Judge Unseals Documents in Stock Sale Lawsuit

A judge rebuffed the state controller Wednesday, unsealing documents central to a lawsuit by people who claim the state improperly sold their valuable stock in the early 1990s and kept the money.

Superior Court Judge Charles Kobayashi, reversing a tentative ruling that sealed the documents last week, noted that much of the information in dispute already is public. He said in a brief written order that “disclosure merely serves to fulfill the purpose of the controller’s office, namely, to serve and protect the public.”

In the lawsuit, Sacramento attorney Jeff Tochterman contends that the papers show that the state made no effort to contact rightful owners of the stock, which was languishing among the state’s unclaimed property, and sold hundreds of shares when the state budget was billions in the red and the stock price was depressed.

Tochterman, who urged Kobayashi unseal the papers, represents owners of 17 shares of highly valuable stock in Berkshire Hathaway, the investment vehicle controlled by billionaire Warren Buffett. The stock sells for about $70,000 a share now, but was about $7,000 a share when the state sold it.

Tochterman contends the judge’s ruling will help his clients and others who may sue over the state’s practice of making little or no effort to contact stock owners whose shares fell into the state’s Unclaimed Property fund, and were sold to pump up state coffers.

“This [document] shows it was a widespread epidemic for years,” he said Wednesday.

Former stock owners represented by Tochterman are seeking more than $1 million--the difference between the stock’s current value and the amount the state received when it sold the shares. Shareholders in other suits are seeking additional sums.

Last week, Kobayashi issued a tentative ruling siding with Controller Kathleen Connell’s attorneys, who argued that the documents should be kept confidential because they were attorneys’ work product. The state lawyers contended that the documents, placed in public court files inadvertently, had been misappropriated.

In his final ruling, however, Kobayashi said: “The public interest in disclosure and the need for fairness to members of the public who may have been deprived of their property unfairly and unjustifiably far outweigh the need to shield these documents from public disclosure.”

Richard Chivaro, the controller’s chief counsel, said that the documents in question--a spreadsheet showing the number of Berkshire Hathaway shares the state sold and a summary of why the state gave no notice to rightful owners--have “no veracity at all.”