3 Top Executives of Lorimar Home Video Unit Quit After Links to a Supplier Surface
Lorimar-Telepictures said Wednesday that it has accepted the resignation of three top executives in its successful home video subsidiary, after evidence surfaced that the men have a financial interest in a company that has been a supplier to Karl Lorimar Home Video.
The resigning executives include Stuart George Karl, 33, the founder, president and chief executive of the Irvine-based subsidiary; Courter Shannon, 26, the unit’s executive vice president, and Gary D. Hunt, 32, vice president of sales.
“This is a breach of our code of ethics, and a conflict of interest,” said Barbara Brogliatti, a Lorimar senior vice president. The company said the amounts involved are not “material” to Lorimar-Telepictures.
In response to a question, however, Brogliatti said Lorimar has not turned over its findings to state or federal prosecutors because “it’s not a criminal matter.” Brogliatti added that Lorimar expects full restitution of profits made by the three executives and the supplier company, tentatively estimated at $500,000 to $600,000.
Lorimar does not anticipate filing any legal action, Brogliatti said, because the company has reached a settlement with the three executives and the vendor, and “because they ran, in our estimation, a legitimate business. . . . (But) you can’t own a vendor and do business with yourself.”
Brogliatti identified the supplier company as Continental Marketing Distributors, but she declined to divulge the financial interests held by the three former Lorimar executives.
She said the company supplied Lorimar’s home video unit with point-of-purchase promotional materials such as cardboard displays.
Incorporated last year, Continental Marketing Distributors listed an Irvine address and identified its agent as Gary Hunt in filings at the California secretary of state’s office.
A predecessor company, Direct Marketing Services Inc., was incorporated on June 10, 1986. On July 9, 1986, the company said it was changing its name to Continental Marketing Distributors. No list of officers was filed.
Stuart Karl founded Karl Video in 1979 and sold it to Lorimar in late 1984 for undisclosed terms, after the company rocketed to success on profits reaped from sales of the top-selling “Jane Fonda’s Workout” videocassette tapes.
Active in Politics
He was one of the largest contributors to Fonda’s husband, Tom Hayden, in his reelection campaign to retain his 44th Assembly District seat. More recently, he has been an active supporter of former Sen. Gary Hart (D-Colo.), who carried Orange County in the 1984 Democratic presidential primary.
Brogliatti said that, through a preliminary audit, Lorimar determined that Continental Marketing made a profit of between $500,000 and $600,000 from sales to Lorimar. Of that sum, the three executives apparently collected a total of about $150,000, Brogliatti said, adding that Lorimar expects to receive restitution from both the supplier and the three executives.
Karl, Hunt and Shannon could not be reached for comment. In the past, however, Karl has granted a number of interviews and is described by acquaintances as “animated” and a contributor to liberal causes.
In a 1980 interview, Karl said he began his business career while still a student at Corona del Mar High School, working for a water bed store, then launching a trade magazine. Within a few years, he started several other publications, including Newport magazine--later to become Orange Coast magazine--with Ron Guccione, cousin of Penthouse magazine publisher Robert Guccione.
Acting Chief Named
Culver City-based Lorimar said it has settled its employment contract with Karl, which was set to expire in 1989. The terms were not disclosed.
The company also announced that Jerry Gottlieb, a senior vice president of the parent company, will serve as acting chief executive of the home video unit. Before joining Lorimar in 1985, Gottlieb served as a senior vice president at MGM/UA Television Group, and executive vice president for United Artists Television.
Although Lorimar does not break out the home video unit’s contribution to its overall sales and profit, Stuart Karl told an interviewer last April that 1986 sales might reach $80 million to $100 million.
Lorimar has encouraged the unit to expand into distribution of cassettes of feature films from its base in so-called how-to tapes. Karl Lorimar, which has 195 employees, recently secured cassette rights to eight films produced by DeLaurentiis Entertainment Group, and films distributed by New Century Entertainment Group for the next two years.
On the American Stock Exchange, Lorimar shares closed Wednesday at $19.75, off 62.5 cents from the day before.
