U.S. Indicts Stuart Karl Jr. on Campaign Fund Counts

Orange County video entrepreneur Stuart Karl Jr. was indicted Thursday on charges of violating federal campaign finance laws by funneling nearly $200,000 in illegal contributions to former presidential candidate Gary Hart and congressional candidates in six states in 1984 and 1986.

Karl, 34, faces up to 36 years in prison and fines up to $930,000 if convicted.

U.S. Atty. Robert C. Bonner said the indictment was returned by a federal grand jury in Los Angeles after 13 of Karl’s former employees testified that they were reimbursed in cash for contributions made in their names to Hart and others.

Bonner said none of the employees would be prosecuted. But he said the investigation would continue into whether unnamed Hart campaign officials may have “suggested” or “assisted” in setting up the scheme.

A spokesman for Robert J. Perry, the Los Angeles lawyer representing Karl, said there would be no comment on the indictment. “We have not seen the indictment yet,” the spokesman said. Repeated telephone calls to Karl’s office brought no response.

In announcing the indictment, Bonner said there was “no evidence that Mr. Hart or the other candidates knew of the illegal contributions by Mr. Karl to (their) campaigns.”

The indictment, charging Karl with making false statements to the Federal Election Commission and with criminal conspiracy, is only the second of its kind, according to Nancy Wieben Stock, the assistant U.S. attorney who heads Bonner’s Orange County office.

“It’s my understanding that this is the second indictment in history charging a contributor with a felony as a result of campaign finance violations affecting a campaign for federal office,” Stock said.

Bernie Schneider, the Orange County lawyer who represents Hart’s campaign committees and is Hart’s personal lawyer, said staff members from the 1984 campaign have been questioned in the inquiry. But Schneider said he had no knowledge of whether any of the staffers had testified before the grand jury or had been offered or granted immunity from prosecution.

Karl is accused of violating laws that are designed “to limit the power and potential influence of big contributors,” Bonner said.

Grand jurors alleged that Karl asked employees to contribute up to $1,000 each--the maximum under federal law--to various candidates, with the promise that they would be reimbursed. They were reimbursed in cash, Bonner said.

Three candidates received a total of $13,300 in illegal contributions, according to Bonner. They are Orange County Superior Court Judge David O. Carter, an unsuccessful congressional candidate in 1986; U.S. Sen. John F. Kerry (D-Massachusetts), and U.S. Sen. Timothy Wirth (D-Colorado).

Also receiving campaign funds, through an illegal $25,000 corporate contribution from Karl Home Video Corp. to a September, 1986, fund-raiser involving singer Barbra Streisand and comedian Robin Williams, were a number of Democratic candidates for the U.S. Senate, Bonner said. They were Sen. Thomas A. Daschle of South Dakota, Bob Edgar of Pennsylvania, Sen. Patrick J. Leahy of Vermont and Sen. Alan Cranston of California, according to Bonner.

‘Violated All Three’

Bonner said that federal law bars a person from contributing more than $1,000 per election to any candidate for federal office or making contributions through third parties or conduits. He said the law bans outright political contributions by corporations.

“According to charges filed today, Mr. Karl violated all three prohibitions of the federal campaign contribution law,” Bonner said.

The indictment also alleges that Karl paid for television advertising, printing and other election expenses for Hart before the 1984 Democratic National Convention and attempted to hide the nature of the payments.

Karl, a 1971 graduate of Corona del Mar High School, struck it rich by persuading Jane Fonda to demonstrate her passion for fitness in a videocassette. The tape sold a million copies, and Karl, not yet 30, made a fortune and helped start the video revolution.

In 1984, Lorimar Telepictures bought out his Karl Home Video, leaving him in charge of the new subsidiary. Karl resigned last year when the firm alleged that he had arranged to buy products from a firm in which he had an interest, allegedly a conflict of interest that involved more than $500,000. Lorimar sued Karl in November, alleging that he had violated his contract.

Barbara Borgliatti, spokeswoman for Lorimar Telepictures in Culver City, said the firm has been cooperating with the federal investigation. “The allegations in the indictment are in violation of our own codes of ethics,” she said.

Asst. U.S. Atty. Stock said a “majority” of the 13 Karl employees named in the indictment as conduits had received immunity from prosecution and all had cooperated with the investigation.

