Sarno

These appeals recount a sadly familiar tale from the Eighties: the financial looting of a federally-insured lending institution by would-be robber barons. 1 The following facts are those which the jury reasonably could have found.

The architect of this particular scheme, Defendant Charles W. Knapp, controlled a suite of financial service corporations collectively identified as the “Trafalgar entities.” In the spring of 1988, Mr. Knapp was gathering capital to fund a foray into the insurance business. Defendant Anthony Sarno, who headed a financial consulting firm, was retained by Mr. Knapp to “build a balance sheet” that would enable Mr. Knapp to enter the reinsurance industry. Mr. Sarno planned to obtain assets for the various Trafalgar corporations through a series of stock swaps with other small businesses: After exchanging its preferred stock with the preferred stock of an outside corporation, a Trafalgar entity would note an increase in shareholders’ equity equal to the value of the transferred stock and then record the acquisition of an asset equal to the value of the received stock. Among those companies solicited by Mr. Sarno were three companies partially owned…