DOWN BUT NOT OUT : Stuart Karl broke the law and is about to pay the price--but will he be able to pick up the pieces of his charmed life?

As boy wonders go, Stuart Karl always cut a pretty good figure. Born into Southern California comfort, he had the cheery, blond looks and the happy-go-lucky mien of someone living the charmed life. He reportedly was a millionaire before his 30th birthday.

But as with many charmed lives, Karl’s was partly illusion. And on Dec. 5 in a federal courtroom in Santa Ana, Karl’s storybook reign as a Wunderkind will come to an inglorious end. On that date, he is scheduled to be sentenced by U.S. District Judge Alicemarie H. Stotler for conspiring to violate federal campaign finance laws in 1984, when he was deeply involved in Gary Hart’s failed presidential bid.

When Karl emerges from the courthouse--his fall from grace complete--the whiz kid turned 35 will have a new challenge: to see if he can fashion a future as colorful and successful as his past.

“You have a guy who has shown the ability to come up with creative ideas and turn them into valuable businesses,” said one acquaintance who asked not to be identified. “So that suggests a skill and talent that should continue. But when you have someone who has had a lot of success at an early age and then tremendous adversity, you’re not sure how that will affect them. Maybe he’ll crawl into a shell and become tentative. Or maybe it’ll harden him up, and he’ll put his nose to the grindstone with the urge to prove himself again.”

If Karl’s resiliency is the question, say friends, family and former business associates, the answer is easy.

Stuart Karl down and out? No chance, they say.

“He’s weathered it admirably well, for all the notoriety and the rest of it,” his father, George Karl, said. “He’s gone on doing his thing. He’s got his mind straight. He’s working hard, putting together things that will reward him.”

Stuart Karl declined to be interviewed for this article. But the elder Karl said his son hasn’t brooded or moped since his indictment, despite the public embarrassment. “Unequivocally, he did not mope. He does not. He makes his move and he goes. He’s not a sitter.’

Because he has agreed to help prosecutors in an investigation into possibly wider campaign finance violations, Karl will not be jailed. Instead, under the terms of his plea bargain, Karl faces a possible fine of up to $350,000 and as much as 6 years’ probation.

A Chapman College dropout, Karl was running a small company at an age when his peers were studying for finals. By his late 20s, he was a seat-of-the-pants millionaire--an entrepreneur with no formal business training but with an alchemist’s knack for turning seemingly nondescript projects into gold.

He did it first with a series of widely diverse trade magazines that became moneymakers. Then, trying to break new ground in the early 1980s in the largely unplowed fields of the home video business, Karl’s company, Karl Home Video, persuaded Jane Fonda to put a workout program on a videotape. A million sales later, Stuart Karl had assured himself a place in the history of home video.

The entertainment business, where illusion and reality somehow find a way to coexist, has long held a particular fascination for Stuart Karl.

As a teen-ager at Corona del Mar High School, Karl, with his blond hair swept over his right eye, played in a rock band and made a 9-minute film. A dozen years later, Karl would confide to an assistant that, despite his success in the video business, his abiding dream was to make a motion picture.

So with his love of the screen already in his blood, it perhaps isn’t surprising that Karl was seduced by that other grand mix of illusion and reality--the American political scene. Despite his genuine interest in politics, however, Karl is not seen by acquaintances as especially impassioned or ideological. Yet he became so involved in political fund raising that federal prosecutors are calling him a “potential star witness” in a wide-ranging political fraud case.

That same kind of puzzling duality surrounds the other ongoing problem in Karl’s life: his legal embroilment with Lorimar-Telepictures. It was Lorimar, the entertainment firm, that bought Karl Home Video in late 1984 in the wake of the Jane Fonda successes. Karl was put in charge of the newly created Karl-Lorimar Home Video subsidiary.

But in March, 1987, Karl was forced to resign. At the time, Lorimar cited a “conflict of interest” for Karl, claiming that he had an interest in another company doing business with Karl-Lorimar. In November, 1987, Lorimar sued Karl.

In February, 1988, Lorimar-Telepictures Chairman Merv Adelson, amplifying on the suit, said in a prepared statement that a “recently broadened investigation of Karl-Lorimar Home Video has revealed a total disregard of corporate policy and direction on the part of Stuart Karl--a deliberate attempt to mislead management. . . .” Lorimar claims that Karl owes it more than $340,000 in loans and other payments, in addition to an unspecified amount for “breaching his fiduciary duties” as head of Karl-Lorimar.

