Merrill Lynch Reargues Case for Secrecy

From Staff and Wire Reports

Merrill Lynch & Co. urged a state appeals court in Santa Ana on Tuesday to block the release of secret grand jury testimony about the giant brokerage’s role in the Orange County bankruptcy, but justices hinted that they might release edited volumes to news organizations and others seeking the material.

Any release of grand jury testimony would be a setback for the Wall Street brokerage, which has fought vigorously to keep the transcripts secret.

The transcripts, attorneys believe, could help to explain what role Merrill Lynch executives played in the financial collapse of Orange County. The brokerage has consistently denied any wrongdoing.

The county declared the nation’s largest municipal bankruptcy in December 1994, after losing $1.64 billion on risky securities.


During the course of a securities fraud investigation, a county grand jury questioned numerous Merrill Lynch executives about the firm’s dealings with former county Treasurer Robert L. Citron, but the investigation was abruptly terminated last June when Orange County Dist. Atty. Mike Capizzi accepted a $30-million settlement to end the probe.

At the request of attorneys representing the news media, Superior Court Judge David O. Carter originally ordered transcripts of the grand jury proceedings released. But attorneys for Merrill Lynch and its employees fought that ruling all the way to the state Supreme Court, which ordered Tuesday’s hearing.

The three-judge appellate panel seemed interested in what the settlement involved.

“What did Merrill Lynch get for its $30 million?” Justice Thomas F. Crosby Jr. asked Robert Morvillo, an attorney for the brokerage.


“I’m not trying to be disingenuous here,” the New York attorney replied. “A major benefit the corporation got was not being indicted.”

The county’s attorneys, who joined the court action on the same side as the media, say they too need the transcripts to prepare for the trial of the county’s federal damage suit against the brokerage, which is due to begin in September.

Although grand jury transcripts are usually kept secret, the news media’s attorneys have argued that there is an overriding public interest in the release of the information collected by the grand jury.

“No one . . . has had any ability to look at what happened here,” argued Kelli Sager, a media attorney.


“What you’re saying is the district attorney used the grand jury to shake down Merrill Lynch for $30 million?” Crosby asked Sager at one point.

That might have happened, Sager replied, but the answer is sealed in the transcripts.

At one point, Crosby asked Sager if she would object to having the thousands of pages and documents returned to Carter for “redaction” to black out trade secrets and information that would be wrongly damaging to Merrill’s employees.

She didn’t object, but she said Merrill Lynch and the employees should specify what they want withheld rather than having Carter pore through stacks of paper.