Release of grand jury testimony blocked by Merrill Lynch

CALIFORNIA–Merrill Lynch obtained an injunction in mid-August to stop the release of thousands of pages of secret grand jury testimony ordered released by a Superior Court judge in Santa Ana.

A panel of the Appellate District Court in Santa Ana enjoined release of testimony discussing the investment banker’s role in speculation that led to the bankruptcy of Orange County, Calif., hours after the order unsealing it. The injunction will remain in effect pending appeal of the superior court’s order.

In its motion for the stay, Merrill Lynch argued that if the transcripts were released before the appeal could be heard, “the opportunity for appellate review will be effectively frustrated” because the secrecy of the transcripts could not be restored.

Orange County Superior Court Judge David Carter wrote that under the First Amendment and the California Constitution, the public has “a compelling and fundamental right” to have access to information about the loss of over $1.67 billion in public funds which “outweighs the general policy regarding secrecy of grand jury proceedings.”

Merrill Lynch was Orange County’s lead investment banker before the county filed for bankruptcy in December 1994. The transcripts in question feature the grand jury testimony of Merrill Lynch employees.

News groups, First Amendment organizations and county lawyers sought release of the transcripts after Orange County District Attorney Michael 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 he had negotiated a settlement with Merrill Lynch, under which the company paid a $30 million civil fine to the county without admitting any wrongdoing. In exchange, Capizzi’s office ceased its criminal investigation of Merrill Lynch before the grand jury could decide whether an indictment was warranted.

Carter’s order was highly critical of the settlement.

According to numerous press reports, Capizzi initially favored public access to the transcripts, but said that he changed his mind after discovering that California law does not allow the release of grand jury testimony unless the proceedings result in an indictment. (In re Request for Transcripts of “Phase Three” Grand Jury Proceedings: Merrill Lynch; Media Counsel: Kelli Sager, Los Angeles)