Court Rejects Bid to Keep O.C. Bankruptcy Testimony Sealed

SANTA ANA — A state appellate panel rejected Merrill Lynch’s bid to keep grand jury testimony about the brokerage’s role in the Orange County bankruptcy secret, and said its temporary stay of a lower court’s order unsealing the transcripts will dissolve at 2 p.m. Tuesday.

The 4th District Court of Appeal ruling released Thursday essentially affirmed Superior Court Judge David O. Carter’s order last week to the Orange County district attorney that he publicly release about 5,000 pages of testimony and documents received by the grand jury looking into the possibility that Merrill Lynch or its executives violated state criminal laws in their dealings with the county.

“This is a victory for the state of California,” said Kelli L. Sager, the lead attorney representing a group of media companies, including The Times, in the court fight designed to force the release of the grand jury transcripts.

“In my view, this provides a mechanism through which the public can get information about what happened in Orange County,” Sager said.

Meanwhile, Merrill Lynch’s attorneys were preparing new legal arguments to convince the justices that the company is entitled to another stay that would halt public release, said Timothy Gilles, the company’s spokesman.

Attorneys representing the giant Wall Street brokerage firm took issue with Sager’s interpretation of Thursday’s ruling, saying it was merely a “procedural ruling.”

“As we read the order, the court has simply ruled on certain procedural issues with respect to the mechanics of obtaining a stay,” Gilles said. “This is by no means final.”

Merrill Lynch paid $30 million last month in a controversial settlement with Dist. Atty. Michael R. Capizzi, who agreed to terminate the grand jury’s investigation only two weeks before its term was to expire.

In an 11-page decision issued Aug. 14, Carter called the deal between the brokerage and the district attorney “extremely unusual and suspect” and ordered the documents released immediately.

Media attorneys and the attorney representing former county Treasurer Robert L. Citron had argued that unless the grand jury testimony was released, the public would have no way of judging whether the district attorney was right to strike such a deal or whether Merrill Lynch had bought its way out of a likely criminal indictment.

Carter’s ruling was without precedent in California, where grand jury testimony is automatically made public in cases in which indictments are issued, but generally kept secret when they are not. But the judge ruled that there was no California law that impinged on the inherent authority of the judge overseeing the grand jury to order the testimony released.

Carter said there was an overriding public interest in disclosure. “There is a compelling and fundamental right . . . of all citizens to have access to vital information relating to the loss of over $1.67 billion,” he wrote.

But before the transcripts could be released, Merrill Lynch attorneys obtained an emergency stay from the appellate court.

Sager and others blamed the district attorney’s office for delaying the release, allowing the brokerage enough time to seek the appeals court stay.

Deputy Dist. Atty. Wallace Wade dismissed such comments Thursday, saying: “That’s a shallow and ill-informed criticism.” The delay was not intended to help Merrill Lynch, but to deal with the task of making multiple copies of the voluminous grand jury records, he said.

The district attorney’s office submitted a letter to the court lambasting Carter’s decision, saying it was based on “rumor, innuendo and hearsay.” The letter also challenged Carter’s belief that the release of the documents will allow the public better understanding of the fiscal debacle.

County officials said they were happy with the court’s ruling. “The public has a right to know,” said Board of Supervisors Chairman William G. Steiner.

Times staff writer Shelby Grad contributed to this story.