The Inslaw Affair: Investigative Report by the Committee on

The Inslaw Affair: Investigative Report by the Committee on

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The Inslaw Affair: Investigative Report by the Committee on the Judiciary Together With Dissenting and Separate Views
September 10, 1992

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Union Calendar No. 491
102d Congress, 2d session

House Report 102-857

THE INSLAW AFFAIR

INVESTIGATIVE REPORT BY THE COMMITTEE ON THE JUDICIARY together with DISSENTING AND SEPARATE VIEWS

[part of the Great Seal of the United States here]

SEPTEMBER 10, 1992. -- Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1992

COMMITTEE ON THE JUDICIARY

JACK BROOKS, Texas, Chairman

DON EDWARDS, California HAMILTON FISH, Jr., New York
JOHN CONYERS, Jr., Michigan CARLOS J. MOORHEAD, California
ROMANO L. MAZZOLI, Kentucky HENRY J. HYDE, Illinois
WILLIAM J. HUGHES, New Jersey F. JAMES SENSENBRENNER, Jr.,
MIKE SYNAR, Oklahoma Wisconsin
PATRICIA SCHRODER, Colorado BILL McCOLLUM, Florida
BARNEY FRANK, Massachusetts GEORGE W. GEKAS, Pennsylvania
CHARLES E. SCHUMER, New York LAMAR S. SMITH, Texas
EDWARD F. FEIGHAN, Ohio CRAIG T. JAMES, Florida
HOWARD L. BERMAN, California TOM CAMPBELL, California
RICK BOUCHER, Virginia STEVEN SCHRIFF, New Mexico
HARLEY O. STAGGERS, JR., West Virginia JIM RAMSTAD, Minnesota
JOHN BRYANT, Texas GEORGE ALLEN, Virginia
MEL LEVINE, California
GEORGE E. SANGMEISTER, Illinois
CRAIG A. WASHINGTON, Texas
PETER HOAGLAND, Nebraska
MICHAEL J. KOPETSKI, Oregon
JACK F. REED, Rhode Island

JONATHAN R. YAROWSKY, General Counsel
ROBERT H. BRINK, Deputy General Counsel
JAMES E. LEWIN, Chief Investigator
JOHN D. COHEN, Investigator
ALLEN F. COFFEY, Jr., Minority Chief Counsel

Table of Contents:

• I. Summary
o A. INSLAW allegations
o B. Committee investigation
 1. Did the Department convert, steal or misappropriate the PROMIS software?
 2. Was there a high level conspiracy?
o C. Additional questions
o D. Evidence of possible coverup and obstruction
o E. Judge Bason's allegations against the Department
o F. Conclusion
• II. Committee Investigation, prior studies, hearings and subcommittee proceedings
• III. Conflicts between the Department and INSLAW result in the misappropriation of INSLAW's Enhanced PROMIS
o A. Project Manager Brewer: An inherent bias and potential conflict of interest
o B. Brewer and Videnieks threaten INSLAW
o C. INSLAW attempts to demonstrate enhancement ownership
o D. The Department misappropriated INSLAW's software
o E. INSLAW declares bankruptcy and pursues litigation
o F. District Court Judge William Bryant's decision on appeal of the Bankruptcy Court's ruling
Department's position against judge's decision is rebutted on appeal
o G. Appeals Court reverses INSLAW's victory on primarily jurisdictional grounds
o H. Department asserts erroneous position before DOTBCA
o I. Department encourages contract mediation while it hinders settlement
• IV. Significant questions remain unanswered about possible high level criminal conspiracy
o A. Allegations of conspiracy and intrigue continue to surround the INSLAW controversy
o B. Enhanced PROMIS may have been disseminated nationally and internationally
 1. Allegations that the Justice Department and Earl Brian conspired to distribute PROMIS
 2. Sworn statement of Michael Riconosciuto
 3. Other sources allege widespread distribution of INSLAW's Enhanced PROMIS
 4. Does the Government of Canada have the PROMIS software?
 5. Did the CIA assist in the sale of PROMIS?
 6. Allegations of PROMIS distribution to agencies within the Department
 7. Ronald LeGrand denies INSLAW's assertions
 8. the allegators
o C. Other important questions remain
 1. The death of Daniel Casolaro
 2. Possible connection between Earl Brian, Michael Riconosciuto, Robert Booth Nichols, and the Cabazon Indian Reservation
• V. Allegations of perjury, coverup, and retribution: A web of contradiction and deceit
o A. Judge Blackshear's recantation
o B. Judge Blackshear's statement to committee lacks credibility
o C. Committee analysis of attempt to assign Harry Jones to the INSLAW case
o D. Bason allegations against Blackshear not adequately considered
• VI. The Department has proven to be incapable of forthright investigation of the INSLAW matter
o A. Jensen failed to adequately investigate INSLAW's concerns
o B. OPR's INSLAW investigations are deficient
o C. GAO study of the Office of Professional Responsibility
o D. The Department did not seriously consider the need for an independent counsel
o E. Department's response to court findings of possible perjury
o F. INSLAW request for independent counsel
• VII. Top Department officials frustrated committee's investigation
o A. Department attempts to thwart committee inquiry
o B. Authorization and oversight hearings
o C. The Department reports key subpoenaed documents missing
o D. Department interferes with Michael Riconosciuto's sworn statement to the committee--refuses request to interview DEA agents
o E. Department official may have attempted to influence a key witness
• VIII. Judge Bason's allegations of Justice Department's improper influence on the judicial selection process
o A. Confidential memorandum
o B. Condition of the clerk's office under Judge Bason
o C. Department's attempts to have Bason removed from INSLAW case fail
• IX. Conclusion
• X. Findings
• XI. Recommendations
• Views: Dissenting views of Hon. Hamilton Fish, Jr., Hon. Carlos J. Moorhead, Hon. Henry J. Hyde, Hon. F. James Sensenbrenner, Jr., Hon. Bill McCollum, Hon. George W. Gekas, Hon. Tom Campbell, Hon. Steven Schiff, Hon. Jim Ramstad, and Hon George Allen
• Separate dissenting views of Hon. Tom Campbell
• Notes
• Index

The Hamiltons have contended that high level officials in the Department of Justice conspired to steal the PROMIS software system. As an element of this alleged theft, these officials, which included former Attorney General Edwin Meese and Deputy Attorney General Lowell Jensen, forced INSLAW into bankruptcy by intentionally creating a sham contract dispute over the terms and conditions of the contract which led to the withholding of payments due INSLAW by the Department. After driving the company into bankruptcy, the Hamiltons have claimed that Justice officials attempted to force the conversion of INSLAWs bankruptcy status from chapter 11 to chapter 7. They have stated that this change in bankruptcy status would have resulted in the forced sale of INSLAWs assets, including PROMIS, to a rival computer company called Hadron, Inc., which at this time was attempting to conduct a hostile buyout of INSLAW. Hadron, Inc., was controlled by the Biotech Capital Corporation which was under the control of Dr. Earl Brian, who was president and chairman of the corporation. This is the same company in which Mrs. Ursula Meese had invested with money loaned to her by Mr. Edwin Thomas, a mutual friend and associate of Mr. and Mrs. Meese and Dr. Brian. [103] The Hamiltons have asserted that even though the attempt to change the status of INSLAWs bankruptcy case was unsuccessful, the Enhanced PROMIS software system was eventually provided to Dr. Brian. This was allegedly done by individuals from the Department with the knowledge and concurrence of then Attorney General Meese who had earlier worked with Dr. Brian in the cabinet of California Governor Ronald Reagan and later at the Reagan White House. According to the Hamiltons, the ultimate goal of the conspiracy was to position Hadron, Inc., and the other companies owned or controlled by Dr. Brian, to take advantage of the nearly 3 billion dollars worth of automated data processing upgrade contracts planned to be awarded by the Department of Justice during the 1980s.

Mr. Meese and Dr. Brian served together in the cabinet of then California Governor Ronald Reagan from 1970 through 1974. Dr. Brian was the controlling shareholder in Biotech Capital Corporation which in turn had a substantial stake in a computer firm called Hadron, Inc. At that time, Dr. Brian was chairman and president of Biotech Capital Corporation and was on the board of directors of Hadron, Inc. The Hamiltons have asserted that after the election of 1980, Dr. Brian moved quickly to put Hadron, Inc., in a position to take advantage of ties to Mr. Meese and others in the newly elected administration. The Hamiltons have claimed that Hadron, Inc.s first post-election moves were to acquire companies supporting Federal law enforcement efforts to control the smuggling of drugs across the Mexican border. Hadron, Inc., entered into several Government contracts with U.S. Customs and various intelligence agencies. The Hamiltons have claimed that in April 1983, Dominic Laiti, president and chairman of Hadron, Inc., contacted them and attempted to purchase Enhanced PROMIS. When they declined to sell PROMIS, he told them that he had ways of making them sell. The Hamiltons have alleged that Mr. Laiti also told them that as a result of contacts at the highest level of the Reagan administration, including Edwin Meese, Hadron, Inc., was able to obtain the Federal Governments case management software business. The Hamiltons have asserted that after declining to sell the PROMIS system, INSLAW became the target of a hostile buyout attempt.

***

On March 25, 1987, Judge Blackshear stated, under oath, to INSLAW counsel that Mr. White told him that Mr. Stanton pressured Mr. White to move in court to convert the INSLAW bankruptcy from chapter 11 to chapter 7. Judge Blackshear also stated that Mr. Stanton planned to have Harry Jones loaned to Washington to manage the INSLAW case and to arrange for INSLAWs conversion. [230] As previously indicated, Judge Blackshear spoke with Judge Solomon on March 18, providing her an identical story on the key points of INSLAWs conversion and the Jones transfer to Washington.

Judge Blackshears Recantation: Judge Blackshear stated that he called Mr. White immediately after he gave his deposition to INSLAWs attorneys to discuss his statement. At that point, according to Judge Blackshear, Mr. White told Judge Blackshear that he was mistaken because they never discussed converting INSLAW. [231] The next morning, Judge Blackshear's attorney James Garrity, an assistant U.S. attorney received a call from Dean Cooper, a trial attorney in the Department's Civil Division. According to Mr. Garrity, Mr. Cooper told him that Judge Blackshear's statement was wrong, and the Department wanted something undertaken (such as a letter) to correct the error. Mr. Garrity spoke with Judge Blackshear by telephone, and Judge Blackshear took the advice of his attorney and decided to correct his alleged errors. [232] It is highly questionable how the Department could ethically represent both itself and Judge Blackshear in the INSLAW litigation. In effect, the Department was a defendant in the case while one of its attorneys (Mr. Garrity) at the same time was representing a key witness (Judge Blackshear) for the plaintiff (INSLAW).

***

Judge Bason concluded his comments by stating that: The acts of DOJ as described in the foregoing findings of fact were done in bad faith, vexatiously, in wanton disregard of the law and the facts, and for oppressive reasons to drive INSLAW out of business and to convert, by trickery, fraud and deceit, INSLAW's PROMIS software.

Apparently in response to Judge Bason's charges as well as INSLAWs request for the appointment of an independent counsel, Arnold Burns, the Deputy Attorney General, asked the Civil Division for advice on the question of the appointment of an outside party to review the INSLAW matter. The Deputy Assistant Attorney General of the Civil Division, Stuart Schiffer, wrote to Richard Willard, Assistant Attorney General, Civil Division, that the idea "would not achieve productive results." Both Mr. Schiffer and Mr. Willard agreed that taking this "extraordinary step" would only serve to highlight the matter and give those criticizing the Department an opportunity to argue that resorting to this remedy proved by inference that events warranted an investigation.

-- THE INSLAW AFFAIR: INVESTIGATIVE REPORT BY THE COMMITTEE ON THE JUDICIARY TOGETHER WITH DISSENTING AND SEPARATE VIEWS
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LETTER OF TRANSMITTAL

HOUSE OF REPRESENTATIVES
Washington, DC, September 10, 1992

HON. THOMAS S. FOLEY,
Speaker of the House of Representatives,
Washington, DC,

DEAR MR. SPEAKER: By direction of the Committee on the Judiciary, I submit herewith an investigative report entitled "The INSLAW Affair."

JACK BROOKS, Chairman
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Re: The Inslaw Affair: Investigative Report by the Committee

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THE INSLAW AFFAIR

SEPTEMBER 10, 1992. -- Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. BROOKS, from the Committee on the Judiciary, submitted the following

INVESTIGATIVE REPORT together with DISSENTING AND SEPARATE DISSENTING VIEWS BASED ON A STUDY BY THE FULL COMMITTEE

On August 11, 1992, the Committee on the Judiciary approved and adopted a report entitled, '"The INSLAW Affair." The chairman was directed to transmit a copy to the Speaker of the House.

I. SUMMARY

The Department of Justice has long recognized the need for a standardized management information system to assist law enforcement offices across the country in the recordkeeping and tracking of criminal cases. During the 1970s, the Law Enforcement Assistance Administration (LEAA) funded the development by INSLAW [1] of a computer software system called the Prosecutors Management Information System or PROMIS. This system was designed to meet the criminal prosecutor workloads of large urban jurisdictions; and by 1980, several large U.S. attorneys offices were using the PROMIS software. At this time, INSLAW (formerly called the Institute for Law and Social Research) was a nonprofit corporation funded almost entirely through Government grants and contracts. When President Carter terminated the LEAA, INSLAW converted the company to a for-profit corporation in 1981 to commercially market PROMIS. The new corporation made several significant improvements to the original PROMIS software and the resulting product came to be known as INSLAW's proprietary Enhanced PROMIS. The original PROMIS was funded entirely with Government funds and was in the public domain.

In March 1982, the Justice Department awarded INSLAW, Inc., a $10 million, 3-year contract to implement the public domain version of PROMIS at 94 U.S. attorneys offices across the country and U.S. Territories. While the PROMIS software could have gone a long way toward correcting the Department's longstanding need for a standardized case management system, the contract between INSLAW and Justice quickly became embroiled in bitterness and controversy which has lasted for almost a decade. The conflict centers on the question of whether INSLAW has ownership of its privately funded "Enhanced PROMIS." This software was eventually installed at numerous U.S. attorneys offices after a 1983 modification to the contract. While Justice officials at the time recognized INSLAW's proprietary rights to any privately funded enhancements to the original public domain version of PROMIS, the Department later claimed that it had unlimited rights to all software supplied under the contract. (See section of report entitled, "The Department Misappropriated INSLAW Software.")

