Karen Wolek arrived in Llanview in May 1976 on the heels of her sister, Jenny Wolek. They were both distant cousins of Wolek siblings Larry, Vince and Anna. Karen took a waitress job at a local bar and grill owned by Tony Lord, where she generated good tips and lots of attention from the male patrons. Karen soon caught the eye of her cousin Larry, a promising young doctor and single father who had been widowed a few years earlier. Seeking a better life for herself, Karen made it her mission to become Larry's wife. Karen's hard work paid off when Larry proposed to her in November 1976. As their wedding day approached, Karen was shaken when a former lover, Marco Dane, came to town. Marco knew about Karen's unsavory past, including having once been arrested for embezzlement, and was worried that Larry would dump her if he found out. Marco toyed with Karen but kept silent, and Karen and Larry were married in March 1977.

Karen quickly grew bored with life as a doctor's wife and living within the strict budget Larry required her to follow. While shopping for a dress for her sister's wedding, Karen met a respected older gentleman named Talbot Huddleston who offered to buy her an extravagant dress that had caught Karen's eye in exchange for her company at lunch. They ended up in his hotel room, where he and Karen had sex. Karen quickly realized that she could get men to buy her extravagant clothes and jewelry in exchange for sex, and she began having secret dalliances with a parade of men. Karen agonized over betraying Larry but felt unable to stop. When Marco discovered what Karen was doing, he blackmailed her into becoming his pimp so he could get a cut of the action.

In January 1978, Karen was riding in Talbot's car when they got in an argument and Talbot accidentally struck Pat Ashley's young son Brian Kendall, who had run out into the street after being told that his biological father was Tony Lord. Brian was killed instantly. Talbot sped away from the accident scene and forced Karen to remain silent.

Karen eventually revealed her secret double life to Viki Lord Riley, Larry's former sister in law. Viki forced Marco to stop prostituting Karen. But Marco turned the tables on Viki by threatening to release doctored photos of Viki's teenage goddaughter, Tina Clayton, posing nude unless she paid him money. When Marco turned up murdered in December 1978, Viki was arrested and put on trial. In March 1979, Karen was viciously cross-examined by district attorney Herb Callison and was forced to reveal her secret life as a hooker in open court, in front of her husband and sister and half the town. Karen revealed that Talbot had struck and killed Brian Kendall and correctly accused Talbot of having killed Marco because he was being blackmailed by Marco over the accident.

Despite the fact that Larry was willing to forgive Karen for her prostitution, she felt their problems were insurmountable and they separated. Karen moved out of their home and took a room at a boarding house run by Ina Hopkins. In August 1979, Karen and Larry divorced. Karen was soon shocked to discover that Marco hadn't died and was masquerading as his twin brother, Dr. Mario Corelli, who had actually been killed by Talbot in a case of mistaken identity. Marco claimed to be a changed man, and Karen kept his secret on the condition that he stop practicing medicine.

In June 1979, Karen agreed to look in on her sister's husband, Brad Vernon, while Jenny was out of town. Brad made several attempts to seduce Karen while his wife was gone. When Karen rejected the unwanted advances, Brad grew volatile and raped her. Karen tried to keep the rape from her sister, who was in the midst of a difficult pregnancy. Marco and Larry both learned what had happened and each beat up Brad. When Jenny eventually found out, she told Brad they were through. The stress of the situation caused Jenny to go into premature labor and she was rushed to the hospital, where she gave birth to a premature baby girl. At the same time, former hooker Katrina Karr gave birth to her own baby girl. Katrina planned to put her baby up for adoption, since it was a product of a previous affair with Brad Vernon. Karen and Marco were in the nursery looking at Jenny's baby when it had a seizure and died. Certain that Jenny couldn't cope with the loss of her child, Karen convinced Marco to switch Jenny's dead baby with Katrina's healthy baby. Katrina was told that her child had died, while Jenny was overjoyed to have a healthy baby girl, which she named Mary.

As 1980 dawned, Larry and Karen began reconnecting. However, things hit a snag when one of Karen's former tricks, Dr. Ivan Kipling, became obsessed with Karen and wanted her for himself. When Karen made it clear she wasn't interested in Ivan, he decided to kill her. During an argument, Karen fell down a flight of stairs and was rushed to the hospital in a coma. Ivan, as chief neurosurgeon, planned to finish Karen off but couldn't bear to do it and allowed her to live. He absconded to South America once his nefarious scheme became public.

After Karen's cousin (and Larry's brother) Vince Wolek was murdered by Ted Clayton, the leader of a dangerous counterfeiting ring, Karen made it her mission to bring Ted's killer to justice. She befriended Steve Piermont, a member of the counterfeiting ring, and pretended to have returned to prostitution to gain access to Ted. Karen and Marco arranged to deliver counterfeit money as part of the operation, but a shootout ensued and Marco was shot in the arm. Steve was arrested and was asked by the police to turn over state's evidence against Ted, who vowed to bring Karen and Marco down with him. Karen and Marco went on the run until Ted was killed in a shoot-out with police and their innocence was proven.

In July 1982, Dr. Ivan Kipling returned with a new plan for revenge. He implanted a device in Larry's brain that allowed him to control Larry's every move. Karen was shocked when Larry left his would-be bride, Mimi King, at the altar and told Karen he still loved her. Karen soon realized that Ivan was controlling Larry's actions, and she agreed to travel with the evil doctor to South America on the condition that he let Larry live. While in South America, Ivan forced Karen to marry him. Karen escaped into the jungle before he could consummate the marriage. Larry arrived and, in a final epic battle, sent Kipling into the river where he was devoured by crocodiles.

Back in Llanview, a guilt-ridden Karen finally confessed to Katrina that her baby was alive and was actually Jenny's daughter Mary. Once Jenny found out, she painfully returned Mary to Katrina. Jenny and Katrina both agreed not to press charges against Karen and Marco.

By late 1982, Karen and Larry had reunited and were making plans to remarry. But Steve Piermont returned to town and visited Karen while Larry was away at a medical convention. As they caught up, Karen felt drawn to Steve's presence and they shared a passionate kiss. When she learned that the mob had put out a hit on Steve, Karen tried to help him and ended up becoming a target herself. Karen and Steve went on the lam in early 1983. Larry tracked them down, and Karen made the difficult decision to stay with Steve. She and Larry shared a bittersweet goodbye, and Karen and Steve left for Canada under the witness protection program.