Under California law, the official transcript of a grand jury proceeding is released to the defendant when the indictment is issued (to permit the accused to know the basis for the charges). Penal Code section 938.1 provides that the transcript is to be released to the public 10 days later. Also, section 939.1 of the Penal Code permits (but does not require) judges to open grand jury proceedings to the public if the subject matter affects the public and involves corruption or dereliction of duty by public officials. 

    However, these provisions of California law stirred controversy in the late 1990s when grand jury transcripts were kept secret in two newsworthy cases: the indictment of the man accused of killing Ennis Cosby, actor Bill Cosby's son, and a criminal investigation of the role of Merrill Lynch in Orange County's $1.6 billion bankruptcy. 

    The judge handling the Cosby case simply refused to release the grand jury transcript, citing a loophole in section 938.1 which says, "If the court determines that there is a reasonable likelihood that making all or any part of the transcript public may prejudice a defendant's right to a fair and impartial trial, that part of the transcript shall be sealed until the defendant's trial has been completed." In spite of the objections of lawyers for the news media, Los Angeles Superior Court Judge John Reid declared that the entire transcript of the grand jury investigation in the Cosby case would remain secret until after the trial. 

    Public defenders representing the accused killer, Mikhail Markhasev, argued that the transcripts should remain secret because a grand jury only hears the case against the defendant and not the defendant's side of the story. Allowing the media to report on a grand jury proceeding would give the public a one-sided view of the case, they argued. 

    In the Orange County bankruptcy case, the Merrill Lynch stock brokerage firm contended that the grand jury transcript included much information about its business that was confidential and should not be released to the public. Media organizations, the county and others replied that the public had a right to know what role this giant Wall Street firm had played in the Orange County bankruptcy--the largest municipal bankruptcy in U.S. history. Merrill Lynch's quest for secrecy was especially controversial because the Orange County district attorney's office reached a controversial (and unusual) settlement with Merrill Lynch in which the firm agreed to pay $30 million without admitting any criminal wrongdoing. (Merrill Lynch later settled a civil lawsuit by agreeing to pay the county an additional $420 million to compensate for some of the county's losses in the bankruptcy.) 

    In 1998, a California appellate court ruled that the public had a right to see the grand jury transcript in the Merrill Lynch criminal investigation. In Merrill Lynch v. Superior Court, the appellate court rejected the idea that a potential criminal defendant could keep a grand jury transcript secret when it would normally be made public merely by paying a large sum of money to settle the case before an indictment could be issued. The court was clearly troubled by the implications of allowing secrecy in this case, given the enormous losses the public suffered in the Orange County bankruptcy. Although the law only provides for disclosure of a grand jury transcript after there is an indictment, the appellate court ruled that disclosure is also proper when there is a settlement before the grand jury can finish its work. 

     That ruling was quickly set aside and then overturned by the California Supreme Court.  In Daily Journal Corp. v. Superior Court, a 1999 decision, the high court held that grand jury 
transcripts can be made public only when statutory law allows it--and at no other time.  The court ruled unanimously that judges have no inherent power to release grand jury transcripts on their own authority.  "Grand jury secrecy is the rule and openness the exception, permitted only when specifically authorized by statute," Justice Stanley Mosk wrote for the court.

     The result:  a wealthy firm like Merrill Lynch can indeed "buy its way out" of embarrassing public relevations by agreeing to pay a large settlement to halt a criminal investigation before 
there is an indictment.  The law specifies that grand jury transcripts are only to be made public 10 days after an indictment.  The records of the investigation of the Orange County bankruptcy 
thus were kept sealed, denying the public any access to information about many details of the transactions that led up to this financial debacle.