Countywide : Stuart Karl to Testify Publicly, Judge Rules

Refusing to grant Stuart Karl “a private court,” a judge ruled Wednesday that the one-time whiz kid of the video industry will have to testify in public about his stormy business relationship with Lorimar Telepictures Corp.

Karl, who rapidly gained riches through the Jane Fonda workout videos but fell nearly as quickly into bankruptcy and political scandal, is expected to be a key witness in an ongoing legal malpractice trial in Orange County Superior Court. He may testify next month.

Court Shannon and Gary Hunt, two of Karl’s former associates in an Irvine-based video venture, are suing their ex-attorney, Michael Genovese of Newport Beach, for $2 million in malpractice damages.

They claim that Genovese gave them bad advice about potential conflict-of-interest issues in their video business, triggering legal problems for the two businessmen and the loss of their jobs.

Karl, Shannon and Hunt were all executives in an Irvine company called Karl-Lorimar Home Video, a division of Lorimar. But all three resigned in March, 1987, after Lorimar discovered that they also had financial interests in a Torrance company that was a supplier to Karl-Lorimar.

Karl did not join in the lawsuit by Shannon and Hunt, nor did he attend Wednesday’s hearing. He may, however, play a critical role in the issue’s resolution by revealing key information about business dealings gone bad, lawyers in the case say.

Lawyers for both Genovese and Karl asked Superior Court Judge Kazuharu Makino on Wednesday to allow Karl to testify in secret, with the court closed to the public and news media.

To have Karl testify in public, they argued, would raise sensitive matters of attorney-client privilege and might put Karl at risk of divulging information that could be used against him in his pending legal battles with Lorimar.

And George Genzmer, defending Genovese against the malpractice claim, also asserted that an open court would only produce more of the type of “bad publicity” that Shannon and Hunt cited in bringing their lawsuit. “We are simply trying to shut that down,” Genzmer said.

But Judge Makino said he saw no reason to give Karl “a private court” or to disregard “the right of the public to hear what goes on in court.”

It was only the latest legal turn against the 37-year-old Karl, who by his early 30s had forged his success in the video industry into a role as a Democratic Party activist and fund-raiser.

In December, 1988, he was fined $60,000 and sentenced to three years’ probation in U.S. District Court in Santa Ana after admitting to illegal campaign financing in funneling $185,000 to former presidential contender Gary Hart and other political candidates.

And in July, as federal officials sought to auction his multimillion-dollar home in Newport Beach, Karl filed for bankruptcy protection against nearly $4 million in delinquent taxes and other debts. His estate, in the Big Canyon area of the city, is set to be auctioned Jan. 5.