are in government receivership, according to Terry A. Ickowicz, Knapp's attorney. Knapp expects to reorganize his debts in this, his first personal bankruptcy, the attorney said.

Knapp was chairman and chief executive officer of Irvine-based Financial Corp. of America, the parent company of American Savings of Stockton, which became, through Knapp's fast-growth practices, the largest and most profitable thrift in the nation in the early 1980s. But the thrift began having financial difficulties and Knapp was forced to resign by regulators in 1984.

Veteran thrift executive William Popejoy took over American's reins from Knapp and tried unsuccessfully to turn it around. American was taken over by the now-defunct Federal Home Loan Bank Board in September 1988, and was one of the largest and first taxpayer bailouts of a savings and loan.

In December 1988, the Robert M. Bass Group, with a cash infusion of $250 million, acquired some of American's branches and deposits and created a new, smaller federal mutual, named American Savings Bank.

Knapp reportedly received a $2 million severance payment when he left the thrift in 1984 and has been criticized for business practices that resulted in heavy loan losses at American. But no formal charges were ever brought against him.

In bankruptcy papers filed in Los Angeles last month, it is revealed that lawsuits against Knapp by federal bank and savings and loan agencies involving more recent dealings of Knapp's Los Angeles area investment banking firms have forced him to seek Chapter 11 bankruptcy protection.

The largest claim against Knapp is a $19.7 million unsecured claim from the RTC.

The RTC is currently suing Knapp for $19.7 million to recover a loan which was made to Knapp's investment company, L.A.-based Trafalgar Capital Corp., by Western Savings & Loan before Western was insolvent. The Phoenix-based thrift has been in the hands of the RTC, the federal agency which liquidates insolvent S&Ls, since 1989.

According to a 1990 Los Angeles Times story, a $15 million unsecured loan made to Knapp by Western was the subject of an investigation by the Federal Bureau of Investigation. Ickowicz said he has "no knowledge" of an FBI investigation involving the loan.

In addition to the RTC claim against Knapp, the FDIC, the agency which liquidates insolvent banks, has won a $736,000 judgment against Knapp for a loan made to one of his companies, Century City-based Atlantic Funding Ltd., by now-failed First Pacific Bank. The Beverly Hills-based bank was placed in receivership with the FDIC in 1990.

Ickowicz said in a statement, "Knapp's Chapter 11 filing was precipitated by many months of negotiations and numerous attempts to effectuate a settlement with various alleged creditors, including and primarily the Federal Deposit Insurance Corp. and the Resolution Trust Corp., which settlement claims were rejected by these agencies."

"Through the protection and supervision of the bankruptcy court, Knapp is confident that a successful reorganization will be accomplished and these personal financial issues will be resolved in a favorable and expeditious manner," the statement said.

Ickowicz added that none of the 25 companies which Knapp either owns or holds an interest in is part of the bankruptcy and that it is a personal bankruptcy filed by Knapp and his wife, movie actress Lois Hamilton Knapp.

The bankruptcy papers assess Knapp's assets at $43 million and his debts at $22 million. "As reflected in the schedule of assets filed by Knapp in the bankruptcy case, the bankruptcy estate contains more than ample assets to cover allowed and anticipated liabilities, including alleged contingent liabilities," Ickowicz's statement said.

However, Knapp's largest asset is listed as a $25 million claim against the officers and directors of Western Savings & Loan, the insolvent thrift which is in the hands of the RTC. That is the same thrift which loaned Knapp $15 million, which the RTC, as receiver, is trying to recover.

The RTC claim against Knapp is part of a $1 billion civil lawsuit the agency filed in June against the Driggs family, which founded, operated and held a 26 percent ownership interest in Western, said Bart Patterson, one of the family's attorneys. The suit includes numerous borrowers and Knapp is one of "dozens and dozens" of other defendants, Patterson said.

Patterson said he "was not aware" of any suit filed by Knapp against the Driggs family.

In addition to the suits against him by the FDIC and the RTC, Knapp is a defendant in eight separate lawsuits, including another one filed by the FDIC, according to the bankruptcy papers.

The suit, FDIC vs. American Savings & Loan, et al, is described as a "class action brought on behalf of shareholders against all directors, officers, outside consultants." Knapp was, in 1984, an officer of the parent company of American Savings and a director of American Savings.

According to bankruptcy papers, a "full settlement" has been reached in that

FDIC case and has been agreed to by all defendants. But when asked what the amount of the settlement was, Ickowicz said, "I have no idea."

Among other creditors listed in the bankruptcy filing is N. Brooke Knapp, a famous aviator who is Knapp's ex-wife and the former president of the Hollywood Chamber of Commerce, who was ousted from the post last summer.

Brooke Knapp is listed as the top secured creditor in the bankruptcy filing which states she is owed $980,000 by her former husband as part of their divorce settlement.