Justice Halts Merrill Testimony Release

The California Supreme Court on Monday granted an 11th-hour request by Merrill Lynch & Co. to keep secret grand jury testimony about the brokerage’s role in Orange County’s historic bankruptcy.

In a brief order, acting Chief Justice Stanley Mosk ordered that the grand jury testimony remain under wraps until the Supreme Court determines whether it should review Merrill’s challenge to a judge’s order unsealing the documents.

The Supreme Court decision scuttles--at least temporarily--the release of some 5,000 pages of grand jury transcripts that were supposed to have been made public by the Orange County district attorney’s office this afternoon.

Mosk’s order came in response to a plea by Merrill’s attorneys that the Supreme Court prevent the release of transcripts of the grand jury testimony and at the same time order the Santa Ana appeals court to review the decision of a Superior Court judge to make the testimony public.

Merrill attorneys took the issue to the Supreme Court after being snubbed three times--the latest rebuff coming Monday morning--by the 4th District Court of Appeal in Santa Ana.

The normally secret testimony was given during the Orange County Grand Jury’s probe into the possibility that Merrill employees ran afoul of state laws in their dealings with Orange County.

The investigation was abruptly halted in July, when the Wall Street brokerage--in a deal with Dist. Atty. Michael R. Capizzi--agreed to pay $30 million to end the investigation and avoid possible prosecution.

Since then, Merrill has fought a pitched battle to keep the documents secret but has suffered a string of defeats.

After a lengthy court hearing two weeks ago, Superior Court Judge David O. Carter ordered Capizzi to release the documents, calling the deal with Merrill “extremely unusual and suspect.”

The 4th District Court of Appeal, which had temporarily stayed Carter’s order, has subsequently denied three separate petitions by Merrill to keep the testimony sealed.

The appellate court maintains that Carter’s order does not appear to be “appealable,” according to a Merrill spokesman.

But Merrill attorneys disagree.

Merrill “will suffer irreparable harm if the transcripts are released before any review of [Carter’s] order,” the brokerage’s attorneys said in their brief to the Supreme Court. “Once the transcripts are released, the secrecy that must be maintained of the grand jury testimony . . . can never be restored.”

Timothy Gilles, a Merrill spokesman, said brokerage officials “still believe we are entitled to a stay and a review of the [case].”

The arguments presented to the Supreme Court already have been rejected by Carter and the appellate court.

Merrill’s attorneys insist that unsealing the transcripts would cause “confidential business information” to be made public and also would invade the privacy of its employees who testified before the grand jury.

The attorneys also maintain that Carter’s decision upended “147 years of unbroken custom and practice” that grand jury testimony is made public when criminal indictments are issued but remains secret otherwise.

But in his opinion, Carter concluded that there was no state law that infringed upon his authority, as the judge overseeing the grand jury, to order the testimony unsealed.

Carter also cited the overriding public interest in disclosure, a position backed by attorneys for the news media, including The Times.

They had argued that unless the grand jury testimony is released, the public will have no way of judging whether the district attorney was right to strike such a deal or whether Merrill bought its way out of a likely criminal indictment.