INSLAW attempted to resolve the matter several times but was largely met with indifference or hostility by Department officials. Eventually, the Department canceled part of the contract and, by February 1985, had withheld at least $1.6 million in payments. As a result, the company was driven to the brink of insolvency and was threatened with dissolution under chapter 7 of the bankruptcy laws. Department officials have steadfastly claimed the INSLAW controversy is merely a contract dispute which has been blown out of proportion by the media. INSLAW's owners, William and Nancy Hamilton, however, have persisted in their belief that the Department's actions were part of a high level conspiracy within Justice to steal the Enhanced PROMIS software.

A. INSLAW ALLEGATIONS

Based on their knowledge and belief, the Hamiltons have alleged that high level officials in the Department of Justice conspired to steal the Enhanced PROMIS software system. As an element of this theft, these officials, who included former Attorney General Edwin Meese and Deputy Attorney General Lowell Jensen, forced INSLAW into bankruptcy by intentionally creating a sham contract dispute over the terms and conditions of the contract which led to the withholding of payments due INSLAW by the Department. The Hamiltons maintain that, after driving the company into bankruptcy, Justice officials attempted to force the conversion of INSLAW's bankruptcy status from Chapter 11: Reorganization to Chapter 7: Liquidation. They assert that such a change in bankruptcy status would have resulted in the forced sale of INSLAW's assets, including Enhanced PROMIS to a rival computer company called Hadron, Inc., which, at the time, was attempting to conduct a hostile buyout of INSLAW. Hadron, Inc., was controlled by the Biotech Capital Corporation, under the control of Dr. Earl Brian, who was president and chairman of the corporation. The Hamiltons assert that even though the attempt to change the status of INSLAW's bankruptcy was unsuccessful, the Enhanced PROMIS software system was eventually provided to Dr. Brian by individuals from the Department with the knowledge and concurrence of then Attorney General Meese who had previously worked with Dr. Brian in the cabinet of California Governor Ronald Reagan and later at the Reagan White House. According to the Hamiltons, the ultimate goal of the conspiracy was to position Hadron and the other companies owned or controlled by Dr. Brian to take advantage of the nearly 3 billion dollars worth of automated data processing upgrade contracts planned to be awarded by the Department of Justice during the 1980s.

Information obtained by the Hamiltons through sworn affidavits of several individuals, including Ari Ben-Menashe, a former Israeli Mossad officer, and Michael Riconosciuto, an individual who claims to have ties to the intelligence community, indicated that an element of this ongoing criminal enterprise by Mr. Meese, Dr. Brian and others included the modification of the Enhanced PROMIS software by individuals associated with the world of covert intelligence operations. The Hamiltons claim the modification of Enhanced PROMIS was an essential element of the enterprise, because the software was subsequently distributed by Dr. Brian to intelligence agencies internationally with a "back door" software routine, so that U.S. intelligence agencies could covertly break into the system when needed. The Hamiltons also presented information indicating that PROMIS had been distributed to several Federal agencies, including the FBI, CIA, and DEA.

B. COMMITTEE INVESTIGATION

Due to the complexity and breadth of the INSLAW allegations against the Department of Justice, the committees investigation focused on two principal questions: (1) Did high level Department officials convert, steal or otherwise misappropriate INSLAW's PROMIS software and attempt to put the company out of business; and, (2) did high level Department of Justice officials, including Attorney General Edwin Meese and then Deputy Attorney General Lowell Jensen, and others conspire to sell, transfer, or in any way distribute INSLAW's Enhanced PROMIS to other Federal agencies and foreign governments?

1. DID THE DEPARTMENT CONVERT, STEAL OR MISAPPROPRIATE THE PROMIS SOFTWARE?

With regard to the first question, there appears to be strong evidence, as indicated by the findings in two Federal court proceedings as well as by the committee investigation, that the Department of Justice "acted willfully and fraudulently," [2] and "took, converted and stole," [3] INSLAW's Enhanced PROMIS by "trickery, fraud and deceit." [4] It appears that these actions against INSLAW were implemented through the project manager from the beginning of the contract and under the direction of high level Justice Department officials.

Just 1 month after the contract was signed, Mr. C. Madison "Brick" Brewer, the PROMIS project manager, raised the possibility of canceling the INSLAW contract. During an April 14, 1982, meeting of the PROMIS Project Team, Mr. Brewer, and others discussed terminating the contract with INSLAW for convenience of the Government. Mr. Brewer did not recall the details of the meeting but said that if this recommendation was made, it was made "in jest." [5] Based on notes taken at this meeting by Justice officials, Bankruptcy Court Judge George Bason found that Mr. Brewers recommendation to terminate the INSLAW contract, ". . . constituted a smoking gun that clearly evidences Brewers intense bias against INSLAW, his single-minded intent to drive INSLAW out of business . . .." [6] By his own admission, Mr. Brewer became upset when INSLAW claimed that it had made enhancements to the public domain version of PROMIS using private funds. In his view, under the contract all versions of PROMIS were the Governments property. It is clear from the record that Mr. Brewer and Mr. Videnieks (the PROMIS contracting officer), supported by high level Justice officials continued to confront INSLAW at every turn. As Senior District Court Judge Bryant stated in his ruling on the case: "There was unending contention about payments under this contract and the rights of the respective parties."

Over the life of the contract, INSLAW made several attempts to reach an agreement with the Department over its proprietary rights to the Enhanced PROMIS software. The Department, however, steadfastly refused to conduct any meaningful negotiations and exhibited little inclination to resolve the controversy. In the meantime, INSLAW was pushed to the brink of financial ruin because the Department withheld at least $1.6 million in critical contract payments on questionable grounds, and in February 1985 was forced to file for protection under chapter 11 of the Bankruptcy Code in order to stay economically viable. INSLAW at this time had installed PROMIS at the 20 largest U.S. attorneys offices across the country as required by the contract. [7] The Department had earlier canceled installation of PROMIS at the 74 smaller offices.

While refusing to engage in good faith negotiations with INSLAW, Mr. Brewer and Mr. Videnieks, with the approval of high level Justice Department officials, proceeded to take actions to misappropriate the Enhanced PROMIS software. These officials knew that INSLAW had installed Enhanced PROMIS at the 20 sites. Yet, without notice, and certainly without permission, the Department of Justice illegally copied INSLAW's Enhanced PROMIS software and installed it eventually at 25 additional U.S. attorneys offices. The Department reportedly also brought another 31 U.S. attorneys offices "on-line" to Enhanced PROMIS systems via telecommunications. INSLAW first learned of these unauthorized actions in September 1985, and notified the Department that it must remove the Enhanced PROMIS software or arrange for license agreements. When the Department refused, INSLAW subsequently filed a claim against Justice in the Federal Bankruptcy Court which eventually led to the Bankruptcys Courts finding that the Department's actions ". . . were done in bad faith, vexatiously, in wanton disregard of the law and the facts, and for oppressive reasons . . . to drive INSLAW out of business and to convert, by trickery, fraud and deceit, INSLAW's PROMIS software." When the case was appealed by the Department, Senior District Court Judge William Bryant concurred with the Bankruptcy Court and was very critical of the Department's handling of the case. In his ruling, at 49a, Judge Bryant stated:

The Government accuses the bankruptcy court of looking beyond the bankruptcy proceeding to find culpability by the Government. What is strikingly apparent from the testimony and depositions of key witnesses and many documents is that INSLAW performed its contract in a hostile environment that extended from the higher echelons of the Justice Department to the officials who had the day-to-day responsibility for supervising its work. (Emphasis added.)


Recently, the posture of some Department officials has been to attempt to exonerate the Department's handling of the INSLAW matter by citing the fact that the Court of Appeals has vacated the Bankruptcy and District Courts judgment involving illegal misconduct of the Department including violations of the automatic stay provisions of the Bankruptcy Code. However, the D.C. Circuits opinion was grounded primarily on jurisdictional questions and did not address the substantive merits of the findings of fact and conclusions of law of either the Bankruptcy Court or the ruling of the U.S. District Court.

Based on the facts presented in court and the committees review of Department records, it does indeed appear that Justice officials, including Mr. Brewer and Mr. Videnieks, never intended to fully honor the proprietary rights of INSLAW or bargain in good faith with the company. The Bankruptcy Court found that:

. . . (The Department) engaged in an outrageous, deceitful, fraudulent game of cat and mouse, demonstrating contempt for both the law and any principle of fair dealing. (Finding No. 266 at 138.)


As the Bankruptcy and District Courts found on the merits, it is very unlikely that Mr. Brewer and Mr. Videnieks acted alone to violate the proprietary rights of INSLAW in this matter. In explaining his own actions, Mr. Brewer, the project manager, has repeatedly stated that he was not acting out any personal vendetta against INSLAW and that high level Department officials including Lowell Jensen were aware of every decision he made with regard to the contract. Mr. Brewer stated, under oath that ". . . there was somebody in the Department at a higher level, looking over the shoulder of not just me but the people who worked for me . . . ." [8] The PROMIS Oversight Committee, headed by Deputy Attorney General Lowell Jensen, kept a close watch over the administration of the contract and was involved in every major decision. Mr. Jensen, who worked with former Attorney General Edwin Meese in the Alameda County district attorneys offices, stated under oath that he kept the Attorney General regularly informed of all aspects of the INSLAW contract. The PROMIS Oversight Committee readily agreed with Mr. Brewers recommendation to cancel part of INSLAW's contract for default because of the controversy regarding the installation of PROMIS in word processing systems at the 74 smaller U.S. attorneys offices. Mr. Brewers proposal was ultimately rejected only because a Justice contracts attorney advised the oversight committee that the Department did not have the legal authority to do so. Curiously, the recommendation to find INSLAW in default occurred shortly after INSLAW and the Department signed a modification to the contract (Mod. 12), which was supposed to end the conflict over proprietary rights.

Mr. Jensen, who is currently a Federal District Court judge in San Francisco, served at the Justice Department successively as Assistant Attorney General in charge of the Criminal Division, Associate Attorney General and Deputy Attorney General between 1981 and 1986. The Bankruptcy Court found that he "had a previously developed negative attitude about PROMIS and INSLAW" from the beginning (Findings No. 307-309) because he had been associated with the development of a rival case management system while he was a district attorney in California, and that this experience, at the very least, affected his judgment throughout his oversight of the contract. During a sworn statement, Judge Jensen denied being biased against INSLAW, but averred that he did not have complete recollection of the events surrounding his involvement in the contract. However, based on the committees own investigation it is clear that Judge Jensen was not particularly interested or active in pursuing INSLAW's claims that Department officials were biased against the company and had taken action to harm the company. Perhaps most disturbing, he remembered very few details of the PROMIS Oversight Committee meetings even though he had served as its chairman and was certainly one of its most influential members. He stated that after a meeting with former Attorney General Elliot Richardson (representing INSLAW) regarding the alleged Brewer bias, he commissioned his deputy, Mr. Jay Stephens, to conduct an investigation of the bias charges. Based on this investigation, Judge Jensen said he concluded that there were no bias problems associated with the Department's handling of the INSLAW contract.

This assertion, however, contradicted Mr. Stephens, who testified during a sworn statement that he was never asked by Judge Jensen to conduct an investigation of the Brewer bias allegations raised by Mr. Richardson and others. Mr. Stephens recollection of the events was sharp and complete in stark contrast to Judge Jensens. As a result, many questions remain about the accuracy and completeness of Judge Jensens recollections and statements. As for the PROMIS Oversight Committee, committee investigators were told that detailed minutes were not kept at any of the meetings, nor was there any record of specific discussions by its members affecting the INSLAW contract. The records that were available were inordinately sparse and often did not include any background of how and why decisions were made.

To date, former Attorney General Meese denies having knowledge of any bias against INSLAW by the Department or any of its officials. He stated, under oath, that he had little, if any, involvement with the INSLAW controversy and that he recalls no specific discussion with anyone, including Department officials about INSLAW's contract with Justice regarding the use or misuse of the PROMIS software. This statement is in direct conflict with Judge Jensens testimony, that he briefed Mr. Meese regularly on this issue and that Mr. Meese was very interested in the details of the contract and negotiations.

One of the most damaging statements received by the committee is a sworn statement made by Deputy Attorney General Arnold Burns to Office of Professional Responsibility (OPR) investigators in 1988. In this statement, Mr. Burns stated that Department attorneys had already advised him (sometime in 1986) that INSLAW's claim of proprietary rights in the Enhanced PROMIS software was legitimate and that the Department had waived any rights in these enhancements. Mr. Burns was also told by Justice attorneys that the Department would probably lose the case in court on this issue. Accepting this statement, it is incredible that the Department, having made this determination, would continue to pursue its litigation of these matters. More than $1 million has been spent in litigation on this case by the Justice Department even though it knew in 1986 that it did not have a chance to win the case on merits. This clearly raises the specter that the Department actions taken against INSLAW in this matter represent an abuse of power of shameful proportions.

2. WAS THERE A HIGH LEVEL CONSPIRACY?

The second phase of the committees investigation concentrated on the allegations that high level officials at the Department of Justice conspired to drive INSLAW into insolvency and steal the PROMIS software so it could be used by Dr. Earl Brian, a former associate and friend of then Attorney General Edwin Meese. Dr. Brian is a businessman and entrepreneur who owns or controls several businesses including Hadron, Inc., which has contracts with the Justice Department, CIA, and other agencies. The Hamiltons and others have asserted that Dr. Brian conspired with high level Justice officials to sell PROMIS to law enforcement and intelligence agencies worldwide.

Former Attorney General Elliot Richardson, counsel to INSLAW, has alleged that the circumstances involving the theft of the PROMIS software system constitute a possible criminal conspiracy involving Mr. Meese, Judge Jensen, Dr. Brian, and several current and former officials at the Department of Justice. Mr. Richardson maintains that the individuals involved in the theft of the Enhanced PROMIS system have violated a plethora of Federal criminal statutes, including but not limited to: (1) 18 U.S.C 654 (officer or employee of the United States converting the property of another); (2) 18 U.S.C 1001 (false statements); (3) 18 U.S.C 1621 (perjury); (4) 18 U.S.C 1503 (obstruction of justice); (5) 18 U.S.C 1341 (mail fraud) and (6) 18 U.S.C. 371 (conspiracy to commit criminal offenses). Mr. Richardson further contends that the violations of Federal law associated in the theft of Enhanced PROMIS, the subsequent coverup and the illegal distribution of PROMIS fulfill the requirements for prosecution under 18 U.S.C. 1961 et seq. (the Racketeer Influenced and Corrupt Organizations (RICO) statute).

