Orange County Entrepreneur : Karl Admits He Violated Campaign Funding Laws

Orange County video entrepreneur Stuart Karl Jr. pleaded guilty Tuesday to conspiring to violate federal campaign contribution laws, pledging his cooperation in an FBI investigation of illegal campaign contributions to Democratic presidential candidate Gary Hart and congressional candidates in six states in 1984 and 1986.

All told, Karl is accused of funneling nearly $200,000 into various campaigns.

Under terms of the plea bargain, Karl, 36, could be fined up to $350,100 and could be subject to probation for up to six years. But he would not be jailed, although the counts to which he pleaded guilty--one a felony and one a misdemeanor--carry a combined maximum sentence of six years in prison.

The plea bargain was approved by U.S. District Judge Alicemarie H. Stotler in Santa Ana after a 40-minute hearing.

“Guilty,” Karl said quietly when asked by Stotler how he pleaded to a felony count outlining how he conspired to skirt campaign contribution limits in the 1984 campaigns.

“Guilty,” Karl repeated when Stotler asked for his plea to a misdemeanor count that he had illegally contributed $3,800 to Sen. John F. Kerry (D-Mass.) in the names of other people.

Stotler released Karl of Newport Beach on $25,000 bail and scheduled a Sept. 19 sentencing hearing. By approving the plea agreement, Stotler opened the door for federal investigators to immediately question Karl in what the prosecutor in the case referred to as an “ongoing investigation” of Hart’s campaign finances and other congressional campaigns mentioned in the indictment.

Assistant U.S. Atty. Nancy Wieben Stock, who oversaw the investigation of Karl, said the inquest “would encompass any and all violations relating to federal office seekers” and would include “co-conspirators.”

“It was a very thorough investigation to begin with, and Mr. Karl’s participation could assist in finishing it,” Stock said after the court hearing Tuesday.

No Suggestion of Hart Role

There has been no suggestion that Hart himself was involved in the violations.

Bernard Schneider, general counsel to Hart’s 1984 and 1988 campaigns and personal counsel to Hart, said: “We don’t have a particular comment, other than we’re sorry for Stuart and we’re sorry this occurred.”

The plea bargain was struck after what Karl’s attorney, John W. Vardaman Jr. of Washington, described as “hard” negotiations with Stock.

“He’s anxious to put this chapter of his life behind him,” Vardaman told Judge Stotler as his client stood at his side. A trial had been scheduled for Nov. 8.

Karl, wearing a double-breasted navy blue sports jacket, responded “yes, your honor,” and “no, your honor,” to questions from Stotler as to whether he understood the terms of the plea bargain. He listened as Stock outlined the activities that led him to be indicted by a federal grand jury June 9. When Stock concluded, Stotler again turned to Karl.

“Do you believe you are guilty of these charges?” Stotler asked.

Karl’s voice was barely audible as he replied: “Yes, your honor.”

When she had concluded her questioning, Stotler said she was “satisfied there would be a factual basis for the defendant’s plea of guilty” to the misdemeanor and felony counts.

According to the indictment, Karl asked employees of his company, Karl Home Video, to contribute up to $1,000 each--the maximum allowed by an individual to a campaigns in a given federal election--then paid them back in cash.

“It was understood at all times

that the employees would be reimbursed,” Stock told the court.

She said it was clear that Karl knew the contributions made to Hart exceeded the $1,000-per-person limit on contributions.

Stock said at the time the indictment was returned that the 13 employees named in it are not expected to be prosecuted.

Some of those employees talked with reporters about Karl’s campaign contribution activities earlier this year, resulting in an FBI investigation. One of them, Rama Middell, told The Times that, on several occasions, she carried bags full of cash from the bank to Karl’s office to reimburse employees, as Karl directed.

Hart campaign attorney Schneider said he did not know whom federal investigators would now be questioning.

“We can do nothing more than speculate, and speculation is not fruitful,” Schneider said. “We’re as interested as you are as to who they might be investigating.”

The Hart campaign received federal matching funds based on the illegal contributions from Karl. The Federal Election Commission has been looking into the question of whether Hart will have to return those funds.

Paid for Hart Expenses

The indictment also charged that Karl paid for certain expenses incurred by Hart, particularly in the closing days of the campaign and at the 1984 Democratic convention.

Stock said that, “by way of agreement” with the Hart campaign, “Mr. Karl would pick up the tab on numerous and sundry types of expenses,” which included media services but also extended to rental cars and air transportation for Hart’s campaign staff and buying promotional plastic bags for the convention.

“Throughout this time period, Mr. Karl had an explicit and also tacit agreement that he would pick up these types of expenses,” Stock said.

She said the bills were sent to Karl “as a matter of routine.”

She would not identify any officials within the Hart campaign with whom Karl may have had such an agreement.

$159,500 in Contributions

All told, Karl was accused in the indictment of making $159,500 in illegal contributions to Hart’s 1984 campaign.

In addition, Karl was accused of making $13,300 in illegal contributions to three other candidates: Kerry, Sen. Timothy Wirth (D-Colo.) and Orange County Superior Court Judge David O. Carter, an unsuccessful 1986 congressional candidate.

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