High Court Grants Merrill Testimony Plea

The California Supreme Court on Wednesday granted a petition by Merrill Lynch & Co. to block the release of secret grand jury testimony about the giant brokerage’s role in the Orange County bankruptcy.

The high court sent the matter back to the 4th District Court of Appeal in Santa Ana to hear Merrill Lynch’s appeal that the transcripts should not be made public.

The firm had obtained an emergency stay from the high court in August after Orange County Superior Court Judge David O. Carter ordered the testimony released.

In its terse two-page ruling, the high court said Carter’s order “is stayed pending final disposition of the appeal” and it ordered the appellate court to hear Merrill’s arguments.

“I’m disappointed that the release of these materials will be further delayed, but I’m hopeful the Court of Appeal will come to the same decision as Judge Carter--that eventually these materials will see the light of day,” said Kelli L. Sager, of the Los Angeles law firm of Davis, Wright & Tremaine, who represents media companies seeking the transcripts.

Sager added, “We’ve asked for an expedited schedule and expect we will renew that request.”

Merrill Lynch spokesman Timothy Gilles said: “We continue to believe that California law protects the privacy of innocent witnesses when no indictment has been issued. We are encouraged that the court has agreed that a full hearing is warranted.”

In June, shortly before the term of the county’s 1996-1997 grand jury was set to expire, Merrill Lynch agreed to pay $30 million in exchange for a halt to the Orange County district attorney’s 30-month criminal investigation.

At issue is more than 9,000 pages of testimony from 42 witness, including 29 from Merrill Lynch, who testified about the firm’s involvement with the investments that led to $1.64 billion in securities trading losses and the largest municipal bankruptcy in history.

Carter, after conducting a six-hour hearing and weighing arguments for several days, ordered the testimony unsealed, saying the county’s citizens had “a compelling and fundamental right” to the information and calling the deal to halt the investigation “extremely unusual and suspect.”

The same day Carter ruled, Merrill Lynch sought and obtained a temporary stay from the 4th District Court of Appeal. But the appellate panel subsequently denied three attempts by Merrill Lynch to keep the records sealed. It commented, at one point, that Carter’s order did not appear to be “appealable.”

On Wednesday, the Supreme Court disagreed and ruled that Carter’s order could be appealed.

Releasing the testimony, Merrill Lynch contends, would harm its client relationships and invade the privacy of its employees, who revealed their salaries and bonuses to grand jurors.

Senior Assistant Atty. Gen. Gary Schons, who argued against the release of the transcripts, said Wednesday, “We will assess our position in light of the court’s order because it now appears this issue will be decided on its merits.”

Assistant Dist. Atty. Wallace J. Wade, who headed the county’s bankruptcy investigation, said he would welcome a full hearing.

“I think there are some important issues that need to get clarified, and there will not be a dearth of parties that want to have their say,” Wade said.