Media, Merrill Debate Release of Secret Testimony

SANTA ANA —  At an unusual hearing Wednesday, an Orange County Superior Court judge listened patiently to several hours of legal arguments about whether to unseal the 5,000 pages of secret grand jury testimony about the role of Merrill Lynch & Co. in the county’s bankruptcy.

Judge David O. Carter, who called the hearing after media organizations requested access to the testimony, said he would review a transcript of the lengthy proceeding before issuing a ruling.

Carter gave no indication in his questions or remarks about how he might decide, but said that he would not rule “before this weekend, and maybe not before next week.”

Both sides asserted that whatever the judge decided would have enormous legal and social significance: for the residents of Orange County who suffered through the bankruptcy; for the Merrill Lynch executives whose salaries and bonuses might be disclosed; even for the very future of grand jury operations.

Arrayed two deep around the bench in front of Carter, 17 attorneys representing nine parties who filed briefs in the matter took turns arguing for six hours, stopping at one point to eat pizza that Carter had delivered to his courtroom.

Nearly every news organization that covered the massive bankruptcy, and other media groups including the Society of Professional Journalists, the First Amendment Coalition and the Orange County Press Club, sought the release of the transcripts after Orange County Dist. Atty. Michael R. Capizzi said in mid-June that he would explore the possibility of making them public.

Capizzi made the statement at a news conference to announce that Merrill Lynch had agreed to pay $30 million to completely halt his 30-month criminal investigation of its role in the bankruptcy and its dealings with former Treasurer-Tax Collector Robert L. Citron.

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The grand jury, whose 18-month term expired June 30, heard 42 witnesses, including 29 current and former Merrill employees, who were called as part of the investigation’s “third phase.”

Kelli Sager of the Los Angeles law firm of Davis, Wright & Tremaine, who argued for the media organizations including The Times, said the court, which oversees grand jury operations, has “inherent authority” to order the release of testimony. And, she argued, the policy in California, unlike other jurisdictions, is that grand jury testimony is more often than not made public.

Even though the grand jury did not make a decision to indict, Sager asserted, “public interest favors disclosure” because “the impact on the citizens of Orange County was undeniably severe.”

She said courts recognize “big case” exceptions, “and how many cases like this one are there?”

In agreeing to pay $30 million to abort the case, Sager continued, Merrill Lynch and its executives, “when it was time to put up or shut up, chose not to do that [and] settled out.”

Former federal prosecutor David W. Wiechert, who represents Citron, also asked Carter to unseal the testimony, noting that Merrill Lynch had fought to keep the case in Orange County. Had the firm contested the district attorney’s impartiality, the case might have ended up in federal jurisdiction.

With potentially stiffer federal penalties, Wiechert asserted, “the smell of $30 million in greenbacks may not [have been] so persuasive” and Merrill may not have been able to cut a deal “so they wouldn’t be indicted.”

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County bankruptcy attorney Bruce Bennett also argued for the testimony to be released, but only to Thomas W. Hayes, the former state treasurer who is the designated “legal representative” under the county’s bankruptcy plan.

But Bennett told the judge that “public release is not on [Hayes’] agenda.” He said the testimony would help the county’s pending $2-billion civil lawsuit against Merrill.

Challenging the media companies were Merrill Lynch’s attorneys, including Paul S. Meyer of Costa Mesa.

“Anybody knows media access has never been permitted absent an indictment,” Meyer said, repeating several times his belief that the court lacks authority to open the records.

State Senior Assistant Atty. Gen. Gary Schons pointed out that the laws governing grand juries in California date back 147 years, and “no court has ever ruled” that transcripts could released on any basis other than the narrow exceptions spelled out in state law.

“In light of historical context,” Schons said, the question he would ask is “why this court, why in this context and why today?”