WHEN MICHAEL CRICHTON shopped his novel about sexual harassment around Hollywood, Warner Bros. liked it enough to pay a record sum of $ 3.5 million. The irony is that the story — about a rising male exec whose career is endangered by a sexual harassment charge from a co-worker — is similar to an actual incident involving a senior WB exec recently. In Crichton’s book, the exec is vindicated. At WB, Lance Young, a senior vice president of production, quietly but bitterly exited the executive suite in late March, though a lawsuit was never filed against him.

Young’s exit also underscores why the subject of sexual harassment has become a hot button in Hollywood. Under current law, the offense is in the eye of the beholder, and, when a subordinate claims to be harassed by a superior, there need not be a long list of documentation that the worker objected to the behavior. Significantly, the corporation can be held liable for the superior’s actions.

Young, who, while at Paramount, once topped a Premiere mag list of hot young exex, encountered his troubles at WB when an assistant complained that he had behaved improperly at his house and in the office last year while on the mend from back surgery. On the surface, the charges against him don’t match the severity of some recent, high-profile cases involving other exex, some of whom kept their jobs.

Supporters of Young say his downfall was political, exacerbated by his aggressive manner and inability to blend with WB’s corporate culture, specifically with his boss, production head Bruce Berman. Warner Bros. has steadfastly declined to comment on any part of the dispute.

In two years at the studio, Young developed and oversaw such projects as “Dennis the Menace” and “Body Snatchers,” and was key development exec on “The Pelican Brief,””Peanuts,” and “Hogan’s Heroes.” None of the parties — including Young and WB — would comment for this story, wanting to keep it private. Unfortunately, it has been a poorly kept secret, one that has generated inquiries almost since the day Young left.

Young’s supporters, though unwilling to speak on the record, feel the complaint gave the studio an excuse to settle his contract. There’s a glut of creative exex there, with Young not the most popular.

YOUNG IS HEADSTRONG and he locked horns with his superiors at Par and WB, though he’s drawn high praise from some filmmakers he’s worked with. Young’s strength is developing film concepts, like “Peanuts” or “Dennis the Menace”; he was less skillful at following the WB model of quietly getting films made and letting higher-ups take the bows.

The sexual harassment charge came out of a dismal six-month stretch last year for Young. Surgery on his chronically bad back in late summer incapacitated him, his relationship with a fiancee was ending and his father was dying. Rather than take time off, Young often worked from his home or the hospital. Sources say Young worked closely with an assistant who, as is often the case, was too smart and overqualified to do clerical tasks, but was paying dues.

Once Young’s back mended, the work relationship became strained, sources said. What followed in January was a complaint letter, including allegations that Young deliberately wore a hospital gown while in the hospital that revealed his buttocks, that Young would unbutton his pants in the office, that he brought a bed to his WB office.

His friends acknowledge he’d worn the gown, but say he was barely able to move at the time. He regularly unbuttoned his pants, they say, to adjust a Velcro brace and do rehabilitation exercises — behind closed doors. The bed was there for him to rest his back.

A charge that he offered to take the assistant on vacation anywhere in the world is answered this way: Young’s father was dying, his mother wanted to claim his frequent flier miles and the assistant investigated if that was possible. When she reported back that they were transferable, he said off-handedly “where do you want to go?” With his father on his deathbed, and a back still aching, was that a formal proposition or an off-hand comment?

Other allegations were that Young screamed at the assistant and that he once tried to kiss her. Friends say he’s vehemently denied the charges. Other colleagues who’ve worked with Young, such as former assistant Lisa Mansourian, acknowledge that he can be a tough boss but discount the charges that he engaged in harassment.

“On the one hand, there’s charges that his butt was showing, and you think, well, he’s in a hospital, in a hospital gown,” Mansourian said. “I could see him making wise-ass cracks. There was no topic we couldn’t banter about, but I’m not sexually harassable. It’s in the eye of the beholder … He could be difficult. If she said he was just abusive and screamed, I’d say, ‘That’s Lance.’ Otherwise , it seems improbable to me.”

Since no suit was filed against Young, the incident never gets beyond the “he said, she said” rumors that have been flying around Hollywood. Friends of the assistant enthusiastically vouch for her credibility.

WB did its own investigation, and the matter was settled, with Young accepting a buyout of the two years left on his contract, with a producing clause, though sources say he’s in Mexico trying to put his life back together.

“Lance got screwed,” opines one studio insider, not the only one to voice this. Sources say his relationship with Berman was eroding, especially after Young went above him to challenge his bonus. He also argued with Berman when the production prexy met with director Alan Pakula on “The Pelican Brief,” unbeknownst to Young, who was point man on the project, sources say.

As echoed in the Crichton book, sexual harassment will continue to be a danger in Hollywood, with studios in fear of being legally culpable.

TITANS ON TITANIC: Peter Stone, Oscar-winning scripter fir “Father Goose,” who traded script writing and doctoring for Broadway musical book writing, is back in Hollywood for the launch of “The Will Rogers Follies,” and is hatching a powerhouse new musical.

Called “Titanic,” the play will be a collaboration between Stone, Mike Nichols and Tommy Tune, with score by composer Maurie Yeston (“9″). The project was hatched while the trio was tinkering with “My One and Only.”

“It’s a large musical about the end of a social and financial era, since that tragedy gave a clear view of (the social class system’s) unattractive side,” Stone said. “It was also the overweening pride of builders who thought you could overcome nature and build something so new, big and fast that it’s unsinkable.

“Mike suggested we call it ‘Titanic: The Musical Disaster,’ ” Stone joked.

THE MOST INNOVATIVE DEVELOPMENT project this week comes from Imagine co-heads Brian Grazer and Ron Howard, who are in Gotham gearing up to start shooting “The Paper,” which Howard will direct. Among the many projects the duo is developing is “Clipped,” a pitch they bought that is being eyed as a vehicle for Steve Martin.

Howard describes it: “It’s a contemporary comedy which explores the human psyche in an entertaining and exciting way. A guy gets a paper clip stuck in his brain, and as it moves around, it stimulates different lobes of his brain, whether it’s his willpower, or his ability to censor. It’s a great vehicle for a comedic actor.” How often does a paper clip get stuck in the cranium? “I tested the idea on a dean of neurology at UCLA,” says Grazer, “and he said the results were plausible.” Charlie Peters will write the script.

HOT TICKET: There’s a reading tonight of “The Clown Prince,” scripted and to be directed by Bill Straus about a white kid who grows up in a largely black neighborhood of Queens, goes to college and finds himself alienated by students from both races. Why are studio and indie types expected to jam the Coast Theater in Hollywood at 7:30 tonight? The project is a collaboration between hot TriStar producers Rob Fried and Cary Woods, and rap impresario Russell Simmons and his partner Stan Lathan. The quartet is looking to set up the project, and there are already plans for a soundtrack on Simmons’s Def Jam label.

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