In May, 1988, Karl countersued Lorimar, saying that the company breached its contract with him and that it owes him at least several hundred thousand dollars.

Karl’s fall at Lorimar was as thorough as it was precipitous, coming just 2 1/2 years after Adelson had gone out of his way to praise young Karl around the company corridors. Yet, that fall, too, is reflective of Stuart Karl’s often differing images over the years.

Hailed by some as a video industry genius after the success of the Fonda tapes, he was seen by others as a lucky roller whose true business mettle was proved when he got in over his head at Lorimar. Some see him as a pawn in the campaign finance matter, while others see someone who was knowingly irresponsible.

Social friends paint an almost unanimous picture of an affable, unpretentious and resolute family man, the father of two boys, while some former employees describe a sometimes intimidating boss who was given to tantrums and who hated to be told no.

‘Humble Little Guy’

He is a man who told an interviewer in 1980 that he sold his red Ferrari after 4 months because “it wasn’t me. I like to be the humble little guy with the torn tennis shoes.” Within a few years, Karl’s possessions included a Porsche, a Jaguar, a BMW, a Cadillac, a boat and, yes, another Ferrari.

Abraham Kantzabedian met Stuart Karl late in 1982 and went to work as Karl’s untitled assistant at Karl Home Video in 1983. Kantzabedian said that Karl created the job for him and that he performed a variety of chores for Karl. “Stuart always had this dream of being a Howard Hughes,” Kantzabedian said, adding that Karl told him he liked the image of having someone accompany him to meetings where the other participants didn’t know what his job was.

Kantzabedian said he thought so much of Karl that in December, 1983, he considered asking his boss to be the best man at his wedding. “Deep inside, the Stuart Karl I knew before he got corrupted is a very gentle, good-hearted man,” Kantzabedian says today. “I called him Golden Heart. He always wanted to see people happy.”

Some friends theorize that this attitude contributed to Karl’s problems with the Hart campaign. After Karl became known as a dependable contributor, the Hart campaign, which was born into poverty and never escaped, kept coming back for more, Kantzabedian said. Toward the end of the 1984 campaign, Kantzabedian said, Karl grew increasingly irascible about the requests for money.

But Kantzabedian believes that Karl got caught at center stage because he was star struck. “The spotlight was on him, and he didn’t want the spotlight to go off,” Kantzabedian said. “That’s when the talk started that if the thing went through with Gary Hart that he (Karl) would be an ambassador somewhere.”

Kantzabedian, who left Karl-Lorimar in 1985, said he is saddened by Karl’s problems. “I think the worst part of the trouble is that he got greedy,” Kantzabedian said. “Not greedy--maybe hungry is a better word. Hungry to succeed. He was trying to become a mini-Howard Hughes.”

Criminal Indictment

The heart of the criminal indictment against Karl was that he used corporate and personal funds in excess of legal limits (it is illegal for an individual to give more than $1,000 per federal election to any candidate and illegal to use any corporate funds). Further, the indictment alleged that Karl sought to circumvent limits on personal spending by asking his employees to give money for which Karl reimbursed them. “What everybody did was keep him happy,” Kantzabedian said. “Nobody wanted to see him get into a tantrum. They had that fear in their guts. When you’ve got a steady job, that meant a lot. When you’re worried about steady work, you’re not thinking about whether what you’re doing is illegal.”

That element of coercion, even if broached in veiled terms, conflicts with the social view of Karl. Around the Newport Harbor Art Museum, for example, Karl is seen as a cheerful and generous supporter, but not “overly generous,” according to Sam Goldstein, a past development chairman.

“He’s sat at my table for a couple fund-raisers,” Goldstein said. “He’s always been a marvelous gentleman, fun and enjoyable.” Far from being a glad-hander, Goldstein said, Karl often has to be cajoled into joining others. “If anything, you have to drag him in,” Goldstein said. “It’s like, ‘Stuart, please come in and join our table.’ ”

But when Karl has his mind on business, his accelerated pace is legendary. Mike Ray is an Orange County construction company executive who is active in Democratic Party circles. Although not intimate friends of the Karls, Ray and his wife have socialized at the Karl home.

“He’s a man who really is something of a creative genius,” Ray said. “You sit and talk to him for an hour, and if you get him off social things and talk about specific business things, he’ll have 25 business ideas in an hour, all of which are good.”