Several of the Karl employees told The Times earlier this year that they felt forced to participate in Karl’s alleged scheme.

One of the Karl employees who testified before the grand jury, Abraham Kantzabedian of Newport Beach, said Thursday: “We all made donations under superior orders. When your boss comes to tell you something, you do it.”

Donations Didn’t ‘Sound Right’

Said Bonner: “The indictment says nothing about a demand being made, other than the fact that if you are in an employer-employee relationship, there may be an element of coercion included when your employer, who holds the key to your future employment, asks you to do something of this sort.”

Kantzabedian, an assistant to Karl at Karl Home Video, said that, although he had no knowledge at the time that the contributions were illegal, they did not “sound right.”

“It’s like eating something and your stomach doesn’t digest. You get heartburn,” Kantzabedian said. “I think everybody jumped on the wagons without realizing it’s a nonstop train and finally you run out of tracks.”

He added: “I know things look bad for him (Karl), but he’s a good man. . . . All the glamour made him lose track of what he was doing.”

Pressed on whether Hart or other politicians were summoned before grand jurors or interviewed, Bonner declined comment. He also declined comment when asked how prosecutors could conclude that the candidates had no knowledge of the illegal scheme.

Officially, the Hart campaign had no comment on the indictment “since it’s in litigation,” said Hart campaign attorney Schneider. He added that it was “inconceivable” to him that Hart, who he said was out of the country and could not be reached, “knew anything about any of this.”

Schneider said he knew of no other Hart supporters or contributors who have been charged with any crimes. He said $3,000 in Karl contributions to Hart’s 1988 presidential campaign that was refunded earlier this year, after the allegations against Karl first surfaced, represents all contributions of which he is aware from Karl employees. The 1984 Hart campaign fund has no assets, Schneider said.

Investigation Not Concluded

Stock said the Karl indictment represents the end “of the first phase of the investigation.”

“It is alleged in the indictment that campaign staffers with the Hart campaign assisted and to some extent suggested certain of the illegal payments by Mr. Karl,” Bonner said. “In that respect, I think all we can say at this point is that in this case there has been an indictment but the investigation is continuing. It has not, in our judgment, been concluded at this time.”

Some of the identities of Hart staffers who “aggressively” sought contributions are known, and others are unknown, Stock said.

Published reports earlier linked Douglas Rosen of Los Angeles, Hart’s 1984 finance director, to Karl’s fund-raising activities for Hart. Rosen in February strongly denied allegations that he advised Karl on how to get around federal restrictions on contributions. Rosen could not be reached for comment on Thursday’s indictment.

The investigation also continues, Stock said, into allegations that Karl or one of his firms paid the salary of a full-time Hart campaign staffer in 1986. The staffer is Dennis Walto, who allegedly was paid between June and November of that year, Stock said.

CONTRIBUTIONS IN KARL INDICTMENT

Here are the contributions listed in the indictment against Stuart Karl Jr.:

$10,500, in 1984, to Americans With Hart in the names of Karl employees.

Unspecified “large contributions,” in 1984, to Americans With Hart in the names of Karl employees.

$4,800, in 1986, to (Massachusetts Democratic U.S. Sen. John F.) Kerry for U.S. Senate Committee in the names of Karl employees.

$7,500, in 1986, to Dave Carter for Congress Committee in the names of Karl employees. Carter, an Orange County Superior Court judge, was an unsuccessful congressional candidate in the Democratic primary that year.

$2,000, in 1986, to the Committee for (Democratic U.S. senator from Colorado) Timothy Wirth in the names of Karl employees.

$25,000, in 1986, to “An Evening With Barbra Streisand and Robin Williams,” a political fund-raising event sponsored by “Voices for a Change,” a multi-candidate political action committee.

$22,000 paid by Karl Production Co. for an obligation that Americans for Hart had with the firm of Zimmerman, Galanty and Fiman.

$2,150 paid by Karl Production Co. for an obligation that Americans for Hart had with More Plastic Bags.

$95,520.42 in services invoiced by Karl Home Video to Americans for Hart in July, 1984, that the indictment alleged “did not represent a bona fide debt but rather represented an illegal contribution” made to Americans for Hart that the committee “was under no legal obligation to repay.” The debt later was repaid by the campaign at 10 cents on the dollar.