Court Urged to Unveil Merrill Testimony

An attorney for the Los Angeles Times and other media groups urged the California Supreme Court to release grand jury testimony about the Orange County bankruptcy Tuesday, but lawyers for the county’s brokerage house warned that disclosure would harm innocent people and undo centuries of common law.

The key legal issue before the court is whether a trial judge has the power to release grand jury testimony in cases in which an investigation does not lead to an indictment.

That was the situation in Orange County, after then-Dist. Atty. Mike Capizzi cut off the probe after reaching a $30-million settlement with the county’s main broker, Merrill Lynch & Co.

Capizzi’s successor, Dist. Atty. Anthony J. Rackauckas, said Monday that he favors full release of the documents, as occurs when the grand jury brings criminal charges.

But Merrill Lynch attorneys pointed out that typically, if no indictment is brought, witnesses’ testimony remains secret.

After the settlement, media organizations sued for the documents related to the 1994 bankruptcy.

Noting that the bankruptcy cost taxpayers more than $1.6 billion, Orange County Superior Court Judge David O. Carter ruled in 1997 that the public has a “compelling and fundamental right” to know what went wrong.

That right outweighs the general policy of grand jury secrecy, the judge said.

The 4th District Court of Appeal agreed with Carter. Merrill Lynch appealed to the Supreme Court, which has 90 days to issue a decision.

The case involves 29 Merrill Lynch employees who testified before the grand jury probing the cause of the bankruptcy.

Speaking on behalf of Merrill Lynch, Robert G. Morvillo argued Tuesday that if the Legislature had wanted to make an exception to the secrecy rule, it would have done so, as it has on rare other grand jury issues.

Kelli Sager, attorney for The Times and other newspapers, responded that “none of the exceptions takes away the court’s right to decide,” which is inherent.

A second line of argument involved potential repercussions to the witnesses from the disclosure of private information on salaries, bosses and company policies.

“Our witnesses stand in as a proxy for all future witnesses in grand jury cases,” Merrill Lynch attorney Audrey Strauss said.

But Sager said the 29 employees could have asked Carter to keep personally embarrassing portions of the testimony private, and they did not take that opportunity.

In questions to attorneys, Justice Joyce L. Kennard asked about the “corrosive effect” if a target of a probe “can buy his way out” of having the public informed by settling the case.

“What about the right of the public to know what’s going on?” Kennard asked.

Morvillo said the public gives up that right in other situations. He noted that both the statewide prosecutor and defense attorney groups supported secrecy in cases that do not result in an indictment.

The state attorney general’s office supports nondisclosure as well.

Justice Marvin Baxter said he was concerned about judges crossing over into law enforcement’s territory.

“I see a real separation of powers problem here, to conclude a court somehow has inherent authority over a criminal case whether that investigation is being conducted by a grand jury or [law enforcement].”