My elven mage has been generating negative karma ever since entering Malachi Rench's castle to get the Dark Helm. I also happened to get the Create Undead and Quench Life spells immediately before grabbing the helm. I had -16 karma without the helmet on. My team was Dog, Virgil, and Geoffrey. I then recruited Torian Kel. My karma without the helmet was about -21. Then I went to the Black Mountain Mines. Three quarters of the way through the BMM, I realized my karma without the helmet was now -53. I assumed my spamming of Harm and Quench Life was to blame, so I learned the whole Force school and switched to it as my primary offense. I also gave Geoffrey the helmet, since my aptitude was now pretty high. But I kept losing karma, down to -64. I did a ton of good deeds for a while, and was at -26 when I reached the wheel clan. I told them where Thorvald was, which put me at -21. Just a few screens into The Dredge, my karma was -31. I killed a spider with Lightening Bolt and it dropped to -33. I figure, "Hey, maybe geoffrey is causing it" and took the dark helm from him. Karma continued to fall. So I reloaded, ejected him from the party, and left the helm on the ground. Karma still dropped. I ejected Torian Kel from the party too, karma continued dropping. I noticed Virgil had picked up an unidentified sword somewhere, so I cracked him in the head and threw it away. Karma fell anyway. I am using the latest version with the newest UAP installed. Putting on and taking off the Dark Helm works like it should; the bonus and penalty both apply and reset normally. I have not used any character editors, and the only modification I've made is adding a new background. My character is not using the customized background, he's using "Only Child". I have not used any necromantic black spells since the BMM. Aside from the Dark Helm, I have no cursed items. I am utterly baffled. My karma only seems to drop following a fight, and it drops whether or not I stay out of it and let my party do the killing. But it doesnt drop after every combat, strangely enough.
I have this memory of the Dark Helm pushing your alignment 20 steps towards evil whenever you gained a level, assuming you had it equipped. Perhaps that's what's causing it?
I think... there's a minor bug (or a feature, depending on how you look at it), where if you gain a substantial amount of bad karma (no idea what the exact value is) from doing quests in an evil way or committing crimes (killing "good" people, stealing, etc), then your karma would continue to decrease after each subsequent kill, no matter how good or evil your victims are. There are not many ways to gain bad karma in this game, so I assume the developers added this to let "evil" characters stay evil. Try doing a few good quests, maybe it will stop. And ditch the helmet, just in case. I may be completely wrong, but I hope this helps. P.S. If it really bugs you, you can always use Virgil's Debug Menu to alter your karma.
No, its dropping following combat kills. More like Drog Alt describes. Like losing karma for casting disintegrate on an ore golem as though the golem was an innocent person. Happens whether I make the first attack or not. And I lose karma even while letting my party do all the fighting. I know making the first strike can confuse the game, since I've had Gar get upset and quit on another character because I backstabbed an assassin before he noticed me. But that's not the case here. Guess I'll buy a shadow shield and live with it. I wanted to hover close to neutral, just evil enough to keep my party, but I suppose it doesn't really matter. It's just bloody wierd.
About Dark Elf's comment. Items get re-equipped at level up, so that's why with the bugged version of the helmet your stats get permanently altered each time you gain a level.