‘On All 15 Cylinders’

Ray said Karl’s ideas “all center around entertainment stuff, that I know of, and he’s going 18,000 miles an hour in 18 different direction and on all 15 cylinders. Sometimes when I’m sitting next to him, I feel like a Volkswagen bug.”

Ray said he is confident that Karl is planning a comeback, but he wasn’t sure what form it will take. “My perspective is that Stuart has a wonderful childlike innocence about him. All these ideas are bubbling up all the time, and he wants to please people and do good things. That’s why it’s such a shame that he got involved in this (political) stuff, but it’s also the kind of thinking that’s pulling him through. There’s a great temptation when you’re in the heat of the battle like that to bend the rules. And he apparently succumbed.”

George Karl said the adverse publicity has bothered him more than it has his son. “I can’t tell you the pride I have in him for the way he handled this,” George Karl said. “He’s handled it as a man, and whatever mistakes he’s made, if they were induced or whatever, he’s handled it beautifully. He hasn’t been to a psychiatrist or anybody else.”

The 1984 Hart campaign, especially in California, was widely identified as combining politics with show biz--a hybrid that, in itself, would have been appealing to Karl. But the political tilt of Hart’s candidacy no doubt was a major factor in his involvement.

Molly Lyon, who like Karl is a member of the Newport Harbor Art Museum, said that she has talked Democratic politics from time to time with Karl and that he is one of the few people in wealthy Orange County social circles who share her views on social issues.

‘Young and Bright’

“I think he’s young and bright and seems to have political concern for other people. That’s what always attracted me to Stuart,” Lyon said. “Because there are very few people who come out of this community, as conservative as it is, that have that philosophy.”

She first sought out Karl when she was fund raising for “some political thing,” Lyon said. “I teased him by saying, ‘It’s not often I see someone I can talk to about this.’ He said, ‘I’ve been hearing about you, too, Molly.’ ”

By the end of the 1984 Hart campaign, lots of people had heard of Karl. Bill Shore, who was a special assistant to Hart and is now involved in a private national fund-raising enterprise for the homeless, said Karl never tried to elbow himself into the inner circle of the Hart campaign.

“He never asked anybody for anything,” Shore said. “He never wanted to be with Hart, which a lot of financial contributors do. He never wanted to travel around with him. He came across as fairly shy. I’m sure most people who read accounts like this think this guy is like a lot of these other fat-cat contributors, but he really wasn’t.”

Steve Rivers is Jane Fonda’s publicist and met Karl through other political contacts. “The sense I always had was that Stuart’s political concerns stemmed from his personality, which was that he was a nice guy and likes to do nice things,” Rivers said. “He likes other people. I never got the sense that he was much of an ideologue, or that he had a specific political agenda.”

‘Give Something Back’

Rivers said he remembers Karl saying more than once that “life had been good to him, that he had been prosperous and that he wanted to give something back.”

The other recollection he had, Rivers said, was of the Karl family. “One time, I don’t remember where it was, but someplace he was there and his mom and dad were there and his wife and kids, and he was leaving or his parents were leaving and he was staying, and he kissed his dad. Just a peck on the cheek. You just don’t see people doing that. It just impressed me that this was a guy to whom family and relationships meant a lot. I always had the feeling he idolized his father.”

John Emerson, the coordinator of Hart’s 1984 California campaign, said he saw Karl as more “candidate-centered than cause-centered.”

“I don’t think it was a social-climber kind of thing because Stuart never did the kinds of things that someone in it just to make contacts and make himself known would do,” Emerson said. “He actually was kind of shy and did not show up at every event and make an effort to clutch the candidate.”

That view was corroborated by several Hart staffers.

One high-ranking Hart campaign official, who insisted on anonymity, said:

‘Absent-Minded Professor’

“You know how some people are great idea people but are the absent-minded professor? He strikes me as being more that kind of person. Look at what happened at Lorimar and with the Hart campaign. Both demonstrate a guy who’s completely out of touch with the way the world works. . . . And whether it be conflict of interest or contributions in a political sense, there are rules and regulations that you need to conform to and live your life under. So he strikes me as the kind of guy who’s much better on the creative side than the management side of business.”

That assessment parallels a view offered of Karl by former business partner Gary Hunt, who says Karl would have made a great fighter pilot because of his ability to be creative and daring and make quick judgments. The only problem, Hunt said, is that Karl “would have fallen out of the sky because he wouldn’t have been paying attention to the gas gauge.”