As discussed earlier, the committees investigation largely supports the findings of two Federal courts that the Department "took, converted, stole" INSLAW's Enhanced PROMIS by "trickery, fraud and deceit," and that this misappropriation involved officials at the highest levels of the Department of Justice. The recent ruling by the D.C. Circuit Court of Appeals does nothing to vitiate those conclusions, the product of an extensive record compiled under oath by two Federal jurists. While the Department continues to attempt to explain away the INSLAW matter as a simple contract dispute, the committees investigation has uncovered other information which plausibly could suggest a different conclusion if full access to documents and other witnesses were permitted. Several individuals have stated under oath that the Enhanced PROMIS software was stolen and distributed internationally in order to provide financial gain to Dr. Brian and to further intelligence and foreign policy objectives for the United States. While it should be acknowledged at the outset that some of the testimony comes from individuals whose past associations and enterprises are not commendable, corroborating evidence for a number of their claims made under oath has been found. It should be observed that these individuals provided testimony with the full knowledge that the Justice Department could and would probably be strongly inclined to prosecute them for perjury if they lied under oath. Moreover, we note that the Department is hardly in a position to negate summarily testimony offered by witnesses who have led less than an exemplary life in their choice of associations and activities. As indicated by the recent prosecution of Manuel Noriega, which involved the use of over 40 witnesses, the majority of whom were previously convicted drug traffickers, a witness perceived credibility is not always indicative of the accuracy or usability in court of the information provided. Although the committees investigation could not reach a definitive conclusion regarding a possible motive behind the misappropriation of the Enhanced PROMIS software, the disturbing questions raised, unexplained coincidences and peculiar events that have surfaced throughout the INSLAW case raises the need for further investigation.

One area which requires further investigation is the allegations made by Mr. Michael Riconosciuto. Mr. Riconosciuto, a shady character allegedly tied to U.S. intelligence agencies and recently convicted on drug charges, alleges that Dr. Brian and Mr. Peter Videnieks secretly delivered INSLAW's Enhanced PROMIS software to the Cabazon Indian Reservation, located in California, for "refitting" for use by intelligence agencies in the United States and abroad. [9] When Dr. Brian was questioned about his alleged involvement in the INSLAW case, he denied under oath that he had ever met Mr. Riconosciuto and stated that he had never heard of the Cabazon Indian Reservation.

C. ADDITIONAL QUESTIONS

Suspicions of a Department of Justice conspiracy to steal INSLAW's PROMIS were fueled when Danny Casolaro an investigative writer inquiring into those issues was found dead in a hotel room in Martinsburg, WV, where he was to meet a source that he claimed was critical to his investigation. Mr. Casolaros body was found on August 10, 1991, with his wrists slashed numerous times. Following a brief preliminary investigation by local authorities, Mr. Casolaros death was ruled a suicide. The investigation was reopened later as a result of numerous inquiries from Mr. Casolaros brother and others regarding the suspicious circumstances surrounding his death.

The Martinsburg Police investigation subsequently concluded in January 1992, that Mr. Casolaros death was a suicide. Subsequently, Chairman Brooks directed committee investigators to obtain sworn statements from the FBI agent and two former Federal Organized Crime Strike Force prosecutors in Los Angeles who had information bearing on the Casolaro case. Sworn statements were obtained from former Federal prosecutors Richard Stavin and Marvin Rudnick on March 13 and 14, 1992. After initial resistance from the Bureau, a sworn statement was taken from FBI Special Agent Thomas Gates on March 25 and 26, 1992.

Special Agent Gates stated that Mr. Casolaro claimed he had found a link between the INSLAW matter, the activities taking place at the Cabazon Indian Reservation, and a Federal investigation in which Special Agent Gates had been involved regarding organized crime influence in the entertainment industry.

Special Agent Gates stated that Mr. Casolaro had several conversations with Mr. Robert Booth Nichols in the weeks preceding his death. Mr. Nichols, according to documents submitted to a Federal court by the FBI, has ties with organized crime and the world of covert intelligence operations. When he learned of Mr. Casolaros death, Special Agent Gates contacted the Martinsburg, WV, Police Department to inform them of the information he had concerning Mr. Nichols and Mr. Casolaro. The Martinsburg Police have not commented on whether or not they eventually pursued the leads provided by Special Agent Gates.

Based on the evidence collected by the committee, it appears that the path followed by Danny Casolaro in pursuing his investigation into the INSLAW matter brought him in contact with a number of dangerous individuals associated with organized crime and the world of covert intelligence operations. The suspicious circumstances surrounding his death have led some law enforcement professionals and others to believe that his death may not have been a suicide. As long as the possibility exists that Danny Casolaro died as a result of his investigation into the INSLAW matter, it is imperative that further investigation be conducted.

D. EVIDENCE OF POSSIBLE COVERUP AND OBSTRUCTION

One of the principal reasons the committee could not reach any definitive conclusion about INSLAW's allegations of a high criminal conspiracy at Justice was the lack of cooperation from the Department.
Throughout the two INSLAW investigations, the Congress met with restrictions, delays and outright denials to requests for information and to unobstructed access to records and witnesses since 1988. The Department initially attempted to prevent the Senate Permanent Subcommittee on Investigations from conducting an investigation of the INSLAW affair. During this committees investigation, Attorney General Thornburgh repeatedly reneged on agreements made with this committee to provide full and open access to information and witnesses. Although the day before a planned committee meeting to consider the issuance of a subpoena the Department promised full access to documents and witnesses, the committee was compelled to subpoena Attorney General Thornburgh to obtain documents needed to complete its investigation. Even then, the Department failed to provide all the documents subpoenaed, claiming that some of the documents held by the Department's chief attorney in charge of the INSLAW litigation had been misplaced or accidentally destroyed. The Department has not provided a complete accounting of the number of documents missing nor has it conducted an investigation to determine if the documents were stolen or illegally destroyed.

Questions regarding the Department's willingness and objectivity to investigate the charges of possible misconduct of Justice employees remain. That Justice officials may have too readily concluded that witnesses supporting the Department's position were credible while those who did not were ignored or retaliated against was, perhaps, most painfully demonstrated with the firing of Anthony Pasciuto, the former Deputy Director, Executive Office of the U.S. Trustees.

Mr. Pasciuto had informed the Hamiltons that soon after INSLAW filed for chapter 11 bankruptcy in 1985, the Justice Department had planned to petition the court to force INSLAW into chapter 7 bankruptcy and liquidate its assets including the PROMIS software. His source for this information was Judge Cornelius Blackshear who, at the time, was the U.S. Trustee for the Southern District of New York. Judge Blackshear subsequently provided INSLAW's attorneys with a sworn statement confirming what Mr. Pasciuto had told the Hamiltons. However, following a conversation with a Justice Department attorney who was representing the Department in the INSLAW case, [10] Judge Blackshear recanted his earlier sworn statement. Moreover, Judge Blackshear, under oath, could not or would not provide committee investigators with a plausible explanation of why he had recanted his earlier statements to INSLAW, Mr. Pasciuto and others regarding the Justice Department's efforts to force INSLAW out of business. He did confirm an earlier statement attributed to him that his recantation was a result of "his desire to hurt the least number of people." However, he would not elaborate on this enigmatic statement.

Similarly, Mr. Pasciuto, under strong pressure from senior Department officials, recanted his statement made to the Hamiltons regarding Judge Blackshear. It appears that Mr. Pasciuto may have been fired from his position with the Executive Office of U.S. Trustees because he had provided information to the Hamiltons and their attorneys which undercut the Department's litigating position before the Bankruptcy Court. [11] This action was based on a recommendation made by the Office of Professional Responsibility (OPR). In a memorandum to Deputy Attorney General Burns, dated December 18, 1987, the OPR concluded that:

In our view, but for Mr. Pasciutos highly irresponsible actions, the department would be in a much better litigation posture than it presently finds itself. Mr. Pasciuto has wholly failed to comport himself in accordance with the standard of conduct expected of an official of his position.


Mr. Pasciuto now states he regrets having allowed himself to be coerced by the Department into recanting and has stated under oath to committee investigators that he stands by his earlier statements made to the Hamiltons that Judge Blackshear had informed him that the Department wanted to force INSLAW out of business. Certainly, Mr. Pasciutos treatment by the Department during his participation in the INSLAW litigation raises serious questions of how far the Department will go to protect its interests while defending itself in litigation. Not unexpectedly, Mr. Pasciutos firing had a chilling effect on other potential Department witnesses who might have otherwise cooperated with the committee in this matter. Judge Blackshear, on the other hand, was not accused of wrongdoing by the Department even though he originally provided essentially the same information as had Mr. Pasciuto.


Despite this series of obvious reversals, the Department, after limited investigation, has apparently satisfied itself that the sworn statements of its witnesses, including Judge Blackshear, have somehow been reconciled on key issues such that no false statements have been made by any of these individuals. This position is flatly in opposition to the Bankruptcy Courts finding that several Department officials may have perjured themselves which was never seriously investigated by the Department. In addition, there are serious conflicts and inconsistencies in sworn statements provided to the committee that have not been resolved. Equally important, the possibility that witnesses testimony were manipulated by the Department in order to present a "united front" to the Congress and the public on the INSLAW case needs to be fully and honestly explored. The potential for a conflict of interest in the Department's carrying out such an inquiry is high, if not prudently manifest, and independent scrutiny is required.

E. JUDGE BASON'S ALLEGATIONS AGAINST THE DEPARTMENT

Judge Bason testified, under oath, before the Economic and Commercial Law Subcommittee that the Department's actions against its critics may have extended into blocking his reappointment as a bankruptcy judge in 1988 because of his ruling in INSLAW's case. Judge Bason was replaced by Martin Teel, Jr., who, prior to his appointment, was a Justice Department attorney heavily involved in the Department's litigation of the INSLAW case. [12]
The committee was unable to substantiate Judge Bason's charges. If such undue influence did occur, it was subtle and lost in the highly private manner in which judge selection procedures are conducted. While sworn statements were not taken, the committee investigators interviewed several of the judges involved in the selection process. The judges who agreed to provide interviews all stated that they had little firsthand knowledge in which to evaluate the candidates, including the incumbent judge. As a result, the members of the Judicial Council had to rely on the findings of the Merit Selection Panel headed by Judge Norma Johnson.

The Merit Selection Panels findings were provided to the Judicial Council by Judge Johnson whose oral presentation was instrumental in the final selection. Judge Johnson had previously worked at the Department of Justice with Stuart Schiffer, who led the Department's attempt to have the District Court remove Judge Bason from the INSLAW case. Mr. Schiffer is also the official who argued vociferously against the appointment of an independent counsel on the INSLAW case in a memorandum to Deputy Attorney General Arthur Burns. Judge Johnson also served in the D.C. Superior Court with Judge Tim Murphy from 1970 through 1980. Judge Murphy subsequently worked directly for Mr. Brewer on the PROMIS contract. The committee, however, has not at this date found any evidence that Judge Johnson had specific discussions with Mr. Schiffer or anyone else at the Department of Justice about Judge Bason, the INSLAW case or the bankruptcy judicial selection process.

The committees investigation revealed that the selection process was largely informal, undocumented and highly subjective. For example, several members of the Judicial Council indicated that one of the primary factors influencing the nonreappointment of Judge Bason, was the poor administrative condition of his court. These same members admitted that they had no firsthand knowledge of the administrative condition and based this opinion on the reports of the Merit Selection Panel and Judge Johnson. This was corroborated by the discovery of a confidential memorandum written by a member of the Merit Selection Panel which was highly critical of Judge Bason and the administrative condition of the Bankruptcy Court. While this memorandum had been seen by several judges during the selection process, committee investigators were unable to determine who authored it. The committees investigation did not reveal any evidence to support the criticisms raised in the memorandum. Martin Bloom, Clerk of the Bankruptcy Court, indicated in his sworn statement to committee investigators that under Judge Bason, the administrative condition of the court vastly improved. These sentiments were echoed by Chief Judge Aubrey Robinson who consistently complimented Judge Bason on his efforts to improve the administrative condition of the Bankruptcy Court in his remarks to the Annual Judicial Conference.

[b]F. CONCLUSION

The history of the Department's behavior in the INSLAW case dramatically illustrates its (1) reflexive hostility and "circle the wagons" approach toward outside investigations; (2) inability or unwillingness to look objectively at charges of wrongdoing by high level Justice officials, particularly when the agency itself is a defendant in litigation; and, (3) belligerence toward Justice employees with views that run counter to those of the agencys upper management. The fact that the Department failed to recognize a need for an independent investigation of the INSLAW matter for more than 7 years is remarkable. Failure to do so has effectively shielded officials who may have committed wrongdoing from investigation and prosecution.

As already documented and confirmed by two Federal judges, the Department's actions in the INSLAW case have greatly harmed the company and its owners. These actions, as they pertain to the dispute with INSLAW over the misappropriation of the PROMIS software, were taken with the full knowledge and support of high level Justice officials. The harm to the company was further perpetuated by succeeding high level officials, such as former Attorney General Richard Thornburgh, who not only failed to objectively investigate the serious charges raised by the Hamiltons and their attorney, former Attorney General Elliot Richardson, but also delayed and rebuffed effective and expeditious outside investigation of the matter by Congress.

