U.S. Grand Jury Expected to Vote on Karl Indictment

After hearing testimony over a three-month period, a federal grand jury in Los Angeles is expected to be asked soon, perhaps today, to vote on whether to issue an indictment in connection with video entrepreneur Stuart Karl’s fund raising and other financial support for Gary Hart’s 1984 presidential campaign, sources said Wednesday.

The grand jury has been hearing testimony at weekly sessions regarding allegations that Karl, of Newport Beach, asked employees to contribute money to Hart and others, then reimbursed them with cash. The allegations, if proved, would amount to a violation of federal election law.

Former Karl employees have alleged that he funneled $40,000 to $50,000 in contributions to Hart’s 1984 campaign and the 1986 congressional campaigns of Orange County Superior Court Judge David O. Carter and Kathleen Kennedy Townsend of Baltimore. Carter and Townsend, both Democrats, lost their races.

Questions have also been raised about $96,000 in video and media services that Karl told the Federal Election Commission he provided for the 1984 Hart campaign, for which he later agreed to be reimbursed at a rate of 10 cents on the dollar.

Former employees of Karl have said that, instead of services, cash went to the Hart campaign for materials for the Democratic National Convention. This raised questions as to whether Karl was making campaign contributions rather than offering business services for payment.

Karl, 34, could not be reached for comment Wednesday.

Karl’s recent problems over his role in the Hart campaign followed a spectacular rise by a self-described “humble little guy with the torn tennis shoes” who became a millionaire and is on a first-name basis with such personalities as Hart and Jane Fonda.

In addition to the investigation into his political activities, Karl has had legal problems with Lorimar-Telepictures Co., which acquired his highly successful video firm in 1984. The firm, Karl Video Corp. was responsible for Fonda’s first “Workout” videotape, which, along with half a dozen successors, has sold millions of copies.

Video Wave of Future

Karl, a graduate of Corona del Mar High School and a resident of the Big Canyon area of Newport Beach, started on his first small fortune as a college freshman, working part time delivering water beds. He told a Times interviewer in 1980 that he sensed that the industry needed a trade magazine, so he started one on $200 borrowed from a friend, making money on the first 12-page issue.

Soon he added a tennis magazine, now defunct, and a weekly newspaper, which he sold. A spa and sauna magazine prospered from the outset, as did the water bed publication. And, with Ron Guccione, cousin of Penthouse publisher Robert Guccione, Karl started Newport Magazine, which evolved into Orange Coast Magazine after Karl sold out.

In 1978 Karl sold his publishing properties and became a millionaire. That sale provided the seed money for Karl Video, founded in 1979 on his sense that home videos are the entertainment wave of the future. Some of his early ventures ranged from distributing tapes of “The Galloping Gourmet” to “Playboy Centerfolds” to Esther Williams showing babies how to swim.

After selling his company to Lorimar in 1984 for an undisclosed amount, Karl became president and chief executive of the entertainment giant’s Karl-Lorimar Home Video division, with an employment contract running through 1989.

In March, 1987, Karl was forced to resign by Lorimar-Telepictures, following conflict-of-interest allegations. By then, Karl told an interviewer, the company’s estimated annual sales were $80 million to $100 million.