Hunt met Karl through an executive search firm, was immediately impressed with him and took a job as vice president of sales at Karl-Lorimar on Dec. 1, 1985. “He was a very early riser,” Hunt says. “We used to have a running joke about who would get to work first. I would sometimes get there by 5:30 or 6 and it was not unusual for him to have been there for an hour. He was one of those people who, from the best I could tell, about 4 in the morning, he would start to turn over, and once an eye opened, it was like, ‘I’ve got to go do something.’ ”

One former Lorimar insider said Lorimar’s Adelson doted on Karl when Karl arrived there, thinking he had landed a crown prince of home video. Karl, with Jane Fonda’s tapes in his hip pocket, was given an annual salary and percentage-of-profits package that, based on expected profits, was easily in excess of $1 million.

But ultimately, Adelson came to believe that the video prince had turned into a fraud.

It was the formation of Continental Marketing Distributors, a video supply company, that led to Karl’s ouster on March 10, 1987. Lorimar alleged that Karl and his lieutenants, Hunt and Court Shannon, had set up the company and, in effect, done business with themselves from their offices at Karl-Lorimar. Hunt and Shannon are suing the lawyers who advised them about the project, saying they were told that it would not constitute a conflict of interest.

Terms of Resignation

The terms of Karl’s resignation letter, dictated by Adelson, point out the harshness that Lorimar felt toward Karl, industry insiders said. Besides asking for the financial reimbursement of more than $340,000, which Karl reportedly had borrowed from Karl-Lorimar, and the as-yet unspecified other damages, Adelson stipulated that Karl not produce home video programming until October, 1989, and that he not use the name “Karl” in any home video business. Karl’s countersuit seeks to rescind his earlier acquiescence to those terms.

Hunt’s perspective: “If the American way is that the buyer and seller are both happy, then I don’t think either Stuart or Lorimar got what they needed. I think, in the end, Stuart was tired of the constraints and, in the end, Lorimar wanted more of a businessman.”

Although Karl had made a lot of money, pre-Fonda, through a series of trade publications, such as those for the water bed, spa and sauna and home video industries, his professional fame is inextricably linked to the Fonda tapes. Although such home video programming now seems old hat, it wasn’t in the early 1980s.

“I know a lot of people said Stuart had one great idea,” Hunt said. “I think to call Fonda a great idea is a gross miscarriage. I think Fonda was a brilliant idea. It still ranks as so far superior to anything in its class that it can’t be compared. It’s the ‘Sgt. Pepper’s Lonely Hearts Club Band’ of video. To put it in context, you have to really go back. This was long before there were many VCRs in the country and certainly before the explosion of VCRs, at a time when industry analysts and consultants were telling him that no one would exercise in their homes like that. Stuart was undaunted.”

Bond with Fonda Tapes

Hunt said Karl maintained a bond with the Fonda tapes (there now are 11 titles and the entire line has sold more than 4 million copies). “It was more than just the money thing,” Hunt said. “I think he considered it his baby. I remember him telling me that at the beginning, they were selling 800 one month, then 1,200 another month and that Jane said if they could sell 25,000, it would be great. And, of course, they sold well over a million.”

Hunt thinks that when Karl resurfaces, it won’t be as a day-to-day managerial head of a company. “I think somewhere there is an idea or invention that none of us mere mortals remotely has any idea of, and Stuart Karl already has the idea of how that application or invention will be marketed,” Hunt said. “I don’t know what it is or how long it’ll take. And it may take a long time before he bounces back. But it’ll be something independent or some kind of leading-edge kind of thing.”

Like a thoroughbred racehorse, Karl has established a form chart for himself. It says that he will bounce back. In a March, 1986, interview with Channels magazine, Karl, then flush with his apparent success, said: “I don’t really consider myself successful. I’m not sitting back. I have yet to achieve what I want to achieve. In this society, unfortunately, success is failure the minute it stops. You stop one day and you’re dead. Failure follows you every step of the way. The more successful you are, the bigger failure you have to worry about.”

And then last January, in the only interview he has given since he left Lorimar, Karl sounded the same wise, if somewhat melancholy note: “You have to take the attitude that you haven’t done enough. . . . With Fonda, we didn’t stop and say, ‘Aren’t we great?’ It was, ‘We did well--let’s do better.’ ”