The Department of Justice is this nations most visible guarantor of the notion that wrongdoing will be sought out and punished irrespective of the identity of the actors involved. Moreover, its mandate is to protect all private citizens from illegal activities that undermine the public trust. The Department's handling of the INSLAW case has seriously undermined its credibility and reputation in playing such a role. Congress and the executive must take immediate and forceful steps to restore public confidence and faith in our system of justice, which cannot be undermined by the very agent entrusted with enforcement of our laws and protections afforded every citizen. In view of the history surrounding the INSLAW affair and the serious implications of evidence presented by the Hamiltons, two court proceedings in the judicial branch and the committees own investigation, there is a clear need for further investigation. The committee believes that the only way in which INSLAW's allegations can be adequately and fully investigated is by the appointment of an independent counsel. The committee is aware that on November 13, 1991, Attorney General Barr appointed Nicholas Bua, a retired Federal judge from Chicago, as his special counsel to investigate and advise him on the INSLAW controversy. The committee eagerly awaits Judge Buas findings; however, as long as the investigation of wrongdoing by former and current high level Justice officials remains under the ultimate control of the Department itself, there will always be serious doubt about the objectivity and thoroughness of the inquiry.
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Re: The Inslaw Affair: Investigative Report by the Committee

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II. COMMITTEE INVESTIGATION, PRIOR STUDIES, HEARINGS AND SUBCOMMITTEE PROCEEDINGS

On December 5, 1990, Chairman Brooks convened a hearing of the Subcommittee on Economic and Commercial Law to review Attorney General Thornburghs repeated refusal to provide the committee full and open access to all INSLAW documents and records. Representatives from the GAO, Mr. Steven R. Ross, the General Counsel to the Clerk of the U.S. House of Representatives (accompanied by Mr. Charles Tiefer, Deputy General Counsel, and Mr. Michael Long, Assistant Counsel), former Attorney General Elliot L. Richardson (of Milbank, Tweed, Hadley & McCloy), Mr. William and Mrs. Nancy Hamilton (INSLAW's corporate officers), and Judge George F. Bason testified at the hearing. [13]

Messrs. Richardson and Hamilton outlined their allegations of a criminal conspiracy in the Department's handling of the INSLAW contract and the theft of the Enhanced PROMIS software. Judge Bason testified that he believed that his failure to be reappointed as bankruptcy judge was the result of improper influence on the court selection process by the Justice Department because of his findings in favor of INSLAW in its bankruptcy proceedings. Mr. Ross refuted the Justice Department's rationale for withholding documents related to possible wrong doing by Justice officials involved with the INSLAW contract. GAO representatives described a wide range of deficiencies in the Department's Information Resources Management Office and its administration of the ADP contracts.

After the December 1990 hearing, the Attorney General once again vowed to cooperate with the committee. By June 1991 however, it was clear that the Department was not going to provide the committee with a substantial number of the documents that had been requested. As a result, Committee Chairman Brooks announced plans to address this and other issues related to INSLAW at the full committee hearings on the Department of Justice Authorization for Appropriations hearings scheduled for July 11 and 18, 1991.

On July 11, 1991, Congressman John Conyers, Jr., chairman of the Government Operations Committee; Congressman Frank Horton, the ranking minority member of that committee; and Congressman Robert Wise, Jr., chairman of the Subcommittee on Government Information, Justice, and Agriculture, testified before the committee. Also appearing before the committee were Mr. Steven Ross, General Counsel to the Clerk of the U.S. House of Representatives; Charles Tiefer, Deputy General Counsel to the Clerk; and GAO officials: Milton Socolar, Richard Steiner, and Richard Fogel.

The Attorney General, who was scheduled to appear before the committee on July 18, 1991, was asked to be prepared to provide an executive branch perspective on the interbranch conflicts over GAO and Judiciary Committee access to Department documents, and to discuss the INSLAW case. [14]

On July 18, 1991, the committee reconvened to review the Department's fiscal year 1992 authorization for appropriations request and to hear the testimony of Attorney General Thornburgh. However, according to the chairman, the Attorney General notified the committee the night before the hearing that he refused to attend on the grounds that the committee press release announcing the hearing had been unduly aggressive and contentious and not in keeping with the tenor of an oversight hearing. The chairman added that "the Attorney General seems to be objecting to a robust interchange of views that is an essential part of the give-and-take at the heart of the political process."

On July 25, 1991, the Subcommittee on Economic and Commercial Law met to authorize the issuance of two subpoenas to the Department of Justice; one for INSLAW documents and the other for a copy of an Office of Legal Counsel Opinion regarding FBIs authority to arrest individuals overseas. The subcommittee authorized issuance of a subpoena by a vote of 10 to 6. [15] On July 31, 1991, the Subcommittee on Economic and Commercial Law received most of the subpoenaed INSLAW documents from the Attorney General. The Department however, claimed that 51 documents or files were missing and could not be found. [16] To date, the subcommittee has not received an adequate explanation from the Department on how the documents came to be missing. [17]
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Re: The Inslaw Affair: Investigative Report by the Committee

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Part 1 of 2

III. CONFLICTS BETWEEN THE DEPARTMENT AND INSLAW RESULT IN THE MISAPPROPRIATION OF INSLAW'S ENHANCED PROMIS

On November 2, 1981, the Department issued a request for proposals (RFP) for installing public domain PROMIS on minicomputers and word processors. Prior to the issuance of the RFP, several vendors, including INSLAW, advised the Department not to try to perform PROMIS functions on word processing equipment because the case management activities were computation-intensive and needed to be performed on full function microcomputers. [18]

One reason why such an approach was inherently flawed was because PROMIS involved over 500,000 lines of Common Business Oriented Language (COBOL) program code and required a very large-capacity computer at that time. INSLAW further advised the Department to move toward the use of full function microcomputers that could perform both case management and word processing. However, word processors remained in the Department's plan. Only 2 of the 104 firms that requested the RFP submitted proposals in the 30 days allowed INSLAW and Systems Architects, Inc. INSLAW was selected for the contract since Systems Architects, Inc., was considered to be non-responsive to the RFP. [19]

Even before the contract was awarded, there was discussion between the Department and INSLAW over a period of 2 months on the subject of public domain software as opposed to privately funded enhancements. INSLAW was explicit in stating to the Department that its version of PROMIS had been enhanced with private funds and future enhancements funded outside the Department's contract were expected. [20]

In March 1982, INSLAW was awarded a $10 million, 3-year contract to install the public domain version of PROMIS on minicomputers in 20 large U.S. attorneys offices and on word processors in 74 smaller offices. According to Judge Bryant, of the U.S. District Court for the District of Columbia, in commenting on the Department's appeal of the Bankruptcy Courts ruling:

. . . the contract sought proposal for (1) implementing the computerized "pilot version" of PROMIS as supplemented by the BJS (Bureau of Justice Statistics) enhancements in 20 "large" U.S. attorneys offices; (2) creating and implementing a noncomputerized version of that software for word processors in the remaining U.S. attorneys offices; and (3) providing necessary training, maintenance and support for 3 years. [21]


Shortly after receiving the contract to implement PROMIS at the 94 U.S. attorneys offices, INSLAW's counsel sent a detailed letter to Mr. Stanley Morris, then an Associate Deputy Attorney General at the Department. This letter, with an attached memorandum written by Mr. Hamilton, notified the Department of INSLAW's intent to market an enhanced version of PROMIS as a fee-generating product to public and private sector customers. [22] This claim to exclusive proprietary rights by INSLAW would naturally require the Department to pay INSLAW license fees if it chose to use Enhanced PROMIS. INSLAW based this claim on the fact that several non-Federal sources paid for continued funding of PROMIS development and implementation. [23]

As detailed by the Bankruptcy Court in its chronology of events surrounding the INSLAW matter, Mr. C. Madison (Brick) Brewer had just assumed the departmental position of PROMIS project manager at the time of contract award. Mr. Brewer reacted negatively to INSLAW's efforts to protect its proprietary interest and in retaliation considered canceling the Department's contract with INSLAW just 1 month after it was initiated. A Department team meeting, including Messrs. Brewer, Videnieks (Justice Contracting Officer), and Rugh (Acting Assistant Director for Office of Management Information Systems Support OMISS), was held on April 14, 1982, in Mr. Brewers office to discuss Mr. Hamiltons "scurrilous" [24] memo. According to Mr. Videnieks notes of the meeting:

Discussed INSLAW's "PROMIS II" memo . . . Termination for Convenience discussed. [25]


Mr. Brewer apparently also discussed other reprisals against INSLAW on its other contracts with the Department. [26] However, when subsequently questioned in the course of litigation, there developed a severe memory loss with respect to the Department witnesses recollection of this meeting, as noted by Judge Bason:

All of the DOJ witnesses who attended the April 14, 1982, meeting professed a total lack of memory about it. They testified they had no recollection of any such meeting. This court disbelieves that testimony. None of them could offer any credible explanation, or indeed any explanation, of the meaning of Videnieks handwritten notes other than what this court finds to be their meaning in this Finding of Fact No. 165. These notes constitute a "smoking gun" that clearly evidences Brewers intense bias against INSLAW, his single-minded intent to drive INSLAW out of business, and Rughs and Videnieks complicity. [27]


In an apparent effort to respond to the concern raised by Department officials over whether the Department or INSLAW would own any enhancements to the PROMIS software, INSLAW's attorney, Mr. James Rogers, wrote on May 26, 1982, to Associate Deputy Attorney General, Stanley E. Morris. In this letter, Mr. Rogers provided a detailed description of what the company planned to do to market the software commercially, and asked that the Department respond to INSLAW to "ensure that these representations are correct." Mr. Rogers went on to explain:

(Y)ou expressed concern about the software itself, PROMIS 82, which INSLAW proposes to license to users for a fee commencing in June of 1982. We are prepared to make the following representations, which should alleviate the Department's concerns:

PROMIS 82 is the sum of only three parts:

(1) the "Original PROMIS," that is, the public domain software as of May 15, 1981 as memorialized in tapes delivered to the Bureau of Justice Statistics;

(2) enhancements undertaken by INSLAW at private expense after the cessation of LEAA funding; and

(3) the so-called printed inquiry enhancement, which was created under contract to the Bureau of Justice Statistics and delivered to the Department of Justice on May 17, 1982.


It is apparent that both Mr. Brewer and Mr. Videnieks, the PROMIS contracting officer, reacted very strongly to INSLAW's notice that it had developed Enhanced PROMIS with private funding. There followed a very antagonistic meeting between Mr. Brewer and INSLAW representatives soon after INSLAW's assertions of proprietary claims to PROMIS. [28] Messrs. Brewer and Videnieks continued to believe that, because the Department was currently funding the implementation of PROMIS, they could ignore INSLAW's proprietary interest in the privately funded enhancements made to the PROMIS software.

However, in an August 1982 response to INSLAW, Mr. Stanley Morris, the Department's Associate Deputy Attorney General, stated that the original PROMIS, as well as an enhancement known as printed inquiry, [29] was in the public domain. He added that, to the extent that any other enhancements to PROMIS were privately funded by INSLAW and not specified to be delivered to the Department, INSLAW could assert whatever proprietary rights it might have. [30]

A. PROJECT MANAGER BREWER: AN INHERENT BIAS AND POTENTIAL CONFLICT OF INTEREST

For those who have formally reviewed the INSLAW matter, both in the judicial and legislative branches, the selection of Mr. Brewer by Mr. William P. Tyson of the Executive Office of U.S. Attorneys (EOUSA) to serve as the PROMIS project manager looms as a curious choice when matters of the conflict of interest, appearance and actual, are considered. [31] Indeed, Mr. Brewer worked for Mr. Hamilton between 1974 and 1976 as general counsel for the Institute for Law and Social Research, a not-for-profit corporation owned by Mr. Hamilton which later became INSLAW. Mr. Hamilton has testified that in this capacity, Mr. Brewer was unable to perform the duties required of him; and, as a result, he was asked to leave. [32]
Mr. Hamilton testified that he provided Mr. Brewer with a sufficient time period to find a job rather than summarily forcing him out of the company. After the initial conflict with Mr. Brewer flared up over the PROMIS software enhancement issue in April 1982, INSLAW formally complained to Mr. Morris that Mr. Brewer was biased against INSLAW because he had been asked to resign his position with the company; and that in any event, the Department should have placed another official in charge of managing the project who was not tainted with past direct (and very possibly negative) associations with the company. Mr. Hamilton strongly believed that Mr. Brewer harbored antagonistic feelings about his past working relationship with Mr. Hamilton. Department officials were apparently impervious to these concerns and stated that Mr. Brewers skills and prior employment with INSLAW were important factors in his hiring by the Department. Mr. McWhorter, Deputy Director of the EOUSA, who was involved in Mr. Brewers hiring, believed that Mr. Brewers employment by INSLAW qualified him to:

. . . run the implementation of a case tracking system for U.S. attorneys to . . . basically direct the implementation of a case tracking system in U.S. attorneys offices. [33]


It is difficult to understand, however, how Mr. McWhorter could make this statement. By Mr. Brewers own admission, he had very little, if any, experience in managing computer projects and Government ADP procurement law at the time he was hired. Perhaps even more damaging, while under oath to committee investigators, he admitted to a lack of experience or detailed understanding of computers or software:

. . . I was not a computer person. We talked about my role, viewed as being liaison, the person who would make things happen, a coordinator. It was not contemplated that I would, by osmosis or otherwise, learn computer science. [34]


Even after interviewing Mr. Brewers supervisor (Mr. Tyson) and other Department personnel involved with his hiring, committee investigators were unable to determine how Mr. Brewer came to be considered for the position. Still unexplained given the appearance of a conflict of interest created by his past employment with Mr. Hamilton and his total lack of experience and training in ADP contracting is why the Department would have considered him prepared, much less best qualified, for the job.

As project manager throughout the implementation of the contract, Mr. Brewer was involved in all major contract and technical decisions including the development of the Department's position on INSLAW's claim of proprietary software enhancements made to the public domain version of PROMIS. Significantly, Mr. Brewer, also reported on the progress on the contract to the Department's PROMIS Oversight Committee, a senior level decisionmaking committee organized in 1981 as part of the Department's overall control point for the PROMIS project. [35]

Investigations by both the Senate and GAO into the INSLAW matter flagged serious concerns about Mr. Brewers appointment and the possible conflict of interest his appointment represented. The Permanent Subcommittee on Investigations (PSI) drew the same conclusion as the GAOs audit manager that Mr. Brewers appointment as project manager created an undeniable appearance of a conflict of interest that should have been avoided at all costs by the Department. The PSI report stated:

The staff finds that the Department exercised poor judgment in ignoring the potential for a conflict of interest in its hiring of the PROMIS project director (Brewer), and then, after receiving allegations of bias on his part, in failing to follow standard procedures to investigate them in a timely manner. [36]


The potential conflict of interest was an unsatisfactory situation irrespective of his admittedly negative feelings about his forced resignation from the company. Had Mr. Brewer taken actions which could have been construed to unduly favor INSLAW throughout the life of the contract, similar questions of potential conflict could just as easily have arisen either from within the Department or from outside competitors of the company. In either situation, the Department had placed itself in an undeniable ethical situation that could have been easily avoided had it followed basic procedures to prevent any possible appearance of a conflict. On this point, Judge Jensen stated that:

I would think that the better path of wisdom is not to do that (hire an alleged fired employee to direct the contract of his former employer) if thats possible to do . . . I think that its better to have these kinds of issues undertaken by people who dont have questions raised about them one way or the other whether they are biased in favor of or against the people they deal with. [37]


While phrased in the abstract, Judge Jensen and other Department officials apparently ignored the circumstances surrounding Mr. Brewers departure from INSLAW and did not consider the potential bias or conflict of interest issues either before or after his hiring. In fact, Mr. Brewer stated that no formal inquiry into these charges was made by the Department until after the contract expired in 1985. On the issue of his departure from INSLAW, Mr. Brewer stated under oath to OPR investigators that:

At no time did he (Mr. Hamilton) ever say you are fired and at no time did he (Mr. Hamilton) ever indicate great dissatisfaction with my performance.

