LOS ANGELES - Merrill Lynch & Co. last week filed briefs asking a California appellate court to bar the release of transcripts from a grand jury probe into the firm's possible role in the 1994 Orange County, Calif., bankruptcy.
Continuing its full-court press against letting the public read testimony, Merrill Lynch argued in papers filed Wednesday that transcripts should be kept secret because the investigation had not led to an indictment. Under California criminal law, the record of grand jury proceedings must be released once there is an indictment.
"Because neither the California Constitution nor the legislation establishing grand jury secrecy authorizes this wholesale disclosure, the superior court's invasion of the sanctity of grand jury proceedings should not be countenanced and its order should be reversed," Merrill Lynch's brief said.
Accompanying the firm's arguments was a supporting brief filed by all of the 28 current and former Merrill Lynch employees who testified from 1995 through 1997 before the Orange County Grand Jury. Since they were asked about possible criminal activity by their employer, they argued release of their testimony would cause "irreparable reputational harm to them and to other innocent parties."
Oral arguments could be heard as early as April.
Last summer, Orange County Superior Court Judge David O. Carter ordered the transcripts unsealed at the request of the media and county government, which sued Merrill Lynch and its former lead investment banker in 1995, seeking $2 billion of damages for alleged securities fraud. The county believes the documents will assist in its case, which is still pending.
But release of the roughly 10,000 pages of transcripts was halted last summer by both the Fourth Appellate District Court and, a week later, by the state Supreme Court. In October, the high court separately ordered a full hearing before the appellate panel, which had previously declined to review Carter's order.
The transcripts record the grand jury testimony of current and former Merrill Lynch employees during a 17-month criminal investigation into the firm's role in the largest Chapter 9 bankruptcy filing in U.S. history. On June 19, District Attorney Michael Capizzi dropped his investigation with no indictment after Merrill Lynch agreed to settle for $30 million.
A month after the settlement, Capizzi's office determined that there was no legal way to release the transcripts. The district attorney, joined by state Attorney General Dan Lungren, has opposed releasing documents in this case.
But Orange County - whose $2 billion securities fraud case is set to go to trial in September - is siding with the news media.
Merrill Lynch would not comment beyond its filing.
Although she had not read the latest round of papers, Karen Frederiksen, a lawyer who represents several news organizations, said Carter had the right to order the release of transcripts.
"There is no California statute that addresses this situation and, therefore, the court does have the discretion and inherent power to release the material," said Frederiksen, a partner with the Los Angeles law firm of Davis Wright & Tremaine.