I dont believe anything Mr. Hamilton did regarding my employment or relationship with the Institute . . . was wrong. I never felt that I was discharged, let alone wrongfully discharged.


Mr. Brewer again asserted this position under oath to committee investigators:

I never thought that he asked me to leave. It has always been my understanding that I was not asked to leave. . . . I have never viewed my departure from the Institute as either being a discharge, or forced.


However, in other parts of his testimony to OPR and the committee investigators he appears to acknowledge that Mr. Hamilton asked him to leave. For example, he stated to OPR:

. . . it has been my view that Mr. Hamilton obviously wanted me gone. I had been sending these signals, if not directly indicating a job dissatisfaction, since April, and it was now February, almost 1 year later and I was still extricating myself.


Mr. Brewer's statements that he was not asked to leave are also contradicted by other witnesses statements on this point. As indicated above, according to Mr. Hamilton, Mr. Brewer was unable to perform the duties required of him and; as a result, he was asked to leave. [38] Mr. Hamiltons account was corroborated by Mr. John Gizzarelli, Jr., who stated under oath that Mr. Hamilton mentioned that Mr. Brewer had been asked to resign and Mr. Hamilton asked for advice on how Mr. Brewer could be removed while preserving his professional dignity and feelings. [39]

Mr. Brewer appears to contradict his own assertions that he was never asked to leave by Mr. Hamilton. At trial, Mr. Brewer stated under oath that:

. . . on one occasion Mr. Hamilton came and said to me, "can you go to lunch?" I explained that I couldnt. . . . And he said, "Well, what I have to say over lunch I can say right now. I think you ought to find (an) alternative that you ought to leave the Institute."


The circumstances surrounding Mr. Brewers departure from the institute appears to have had a major influence over his views about INSLAW and its president, Mr. Hamilton. Several witnesses asserted that Mr. Brewer exhibited considerable bias against INSLAW and Mr. Hamilton during critical points of the contract. When asked about his relationship to Mr. Hamilton, Mr. Brewer stated:

He was very supportive, and I thought that he was a very dynamic and creative person, a very skilled communicator and a very talented individual, but as to some aspects of life, one who did not have a realistic viewpoint on some things . . . he had said some things to me on occasion that made me think that he was somewhat of a zealot about his pursuits and the things he did. . . . Mr. Hamilton is a difficult person to deal with, or that he is not realistic. . . . [40]


However, several witnesses provided a considerably different description of Mr. Brewers feelings toward INSLAW and Mr. Hamilton. Mr. Gizzarelli stated under oath that:

I also had occasional contact with Mr. Brewer during the period of his employment with INSLAW . . . specifically, he thought that Mr. Hamilton was insane. And I think he meant that literally. He did make comments about his rationality, his sanity, thought he wasnt capable of leading an organization. The tenor of his remarks were to me very startling.

* * * * * * *

. . . mental observation . . . was used to describe a person for whom that process might be advisable, mental observation being a psychiatric evaluation to determine whether or not a person is or is not afflicted with a psychosis. And Mr. Brewer used that term to describe Mr. Hamilton. He said he was M.O., (mental observation) which is a colloquialism means he should be examined by a psychiatrist.

* * * * * * *

After he became the project manager . . . a flood of memories about his prior involvement with INSLAW and his characterization of Bill Hamilton came back, and I was afraid that his bias would be overwhelming would overwhelm him. [41]


Mr. Gizzarelli later stated by memorandum to Mr. Dean Merrill that Mr. Brewer:

. . . has made no secret of his dislike of Bill Hamilton. In his present job, he is in a position to demonstrate his dislike. Bill, however, has kept his distance from the project and probably will continue to do so, until and unless there are large problems which Bill in his role as president must deal with personally. It is entirely possible and I believe likely that Brick will escalate the level of controversy until he draws Bill into the project, at which time he will be able to "lord it over him" and show whos boss. I dont think Brick will ever be at peace with his feelings about Bill and therefore, with us. [42]


Mr. Harvey Sherzer, INSLAW's attorney, made similar assertions about Mr. Brewers bias against INSLAW during the trial:

. . . I think the most descriptive answer is to say that Mr. Brewer exhibited an animus toward INSLAW and toward Mr. Hamilton.

He viewed with . . . skepticism and negativism and some hostility INSLAW's allegations with regard to its financial condition. And I recall specifically that I reached the conclusion at that time that, and I recall expressing it to him, that he had a problem, that he seemed to think there was something wrong with a contractor benefiting from a government contract. Let me be more specific on that point. The gist of what he seemed to be saying was that by performing this contract INSLAW and Mr. Hamilton, specifically, was making an effort to expand the company . . . And there seemed to be a negative inference toward INSLAW's ability to use the base created by this contract to expand.

And I recall explaining to him that that was perfectly legitimate, and, indeed, that the Government often in its efforts to support congressionally the appropriations for the space program and other programs often points out that a byproduct of a space program is a better toaster oven because various alloys (are) created or what have you. Its a common phenomenon whereby the . . . by-product of Government work is the ability to benefit both the company the Government and the community generally in a broader way. And Mr. Brewer seemed to resent the fact that INSLAW might use the benefits of this large contract to expand its company, which at that time it was doing. [43]


On this same issue the Bankruptcy Court concluded that:

On the basis of the . . . evidence taken as a whole, this court is convinced beyond any doubt that . . . Brewer was consumed by hatred for and an intense desire for revenge against Mr. Hamilton and INSLAW, and acted throughout this matter in a thoroughly biased and unfairly prejudicial manner toward INSLAW.


In reviewing Judge Bason's substantive findings of fact and conclusions of law, the District Court also concluded that:

The nature and circumstances of his separation from that employment are somewhat in dispute, but it is clear that Brewer was not happy in his job when he left it after being urged to do so by Hamilton.


***

INSLAW attributed its troubles to an acute bias on the part of Brewer, who according to it was intent on running the company out of business. INSLAW lodged many complaints of bias and made several request of DOJ to investigate these complaints and give some relief from what it perceived to be grossly unfair treatment. DOJ made no meaningful response to these complaints, and INSLAW's fortunes did not change.

INSLAW's problems began soon after the contract was awarded and immediately after its assertion of proprietary enhancements to public domain PROMIS. Mr. Brewers animosity toward INSLAW was strongly manifested in a meeting (April 19, 1982) to discuss INSLAW's proposal to market its Enhanced PROMIS software, as noted in an INSLAW memorandum on the meeting:

Brewer . . . seized upon this issue and launched into a tirade which was very emotional, unorganized and quite illogical. He said that:

"1. the memo was typical of INSLAW and Bill Hamilton and that it was self-serving and unnecessary.

"2. that how did they know that we might say work was not finished under our Government contracts and the next week copyright the work and begin selling it back to the Justice Department.

"3. that the press release about the contract award was not accurate in that it described West Virginia as a successful implementation when in fact, they had spent an additional 20K on the project and Lanier was doing all the work. . . .

"7. that the memo had caused all kinds of problems in Justice and had many people upset.

"8. that if you ask Namely, Illinois Criminal Justice Coordinating Council, Michigan Prosecuting Attorneys Association, Andy Voight and others, they would tell you that INSLAW did not do good or successful work.

"9. that Bill Hamilton started the PROMIS system as an employee of the D.C., U.S.A.O. and that all of the software was developed with Federal funds and what right did Hamilton have to try to claim ownership of the software."

All of these comments were based with an obvious dislike of Bill Hamilton and a resentment for the success of INSLAW personified in him. [44]


After this meeting, INSLAW complained to Associate Deputy Attorney General Morris that Mr. Brewer was obviously biased against INSLAW because he had been asked to leave his employment at the company. On this basis, INSLAW requested that Mr. Brewer be recused from further Department consideration of the proprietary software enhancement issue. Subsequently, Mr. Morris decided to remove Mr. Brewer from face-to-face negotiations with INSLAW officials on the enhancement issue. By note dated May 27, 1982, Mr. Laurence McWhorter, Deputy Director of the Executive Office of U.S. Attorney, stated that he was directed by Mr. Morris to "take the point outside the Department" on the proprietary enhancement issue. It is clear from this action that Mr. Morris was concerned about the possibility of an appearance of a conflict of interest with having an ex-employee of INSLAW operating as the Department's project manager on a contract involving the same company. However, this solution was only superficial because Mr. Brewer continued to have substantive influence over the management and administration of the INSLAW contract. Mr. Brewer acknowledged under oath that he remained involved in the Department negotiations with INSLAW on all important issues including the enhancement issue throughout the life of the contract. He also stated that Mr. Hamilton had "shot himself in the foot" and created considerable "ill will" within the Department by asserting that INSLAW had proprietary interest in the PROMIS software. [45] INSLAW's expanding problems with the Department are detailed in the following sections of the report.

B. BREWER AND VIDENIEKS THREATEN INSLAW

During the contract negotiations the Department acknowledged INSLAW's cash-poor situation by inserting a contract clause that enabled INSLAW to receive payment in advance of the Department receiving and approving finished products. [46] During November 1982, the Department learned that INSLAW had assigned Government invoices to a financial institution to secure a line of credit, and Mr. Videnieks, by letter dated November 10, 1982, asserted to INSLAW that it was in default of the advance payments clause of the contract. [47]

Cancellation of the advance payments would have had a devastating impact on INSLAW. Mr. Videnieks told committee investigators under oath that:

I think I was advised at the same time. . . . that INSLAW may indeed have difficulty in meeting the December payroll, and I think in general I was advised that they were in bad financial condition. [48]


INSLAW, at that point, was supporting the Department's utilization of PROMIS with its proprietary enhanced software through time-sharing on a mainframe. The Department, lacking the hardware to implement public domain PROMIS, moved to obtain a copy of INSLAW's proprietary Enhanced PROMIS software, as described in an internal memorandum dated March 7, 1983:

Of course, an INSLAW failure at any time prior to contract completion would have a detrimental effect on the implementation project. Currently, programmatic risk is very high. So long as INSLAW continues to support U.S. attorneys offices in a timesharing mode, withholds time-sharing (the enhanced) PROMIS software, and fails to complete delivery of at least one system operating on a Government furnished Prime computer and at least one system operating on a Government-furnished Lanier word processor, programmatic risk will remain high. [49]


Mr. Videnieks told committee investigators under oath that:

We were afraid if they indeed were for financial reasons required to close their doors . . . then we would have to revert to a manual PROMIS in these U.S. attorneys offices. So the reason for requesting copies of this data and documentation were to be able to continue, if indeed INSLAW were to close its doors, automated PROMIS on Government computers. [50]


An internal Department analysis notes, however, that:

Because DOJs computers were not in place, DOJ purchased time on INSLAW's computer. INSLAW retained the software to use for time-sharing purposes in its offices and had not yet delivered it to the various U.S. attorneys offices. [51]


Judge Bryant pointed out that:

On November 19, 1982, DOJs technical representative formally requested a copy of the PROMIS software that was then in use by the U.S. attorneys offices. According to the Justice Department the request was motivated by concern over the financial viability of INSLAW. It is without dispute that because the Government had not obtained the minicomputer hardware for each office, INSLAW arranged for the largest U.S. attorneys offices to use PROMIS on a time-sharing basis.


Mr. Brewer stated in a December 9, 1982, memorandum that he was concerned with the possibility of INSLAW's bankruptcy, the possible need for in-house EOUSA personnel to take over the PROMIS project, and the possibility of terminating the PROMIS contract. In December 1982, Mr. Videnieks demanded that INSLAW turn over all computer programs and supporting documentation relating to the contract. [52] INSLAW responded that it would not do this without the Department modifying the contract to acknowledge that proprietary enhancements had been inserted into the Department's public domain version of PROMIS. INSLAW required this acknowledgment because INSLAW's other timesharing customers also used this proprietary version of PROMIS.

The Department responded that the contract called for software in which the Government had unlimited rights, and asked that INSLAW identify those portions of the software that it claimed were proprietary. INSLAW offered to provide the enhanced software if the Department agreed to INSLAW's rights and controlled its dissemination. Mr. Videnieks stated to committee investigators that the Department believed that it had unlimited rights to any versions of PROMIS, and data rights restrictions would not satisfy INSLAW's obligation under the contract. [53]

INSLAW proposed that the Department use its enhanced software at the 94 U.S. attorneys offices at no additional cost, but that the Government not disseminate the Enhanced PROMIS beyond those offices. The Department objected to this proposal and made a counter-proposal that a contract modification be made which, in exchange for the software and documentation requested previously, the Department would agree not to disseminate Enhanced PROMIS beyond the 94 offices and the EOUSA pending resolution of the enhancement dispute. [54]

Mr. Videnieks further proposed that, if INSLAW could demonstrate that the software contained enhancements to which the Department was not entitled, the Department would either direct that INSLAW remove the enhancements or negotiate with INSLAW regarding inclusion of the enhancements. [55]
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Re: The Inslaw Affair: Investigative Report by the Committee

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Part 2 of 2

C. INSLAW ATTEMPTS TO DEMONSTRATE ENHANCEMENT OWNERSHIP

INSLAW and the Department ostensibly resolved their dispute by "good-faith" action on a contract modification (Mod. 12) dated April 11, 1983. As a result, DOJ agreed to continue to provide advance payments to INSLAW. [56] According to Judge Bryant, under this agreement:

The parties reaffirmed their understanding that their initial contract governs the rights to the disputed software.


By letters dated April 5, and April 12, 1983, INSLAW attempted to demonstrate that its enhancements were privately funded, but the Department did little to assist INSLAW in determining what documentation would be acceptable. [57] By letter dated April 21, 1983, Mr. Videnieks reiterated that the contract entitled the Government to a version of PROMIS with no restrictions, and demanded that INSLAW:

. . . . provide all information necessary to demonstrate that the change was developed both at private expense and outside the scope of INSLAW's performance of any Government contract.


INSLAW sent another proposed methodology to demonstrate private funding by letter dated May 4, 1983. [58] Mr. Videnieks responded that INSLAW's methodology was unacceptable because it did not identify enhancements developed without Federal funds. [59] Mr. Videnieks never provided INSLAW with a methodology on standards by which INSLAW could demonstrate his evidence requirements.

Mr. Jack Rugh, the Department's Acting Assistant Director for Office of Management Information Systems Support (OMISS), analyzed the INSLAW submissions supporting its contentions that Enhanced PROMIS had been privately funded. Mr. Rugh stated under oath during the Bankruptcy Court hearing that it was his opinion that the methodology used by INSLAW to support its assertion was flawed and that the companys presentation "probably" (emphasis added) lacked accounting records to support its claims. Mr. Rugh further stated that he could not recall if he had informed INSLAW of his concerns regarding their lack of accounting records to substantiate their claims. Mr. Rugh said that although he could see no reason why he would withhold this information from INSLAW, he could see no reason for including it. [60] Mr. Rugh stated, however, that INSLAW had an excellent method of documenting the changed (enhanced) source code, so that those changes could be considered proprietary if they were attributed to a particular private source. [61] This admission caused the bankruptcy judge to conclude:

This process of comparing the enhancements proofs with the previously-provided PROMIS software could have been performed easily by INSLAW with DOJs assistance in the summer of 1983, when INSLAW attempted to negotiate this issue with DOJ and submitted to DOJ its memoranda proving specific enhancements. All of the documents used by INSLAW in this proceeding to identify the funding of its enhancements existed at the time the negotiations should have occurred. As Mr. Rugh conceded at trial, the proofs offered by INSLAW would have satisfied him that the enhancements were indeed privately funded. (Rugh, T. 1517-1520). DOJ was required to negotiate then, in 1983, as Videnieks specifically had proposed under Modification 12, (see PPFF 228-236) but instead it wrongfully and cynically failed either to negotiate in good faith or even to reveal to INSLAW any purported concerns of Messrs. Rugh and Videnieks at that time with INSLAW's proposed method of proof (see PPFF 246-250). [62]


Mr. Videnieks never accepted any INSLAW attempts at defining proprietary enhancements, and Department officials concluded that the Department had the same unlimited rights to Enhanced PROMIS as it had with public domain PROMIS. This posture was made clear from a variety of sources, including Messrs. Brewer and Videnieks. In a sworn statement before this committee, Mr. Brewer responded to the following questions:

Question: At this April 19th meeting, do you recall making the statement that the Department had unlimited rights to the software?

Mr. Brewer: That was our position throughout this whole thing, yes.

Question: What is your view today on that?

Mr. Brewer: I maintain that we negotiated for and received unlimited rights and data.


Mr. Videnieks also believed that the Department had title to Enhanced PROMIS, which he characterized while discussing his position regarding Modification 12 in a sworn deposition before this committee:

Initially, I'm the one who wanted no modification. I wanted only a letter saying, "Give us the data," because if we we dont need any signatures, if we can get the goods. My words. The goods were ours under the contract. All we would have to pay for to effect delivery of those goods were reproduction costs.

Brewer, I believe, wanted a supplemental agreement but not a modification. I didnt want any of them. But the legal advice was that Bill Snider (the Department's legal counsel) felt strongly that there should be a Modification 12, but my opinion was supported by Patricia Rudd, who was the Chief Procurement Officer at that time.

So we in Procurement, the hands-on people, thought that the contract as it stands had the mechanism in there for satisfying the Program Officers needs. But the lawyers on all sides felt that we needed to write escrow agreements and make the thing look pretty, I guess. [63]


Mr. Videnieks, by letter dated July 21, 1983, told INSLAW that:

We agree with you that Modification No. P0012 to the Contract continues to limit dissemination of that version of the PROMIS computer software specified in the modification. Modification No. P0012 will continue to apply in the event that the Government invokes the provisions of Clause 22, "Disputes," in that the Government will limit dissemination pending a Contracting Officers Final Decision in the matter. [64]


On December 29, 1983, in spite of a report that there was progress with INSLAW counsel on resolution of the contract problems, Judge Jensen and other members of the PROMIS Oversight Committee approved the termination of the word processing portion of the contract for default based on their view that INSLAW had failed to perform this portion of the contract. [65] However, in February 1984, Department procurement counsel William Snider issued a written legal opinion showing that the Department lacked sufficient legal justification for a default termination. Instead, the PROMIS Oversight Committee approved the termination of the word processing portion of the contract for convenience. Shortly thereafter, Mr. Brewer notified Mr. Hamilton by telephone that Judge Jensen had decided to only terminate the word processing portion of the INSLAW contract at the 74 smaller U.S. attorneys offices for convenience of the Government. [66]

D. THE DEPARTMENT MISAPPROPRIATED INSLAW'S SOFTWARE

The Department's position that it owned Enhanced PROMIS was founded on amendments to the RFP [67] that (1) made available to all offerors copies of the pilot project software and (2) stated that the RFP does not anticipate redevelopment of the public domain PROMIS software used in the pilot offices. The RFP also stated that:

All systems enhancements . . . performed pursuant to this contract shall be incorporated within the systems which have already been installed in the U.S. attorneys offices, including systems installed pursuant to other contracts. . . .


According to Department officials, this language was included to ensure that offices already using PROMIS would benefit from the enhancements and modifications to the Government-furnished software during performance of the new contract. Unfortunately, this language may also have blinded Department management to the idea that INSLAW had made privately funded enhancements that were its property, notwithstanding the Department's claims to the contrary.

INSLAW attempted to convince Department officials that it held proprietary rights to Enhanced PROMIS over a period of several years, but to no avail. The Department steadfastly ignored INSLAW's requests, and even fought two judgments that it believed were in error based on technical, legal issues rather than on the merits of the case. Department officials have continued to maintain that they enjoy total control of Enhanced PROMIS since they obtained it from INSLAW in 1983.

After Modification 12 was signed and the Department obtained Enhanced PROMIS and terminated the installation of PROMIS at the 74 smaller U.S. attorneys offices, INSLAW again attempted to define its enhancements to the Department while the Department continued to use INSLAW's software and services. Each attempt was rebuffed by Mr. Videnieks. He issued a series of determinations in response to INSLAW's claims between November 1984 and September 1986. Finally, almost 3 years after signing Modification 12, Mr. Videnieks declared, on February 21, 1986, that INSLAW had no enhancements that were proprietary to it, and denied INSLAW's claim of $2.9 million for licensing fees.


The Bankruptcy Court took the position that the Department obtained INSLAW's Enhanced PROMIS through "fraud, trickery, and deceit." As stated by Judge Bason:

Under Modification 12, it is undisputed that INSLAW delivered Enhanced PROMIS to DOJ on the basis of an explicit commitment by DOJ which had three components: first, to bargain in good faith to identify the proprietary enhancements; second, to decide within a reasonable time which enhancements it wanted to use; and third, to bargain in good faith with INSLAW as to the price to be paid for such enhancements. On the basis of the foregoing and all of the evidence taken as a whole, this court finds and concludes that the Department never intended to meet its commitment and that once the Department had received Enhanced PROMIS pursuant to Modification 12, the Department thereafter refused to bargain in good faith with INSLAW and instead engaged in an outrageous, deceitful, fraudulent game of "cat and mouse," demonstrating contempt for both the law and any principle of fair dealing. [68]

The Department's unilateral claim of ownership rights to Enhanced PROMIS, coupled with Mr. Videnieks denial of INSLAW's claims to proprietary enhancements, demonstrates at the very least, a mechanistic approach to procurement policy that always favors the Department, which just happens to be in a most favored negotiating position at every turn. At worst, it reflects a biased view that denied due process and full and fair consideration, for whatever reason. Most disturbing, Mr. Brewer and Mr. Videnieks, the persons in charge of the PROMIS project, refused to consider the software ownership concepts involved in INSLAW's assertions. The judge, in the Bankruptcy Courts findings of fact and conclusions of law, stated:

Brewer was not given and had not considered INSLAW's January 13, 1982 letter, or any of the pre-contract correspondence between INSLAW and Videnieks; therefore, Brewers subsequent positions regarding INSLAW's proprietary rights were taken without consideration of this letter. [69]


This position which seemed to be predicated more in the fear of giving up an advantageous position, than reaching a determination on the merits, is corroborated in an August 15, 1984, memorandum, in which Mr. Brewer stated that:

. . . the proposal would substantially alter our rights in data (e.g., we would become a licensee and thus give up the unlimited rights we currently enjoy). (Emphasis added.) [70]


This belief, was shared by other officials at the Department. In its analysis of an INSLAW proposal, dated April 30, 1985, an EOUSA analysis stated:

. . . it appears (to the Department) that there are no proprietary enhancements.

All . . . proposals received from INSLAW. . . . attempt to force the Department into acknowledging INSLAW's proprietary interest in the U.S. attorneys version of PROMIS by offering a license agreement for software maintenance. To accept INSLAW's proposal would, in effect, ratify INSLAW's claim that the software is proprietary; not only the micro-computer version which INSLAW proposes to develop, but also the Prime mini-computer version currently operational in 20 districts. [71]


Also, in a November 15, 1985, counter proposal to an INSLAW settlement offer, Justice Management Divisions General Counsel hewed to the inflexible position that:

1. The United States will not pay INSLAW any additional money for software obtained pursuant to this contract.

2. INSLAW will recognize that the United States has the right to unrestricted use of the software obtained or delivered under this contract for any Federal project, including projects that may be financed or conducted by instrumentalities or agents of the Federal Government such as its independent contractors.

3. The Department of Justice will agree not to make or permit any disclosure or distribution of the software other than as described above (in 2. above) or as required by Federal law. [72]


Between August 29, 1983, and February 18, 1985, INSLAW implemented Enhanced PROMIS in 20 U.S. attorneys offices.

Yet, even as negotiations were underway, the Department, between June 24, 1985, and September 2, 1987, installed Enhanced PROMIS software at 25 additional sites. [73] According to INSLAW's counsel, Elliot Richardson, Enhanced PROMIS was illegally copied to support an additional two sites and subsequently 31 additional sites were brought "on line" via telecommunications. This action was considered an explicit breach of the bankruptcy rules governing the respective actions of creditors and debtors in a reorganization situation. As stated in the findings of facts, the automatic stay provisions of the Bankruptcy Code prohibit "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." [74] The Department violated the provisions of the stay by installing Enhanced PROMIS at the additional sites, and also accomplished this deed over the known protests of INSLAW. On September 9, 1985, Mr. Hamilton told the Department that:

I am extremely disturbed and disappointed to learn that the Executive Office for U.S. Attorneys has begun to manufacture copies of the PROMIS software for customization and installation in additional U.S. attorneys offices, specifically those in St. Louis, Missouri, and Sacramento, California. This action occurs at the very time that the Department of Justice and INSLAW are attempting to resolve, by negotiation, INSLAW's claim that the U.S. attorneys version of PROMIS contains millions of dollars of privately-financed enhancements that are proprietary products of INSLAW and for which INSLAW has, to date, received no compensation. [75]


Not only did the Department proceed with the national installation of Enhanced PROMIS, but it also may have used its "unlimited rights" posture as a pretextual basis for its national and international distribution of Enhanced PROMIS outside of the Department. Details of this distribution are discussed in section IV of this report.

According to Judge Bryant:

Although INSLAW and the Justice Department negotiated over the enhancements that INSLAW indicated that it had included in the proprietary version of PROMIS, the parties could not agree that the enhancements had been paid for with non-government funds. While INSLAW made several efforts to demonstrate the private financing of the enhancements, the Government did not accept its methodology for allocating funding. When asked to provide an alternative methodology that would be acceptable, the Government declined. [76]


The Department proceeded in its unilateral actions despite internal advice that INSLAW's claims were not frivolous and in fact, likely to be sustained in a court challenge. Pursuant to a letter dated July 9, 1986, from Senator Mathias, Mr. Arnold Burns, the Deputy Attorney General, conducted an inquiry into the status of the INSLAW litigation and was told that INSLAW wanted the Department to pay royalties. As a result of this briefing, Mr. Burns suggested that the issue should be turned around and that a claim against INSLAW should be made for INSLAW to pay royalties to the Government since he believed that PROMIS was the Department's property. Department research provided a shocking result to Mr. Burns:

. . . the answer that I got, which I wasnt terribly happy with but which I accepted, was that there had been a series of old correspondence and back and forthing (sic) and stuff, that in all of that, our lawyers were satisfied that INSLAW could sustain the claim in court, that we had waived those rights, not that I was wrong that we didnt have them but that somebody in the Department of Justice, in a letter or letters, as I say in this back and forthing (sic), had, in effect, waived those rights. [77] (Emphasis added.)


Considering that the Deputy Attorney General was aware of INSLAW's proprietary rights, the Department's pursuit of litigation can only be understood as a war of attrition between the Department's massive, tax-supported resources and INSLAW's desperate financial condition, with shrinking (courtesy of the Department) income. In light of Mr. Burns revelation, it is important to note that committee investigators found no surviving documentation (from that time frame) which reveal the Department's awareness of the relative legal positions of the Department and INSLAW, on INSLAW's claims to proprietary enhancements referred to by Mr. Burns.

E. INSLAW DECLARES BANKRUPTCY AND PURSUES LITIGATION


By February 1985, at least $1.6 million in contract payments had been withheld by the Department and INSLAW was forced to file for chapter 11 reorganization in the Bankruptcy Court for the District of Columbia. [78] On June 9, 1986, INSLAW filed a Complaint for Declaratory Judgment, and for an order Enforcing Automatic Stay [79] and Damages for Willful Violation of Automatic Stay in the Bankruptcy Court. [80] In its pleadings, INSLAW asserted that Mr. C. Madison Brewer, who was responsible for implementing PROMIS throughout the Department, was instrumental in propelling INSLAW into bankruptcy, and that he thereafter hindered INSLAW in its development of a reorganization plan. [81] INSLAW also alleged that the Department had improperly converted and exercised control over INSLAW's proprietary Enhanced PROMIS and that its concerns were made known to the highest levels of Department management, without any departmental response. [82]

On July 20, 1987, the court began a trial that lasted 2 1/2 weeks and involved sworn statements from over 40 witnesses and thousands of pages of documentary evidence. [83] On September 28, 1987, Bankruptcy Court Judge Bason issued an oral ruling on liability, concluding that a key Department official was biased against INSLAW and that the Department "took, converted, and stole" INSLAW's Enhanced PROMIS by "trickery, fraud, and deceit." [84] On January 25, 1988, the bankruptcy judge issued his written order on liability, which documented his September 1987 oral ruling. On February 2, 1988, the court issued an order awarding INSLAW $6.8 million in damages and $1.2 million in attorneys fees.

Department violated the Bankruptcy Court's automatic stay: During INSLAW's period of chapter 11 bankruptcy, the Department proceeded to copy and use INSLAW's Enhanced PROMIS, and even spread its use in violation of the automatic stay. By letter dated March 14, 1986, shortly after INSLAW declared bankruptcy, INSLAW's counsel notified the Department's contracting officer that:

. . . any continued use by the Department of the (Enhanced) PROMIS software without the consent of INSLAW and the use of the software without any agreement as to the payment of license fees contravene INSLAW's property rights, its rights as a debtor in possession under the Bankruptcy Code and is a wrongful exercise of control over property of the debtors estate in violation of the automatic stay now in effect. Furthermore, the Department's disclosure and dissemination of the PROMIS software to third parties will substantially dissipate, if not completely waste, the commercial value of this major INSLAW asset. We will hold the Department of Justice liable for any such loss of the value of INSLAW's property rights and if necessary will take such actions as are required to prevent such a loss. . . . If the Department of Justice causes a loss in the commercial value of INSLAW's principal asset, PROMIS, it may be responsible for destroying the company. [85]


The Bankruptcy Court found that the Department had violated the automatic stay by not negotiating a license fee for Enhanced PROMIS after INSLAW declared bankruptcy:

. . . INSLAW is entitled to automatic stay protection for its enhancements under the bankruptcy laws, and appropriate relief for violations of the automatic stay by DOJ.

* * * * * * *

Under 11 U.S.C. 362(h), (a)n individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys fees and, in appropriate circumstances, may recover punitive damages.

* * * * * * *

A "willful" violation does not require a specific intent to violate the automatic stay. Rather, the statute provides for damages upon a finding that the defendant knew of the automatic stay and that the defendants actions which violated the stay were intentional. Whether the party believes in good faith that it had a right to the property is not relevant to whether the act was "willful" or whether compensation must be awarded.

* * * * * * *

The judge concluded that the Department was liable for actual damages, including costs and attorneys fees, and that INSLAW could recover punitive damages.


F. DISTRICT COURT JUDGE WILLIAM BRYANT'S DECISION ON APPEAL OF THE BANKRUPTCY COURT'S RULING

The Department appealed the Bankruptcy Court rulings in the U.S. District Court for the District of Columbia. On November 22, 1989, the District Court upheld the Bankruptcy Courts orders regarding liability and damages against the Department. District Court Judge William Bryant in his ruling stated:

The government accuses the bankruptcy court of looking beyond the bankruptcy proceedings to find culpability by the government. What is strikingly apparent from the testimony and depositions of key witnesses and many documents is that INSLAW performed its contract in a hostile environment that extended from the higher echelons of the Justice Department to the officials who had the day-to-day responsibility for supervising its work. [86]


In its decision upholding the ruling of the Bankruptcy Court, the District Court:

Emphasized that the Department knew Enhanced PROMIS represented INSLAW's central asset and that ownership of the software was critical to the companys reorganization.

Held that the Department's unilateral claim of ownership and its installation of Enhanced PROMIS in offices around the United States violated the automatic stay.

Concurred with the bankruptcy courts conclusion that the Department never had any rights to Enhanced PROMIS.


The District Court also agreed with Bankruptcy Judge Bason's finding that:

. . . the government acted willfully and fraudulently to obtain property that it was not entitled to under the contract. . . .

and found

. . . convincing, perhaps compelling support for the findings set forth by the bankruptcy court. . . . . The cold record supports his (Bason's) findings under any standard of review. [87]


The District Court also found that the Department unlawfully violated the automatic stay provision of the Bankruptcy Code and agreed that the Department attempted to convert INSLAW's bankruptcy standing from a chapter 11 reorganization to a chapter 7 liquidation. The court also upheld the Bankruptcy Courts order regarding assessed damages as a result of the Department's unlawfully exercising control over and proliferating INSLAW's Enhanced PROMIS and upheld the award of attorneys fees, but reduced compensatory damages by $655,200. [88]

DEPARTMENT'S POSITION AGAINST JUDGE'S DECISION IS REBUTTED ON APPEAL

The Department's legal defense was found to be deficient on appeal by District Court Judge Bryant. [89] The Department contended that the Bankruptcy Court lacked jurisdiction over INSLAW's claim because the Department had not waived its immunity from monetary judgments against the United States. Judge Bryant ruled against the Department's position stating that the Department's actions throughout the litigation suggested a calculated decision to assert a claim against INSLAW until it appeared that the Department had more to lose than gain.

The Department also argued that the Bankruptcy Court should have referred the case to the Department of Transportation Board of Contract Appeals (DOTBCA) for judgment because INSLAW's claims were based on contract law. However, Judge Bryant found that the INSLAW case did not involve a contract claim but was grounded in bankruptcy law, whereby INSLAW sought relief for violations of the automatic stay provisions of bankruptcy laws. Judge Bryant also found that Bankruptcy Judge Bason used his discretion to decide the legal ownership of Enhanced PROMIS that was necessary for determining whether there had been a violation of the automatic stay.


The Department also argued that INSLAW did not prove that the automatic stay had been violated. However, Judge Bryant concluded that the facts established in the Bankruptcy Court support the multiple violations of the automatic stay that the Bankruptcy Court found. Judge Bryant stated that the Department knew that PROMIS represented INSLAW's principal asset and that, without ownership of the software, the companys economic viability was threatened. Judge Bryant found that the Department acted willfully and fraudulently to obtain property that it was not entitled to under the contract and that, once the software was in the possession of the Department, there was no evidence that it ever negotiated in good faith over the proprietary enhancements claimed by INSLAW. Judge Bryant noted that, instead of following the procedure established by the Bankruptcy Code for resolving the ownership dispute and seeking relief from the automatic stay, the Department had pursued a course of self-help by claiming Enhanced PROMIS to be its property and installing it throughout the United States.

The Department also charged that Judge Bason exhibited the appearance of bias and should have recused himself, and requested a new trial based on this assertion. The Department also accused Judge Bason of using the bankruptcy proceeding to find culpability by the Government. Judge Bryant responded that the Department had previously been denied its reversal request by the District Court and, considering the earlier denial, no new trial would be granted. Judge Bryant further stated that, while the bankruptcy review must focus on Department actions taken after INSLAW filed for bankruptcy, the Department's actions cannot be understood without understanding the events leading up to the bankruptcy. He added that what was strikingly apparent from the evidence was that INSLAW performed its contract in a hostile environment from the higher echelons of the Justice Department to the officials who had responsibility for supervising its work. Judge Bryant also noted that Judge Bason's attention to detail, in both his oral and written rulings, demonstrated a mastery of the evidence and provided compelling support for his findings. Judge Bryant concluded that the record adequately supported the bankruptcy judges findings under any standard of review.

The Department also stated that the award of damages by the Bankruptcy Court exceeded its authority and urged that no attorney fees be awarded. However, Judge Bryant determined that the Bankruptcy Court discharged its responsibility to assess damages based on the evidence provided at trial, and its decision was supportable.

G. APPEALS COURT REVERSES INSLAW'S VICTORY ON PRIMARILY JURISDICTIONAL GROUNDS

On October 12, 1990, the Department appealed the District Court decision to the U.S. Court of Appeals for the District of Columbia. The Department raised some of the same issues previously raised in its appeal to the District Court and requested a reversal on the basis of the facts found in the Bankruptcy Court. In its brief for the appellants, the Department stated that:

In the district court, the Government set out the clear errors underlying these findings of facts at great length and with great specificity. The district courts decision is deficient in not discussing any of these specific contentions. Of necessity, our factual contentions on appeal are more limited. [90]


The following issues were raised by the Department on appeal to the Court of Appeals: (1) that the Department's use of computer software in its possession did not violate the automatic stay and was more properly the subject of a contract dispute under the Contract Disputes Act, which should be heard in DOTBCA; (2) that since there was no motion to convert INSLAW from a chapter 11 to a chapter 7, there was no violation of the automatic stay; (3) that the Department did not file a claim and therefore, did not waive its sovereign immunity; and (4) that damage awards for violation of the automatic stay can only be paid to individuals not corporations. [91]

On May 7, 1991, a panel of the U.S. Court of Appeals for the District of Columbia reversed both the Bankruptcy Courts and District Courts judgments on primarily jurisdictional grounds the Circuit Court found that the Bankruptcy Court was an inappropriate forum to litigate the issues it decided and furthermore that the Department had not violated the automatic stay and dismissed INSLAW's complaint against the Department. The Court of Appeals noted that both courts found that the Department had "fraudulently obtained and then converted Enhanced PROMIS to its own use." The court further noted that: "Such conduct, if it occurred, is inexcusable." [92]

On October 9, 1991, INSLAW filed an appeal for a writ of certiorari to the Supreme Court of the United States. On January 13, 1992, the Supreme Court denied the writ.

H. DEPARTMENT ASSERTS ERRONEOUS POSITION BEFORE DOTBCA

In addition to initiating proceedings in the Bankruptcy Court, INSLAW pursued remedies under the Contract Disputes Act. INSLAW filed notices of appeals with the Department of Transportation Board of Contract Appeals (DOTBCA) in February 1985, and in May and November 1986. On June 23, 1986, the first complaint was filed before DOTBCA. Additional claims were filed on September 19, 1986, and August 24, 1987.

INSLAW's claims before DOTBCA fell into six categories: (1) computer time-sharing charges associated with the computer center operated by INSLAW and used by several U.S. attorneys offices; (2) contract target fees and voucher payments withheld by the Department and additional fees due INSLAW as a consequence of changes in the scope of work ordered by the Department; (3) indirect costs, including overhead; (4) direct costs; (5) costs, including legal fees, allegedly incurred by INSLAW because of the termination for convenience by the Department of the word processing portion of the contract; and (6) costs incurred because the Department withheld payments.

These claims were held in abeyance pending the outcome in the bankruptcy adversary proceeding. INSLAW's claims against the Department totaled $1,589,562 and the Department's claims against INSLAW totaled $1,216,752. On November 13, 1991, DOTBCA established October 13, 1992, as the trial date to hear INSLAW's case. [93]

Unfortunately, the Department took the spurious position that it has successfully defended itself against assertions of illegality, as defined in two courts and based on some of its own internal analysis, by having convinced the Appeals Court to vacate the earlier courts decisions based on jurisdictional grounds a ruling that had absolutely no bearing on the truth of the matter adjudicated on the basis of the substantial evidence presented. The Department is operating under the belief that it has been exonerated of any misconduct. In a November 13, 1991, hearing before DOTBCA, Department counsel stated that:

I think those trials speak for themselves, and every order has been vacated. . . . [94]


However, the DOTBCA judge responded:

There is one problem. The fact that a judge or a court doesnt have jurisdiction doesnt mean that the court is completely ignorant. True, Mr. Bason (the bankruptcy court judge) and Mr. Bryant (the judge that heard the initial appeal) did not have jurisdiction, but they did make some very serious findings on the basis of sworn testimony.

They had been truly vacated, and it may be that all the statutes to run have run and they cant go anywhere. Those cases may be dead forever. But it has left a cloud over the respondent (the Department). (Emphasis added.) [95]


Thus, still another adjudicating judge found that the rulings of the two courts that reviewed the INSLAW litigation ran counter to the Department's intransigent approach to recognizing formerly what its own internal analysis had suggested in confidence. When asked for his reaction to the finding of the District Court, Attorney General Meese responded that the ruling:

. . . seems totally at odds with everything I have learned and been told while I was in the Department of Justice . . . that there was any wrongdoing on the part of Justice people. [96]


Department counsel at the DOTBCA hearings responded to the judge by stating that:

Your Honor, with all due respect, those orders were vacated. And the effect of the vacating is to make them void. They have no force in effect whatsoever. They are as if they never happened. They it would be improper for a court or a board or any other judicial tribunal to rely, in any way, shape or form, on those decisions. (Emphasis added.) [97]


Certainly, the Department may be correct in asserting that there is presently no legal force to the courts rulings on terms of enforceability. But that result is because of the jurisdictional defects, and not the merits of the case, which had been adjudicated in two separate forums. However, it is not correct for the Department to conclude that the INSLAW matter has been resolved or that it should be considered as if it "never happened." The Department has not yet compensated INSLAW for its illegal and improper use of software that was found to be proprietary to INSLAW by two courts. Furthermore, Justice officials cannot escape accountability merely because the Appeals Court has reversed the lower courts rulings based on a procedural ruling.

As the DOTBCA judge concluded, there definitely remains a cloud over the Department's handling of INSLAW's proprietary software. Department officials should not be allowed to avoid accountability through a technicality or a jurisdiction ruling by the Appeals Court and INSLAW deserves to receive equitable consideration of its claims.

An impartial inquiry needs to be undertaken to assess the facts and potential culpability of the actions involved. Strategic gamesmanship has no place when the full weight and resources of the enforcement arm of the Government is pitted against a private interest, whose financial ability to litigate may have been compromised by the very departmental actions in dispute. In addition, should the Department not resolve this matter fairly and expeditiously, the dispute should be referred through a bill to the Chief Judge of the Claims Court whereby the statute of limitations can be suspended. To recover in such a case a claimant must show that (1) the Government committed a negligent or wrongful act, and (2) this act caused damage to the claimant. [98]

The litigation of a congressional reference case is fully adversarial once the pleading is complete. It proceeds like any other court case through discovery, pretrial, trial, the submission of requested findings and briefs, and decision. After the case is heard, a hearing officers report is submitted to the Congress, together with the findings of facts. The hearing officer must provide sufficient conclusions to inform Congress:

. . . whether the demand is a legal or equitable claim or a gratuity, and the amount, if any, legally or equitable due from the United States to the claimant. [99]


There is a distinct possibility that the extent of damages to INSLAW (particularly the Department's distribution of INSLAW's proprietary PROMIS) will never be fully known. Department documents provide evidence of distribution of PROMIS to at least one foreign government. There are also numerous allegations of widespread distribution to other foreign governments.

I. DEPARTMENT ENCOURAGES CONTRACT MEDIATION WHILE IT HINDERS SETTLEMENT


It is important to document that another equivocal effort to mediate the INSLAW dispute was initiated on June 28, 1990, when the Department requested the Appellate Court to consider INSLAW for the Appellate Mediation Program. [100] This action on the Department's part appeared significant because it was its first mediation request out of the 13 appeals submitted since January 1989. However, the success of this program requires that confidentiality be ensured throughout the mediation process. Information concerning cases screened by the Chief Staff Counsels Office is not to be shared with judges or with anyone outside the court. The judges do not know which cases are selected for mediation. [101]

However, for some unexplained reason, the Department failed to comply with this most basic requirement. On October 3, 1990, Ms. Linda Finklestein, Circuit Executive of the District of Columbia Circuit Court, contacted INSLAW's counsel and referred to an October 1, 1990, Washington Post article, which revealed that mediation had been requested by one of the parties. The article, cited to a departmental spokesman stated:

that the department has requested that the matter (INSLAW) be considered for mediation by the appeals court, in an attempt to settle the long-running dispute. [102]


This disclosure was completely contrary to the standards of the Appellate Program pursuant to the order of the court. The effect was to force INSLAW to withdraw from the program after only 3 months. It is difficult to understand the Department's strategy by this action. It may be that the Department wanted to maintain the facade of working diligently to settle a sticky contract dispute while working behind the scenes to sabotage it and keep pressure on INSLAW by forcing it to expend additional resources on legal support during the mediation process. If this is the case, the Department was successful. But the Department also succeeded in maintaining a near-flawless record of seeking delay over resolution and raising the level of suspicion about its motives to a point where the public trust in the untarnished pursuit of justice is subject to grave doubts.
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Re: The Inslaw Affair: Investigative Report by the Committee

Postby admin » Thu Apr 28, 2016 10:32 pm

Part 1 of 2

IV. SIGNIFICANT QUESTIONS REMAIN UNANSWERED ABOUT POSSIBLE HIGH LEVEL CRIMINAL CONSPIRACY

A. ALLEGATIONS OF CONSPIRACY AND INTRIGUE CONTINUE TO SURROUND THE INSLAW CONTROVERSY


The Hamiltons have alleged that high level Department officials conspired to steal the PROMIS software system. According to their allegations, the theft involved a number of stages which included: (1) the failure of the Department to comply with the terms and conditions of the contract with INSLAW; (2) attempts to force into bankruptcy and force the sale of PROMIS through liquidation of the company; (3) the attempted hostile buyout of INSLAW by a computer company owned by Dr. Earl Brian, a friend and former associate of Attorney General Meese; (4) the providing of the Enhanced PROMIS system to Dr. Brian by high level Department officials; (5) the modification of the PROMIS system by individuals associated with the world of covert intelligence operations so that Enhanced PROMIS could be distributed worldwide to intelligence and law enforcement organizations; and finally, (6) the actual distribution of the Enhanced PROMIS software system domestically and internationally with the knowledge and support of the CIA and Justice Department.

The Hamiltons have asserted that the first step in the conspiracy to steal the PROMIS system occurred when the Department intentionally failed to comply with the terms and conditions of the contract that it had entered into with INSLAW. The Hamiltons believe that INSLAW's contract with Justice did not include the enhanced version of the PROMIS software. In November 1982, the Department demanded that INSLAW turn over the enhanced version of PROMIS stating that INSLAW had no title to it. Further, the Hamiltons have asserted the Department's project manager, C. Madison Brewer, and the contracting officer, Peter Videnieks, directed by Deputy Attorney General D. Lowell Jensen, Attorney General Edwin Meese and other high level officials, resisted any type of negotiated arrangement with INSLAW in order to put the company out of business. The Hamiltons claim that by withholding $2 million in contract payments to INSLAW during this dispute, the Department intentionally forced INSLAW into bankruptcy. The Hamiltons have asserted that the Department then attempted to convert INSLAW from chapter 11 to chapter 7 bankruptcy, so that it could force the sale of INSLAW's assets, including Enhanced PROMIS, to a rival computer company controlled by Dr. Brian.

The Hamiltons have contended that high level officials in the Department of Justice conspired to steal the PROMIS software system. As an element of this alleged theft, these officials, which included former Attorney General Edwin Meese and Deputy Attorney General Lowell Jensen, forced INSLAW into bankruptcy by intentionally creating a sham contract dispute over the terms and conditions of the contract which led to the withholding of payments due INSLAW by the Department. After driving the company into bankruptcy, the Hamiltons have claimed that Justice officials attempted to force the conversion of INSLAW's bankruptcy status from chapter 11 to chapter 7. They have stated that this change in bankruptcy status would have resulted in the forced sale of INSLAW's assets, including PROMIS, to a rival computer company called Hadron, Inc., which at this time was attempting to conduct a hostile buyout of INSLAW. Hadron, Inc., was controlled by the Biotech Capital Corporation which was under the control of Dr. Earl Brian, who was president and chairman of the corporation. This is the same company in which Mrs. Ursula Meese had invested with money loaned to her by Mr. Edwin Thomas, a mutual friend and associate of Mr. and Mrs. Meese and Dr. Brian. [103] The Hamiltons have asserted that even though the attempt to change the status of INSLAW's bankruptcy case was unsuccessful, the Enhanced PROMIS software system was eventually provided to Dr. Brian. This was allegedly done by individuals from the Department with the knowledge and concurrence of then Attorney General Meese who had earlier worked with Dr. Brian in the cabinet of California Governor Ronald Reagan and later at the Reagan White House. According to the Hamiltons, the ultimate goal of the conspiracy was to position Hadron, Inc., and the other companies owned or controlled by Dr. Brian, to take advantage of the nearly 3 billion dollars worth of automated data processing upgrade contracts planned to be awarded by the Department of Justice during the 1980s.

Mr. Meese and Dr. Brian served together in the cabinet of then California Governor Ronald Reagan from 1970 through 1974. Dr. Brian was the controlling shareholder in Biotech Capital Corporation which in turn had a substantial stake in a computer firm called Hadron, Inc. At that time, Dr. Brian was chairman and president of Biotech Capital Corporation and was on the board of directors of Hadron, Inc. The Hamiltons have asserted that after the election of 1980, Dr. Brian moved quickly to put Hadron, Inc., in a position to take advantage of ties to Mr. Meese and others in the newly elected administration. The Hamiltons have claimed that Hadron, Inc.s first post-election moves were to acquire companies supporting Federal law enforcement efforts to control the smuggling of drugs across the Mexican border. Hadron, Inc., entered into several Government contracts with U.S. Customs and various intelligence agencies. The Hamiltons have claimed that in April 1983, Dominic Laiti, president and chairman of Hadron, Inc., contacted them and attempted to purchase Enhanced PROMIS. When they declined to sell PROMIS, he told them that he had ways of making them sell. The Hamiltons have alleged that Mr. Laiti also told them that as a result of contacts at the highest level of the Reagan administration, including Edwin Meese, Hadron, Inc., was able to obtain the Federal Governments case management software business. The Hamiltons have asserted that after declining to sell the PROMIS system, INSLAW became the target of a hostile buyout attempt.


The Hamiltons have alleged that after the Enhanced PROMIS software was stolen, it was illegally disseminated within the Department of Justice, to other Federal Government agencies and to governments abroad. This dissemination included the distribution of PROMIS to U.S. intelligence agencies, the FBI and the DEA. The Hamiltons have also claimed that the PROMIS software was sold to foreign governments for use by their intelligence and law enforcement agencies. The Hamiltons have strongly asserted that prior to PROMIS being distributed, it was modified by individuals connected with covert U.S. intelligence operations. These modifications possibly allowed for the creation of a "back door" into the system which would allow U.S. intelligence agencies to break into the systems of these foreign governments whenever they wished.

The Hamiltons have alleged that the Department furthered the conspiracy, when Department officials and others, including Judge Cornelius Blackshear, William Tyson, Thomas Stanton, Laurence McWhorter and William White, committed perjury and obstruction of justice during the investigation of the theft of PROMIS and during the trial in front of Judge Bason.

Former Attorney General Elliot Richardson, counsel to INSLAW, has described the circumstances surrounding the INSLAW case as a possible criminal conspiracy involving Edwin Meese, Judge Lowell Jensen, Dr. Earl Brian and several current and former officials at the Department of Justice. Mr. Richardson has stated that the individuals involved in the theft of the PROMIS system, the subsequent coverup and its illegal distribution may have violated several Federal criminal statutes including: (1) 18 U.S.C. 654 (officer or employee of the United States converting the property of another); (2) 18 U.S.C. 1001 (false statements); (3) 18 U.S.C. 1621 (perjury); (4) 18 U.S.C. 1503 (obstruction of justice); (5) 18 U.S.C. 1341 (mail fraud); and, (6) 18 U.S.C. 371 (conspiracy to commit offense). Mr. Richardson also believes that the circumstances surrounding the INSLAW case fulfill the requirements necessary for prosecution under 18 U.S.C. 1961 et seq. (the Racketeer Influenced and Corrupt Organization (RICO) statute). [104]

As discussed in the first section of this report, the committee investigation largely supports the findings of two Federal courts that the Department "took, converted, stole" INSLAW's Enhanced PROMIS by "trickery, fraud and deceit," and that this misappropriation had to involve officials at the highest levels of the Department of Justice. The Department deliberately ignored INSLAW's proprietary data rights, took the Enhanced PROMIS software and improperly distributed it to numerous Justice Department offices that were not entitled to use it under the Department's contract with the company. Certainly, this was a high risk venture in which Department officials had to have known would be vigorously challenged by the Hamiltons. Nonetheless, the Department expended enormous time, energy and money pursuing its conflict with INSLAW including almost 7 years of litigation. The Department took this course of action even though high level Justice officials knew, at least as early as 1986, that INSLAW had legitimate proprietary rights to the Enhanced PROMIS software and that the Department would not likely win the case in court on its merits. This raises the troubling question of why the Department would go to such great lengths to contest a relatively small $10 million procurement when there are certainly more pressing criminal justice matters to attend to. The inability of the Department to provide a plausible answer to this key question has fueled concerns that a more sinister explanation exists.

While the Department continues to explain the INSLAW conflict as a simple contract dispute, the committees investigation has uncovered or identified information which suggests a different and much more involved explanation.

B. ENHANCED PROMIS MAY HAVE BEEN DISSEMINATED NATIONALLY AND INTERNATIONALLY

After INSLAW became a for-profit organization, its business objective was to enhance revenues from the licensing, [105] sale or leasing of PROMIS and maintenance fees earned by its PROMIS software on a worldwide scale. INSLAW's international sales of PROMIS were conducted under the corporate name INSLAW International, [106] which licensed PROMIS in Ireland, Scotland, Australia, Holland and Italy. [107] Nationally, INSLAW's objective was to market PROMIS to state and local jurisdictions, the Federal Government, and private businesses such as law firms. [108]

As previously discussed, INSLAW had long asserted and was supported in the courts that it owned proprietary rights to its enhanced version of PROMIS that were turned over to the Department in April 1983. It was the courts position that the Department stole and improperly distributed INSLAW's Enhanced PROMIS. Although later overturned by the Circuit Court, the Bankruptcy and District Courts held that the Department had violated an automatic stay and was liable for license fees for unlawfully using Enhanced PROMIS (as described in other sections of this report). [109] It also appears, however, that the Department's distribution of PROMIS may have gone far beyond its own boundaries because there are documentation and corroborating statements which indicate that PROMIS may have been distributed by Department officials to locations worldwide.

On April 15, 1983, Mr. Brick Brewer asked Mr. Jack Rugh, the Acting Assistant Director, OMISS, EOUSA, about any discussions that he may have had regarding the availability of the various Federal versions of PROMIS to organizations other than U.S. attorneys offices. In a Department memorandum dated April 22, 1983, Mr. Rugh wrote that:

Since INSLAW made their claim of proprietary interest in our enhanced version of PROMIS, I have qualified the possibility of the availability of that version. Prior to that claim, I told several of the organizations discussed below, that EOUSA enhancements could be provided to them at some future date. (Emphasis added.)

As part of our solicitation for computer equipment, Government owned versions of PROMIS were made available to potential bidders for use in benchmarking their equipment. All four LEAA versions (DEC, IBM, Wang, and Burroughs) as well as the EOUSA Prime pilot version were supplied. . . .No restrictions were placed on the usage of that software. (Emphasis added.)

Also as part of our computer buy, a copy of the EOUSA Prime pilot version of PROMIS was supplied to Mr. Dave Hudak who contracted with us to develop certain benchmark programs. Again no restrictions were placed on software usage. (Emphasis added.)

In early 1982, I supplied a copy of the EOUSA Prime pilot version of PROMIS to Bob Bussey of the Colorado District Attorneys Council, at Bricks (Brewers) request. . . .Subsequently, I discussed the availability of our PROMIS enhancements, funded through the LEAA contract, once they were installed on our Prime equipment with Mr. Bussey. I also provided him with a copy of the LEAA DEC version of PROMIS in early 1983. (Emphasis added.)

I provided Jean Gollatz from the Pennsylvania State Government with a copy of our computer RFP in early 1982 . . . I have told Ms. Gollatz on several occasions that our Prime pilot version of PROMIS is available for their use, and that our enhanced Prime version should be available by mid-summer, 1983. (Emphasis added.)

I have discussed the availability of EOUSA Prime pilot version of PROMIS as well as the enhanced version with Don Manson of the Bureau of Justice Statistics on a number of occasions. Mr. Manson is particularly interested in providing a copy of our enhanced software to the U.S. Virgin Islands. (Emphasis added.)

During the week of April 11, 1983, INSLAW demonstrated PROMIS in the Boston U.S. attorneys office to a group of people from the State of Massachusetts. Joe Creamer, our system manager in Boston, called me late in the week. He said someone from State (the State Government) had called him to ask about the availability of PROMIS software from sources other than INSLAW. I told Joe that the LEAA versions and our Prime pilot version were certainly available, but that there was a current dispute with INSLAW regarding our enhanced version. I do not know if Joe provided this information to the State. (Emphasis added.)

I have held a number of informal discussions with personnel in the Criminal Division regarding their possible use of our enhanced version of PROMIS and the possibility of their using one of our optional Prime machines. We have also discussed the possibility of cooperating on PROMIS software maintenance and enhancements in the future. (Emphasis added.) [110]


A Department memorandum also shows that the Department made at least the LEAA version of PROMIS available to an interested party from a foreign government. In a memorandum dated May 6, 1983, Mr. Rugh stated:

Reference my memorandum to file dated April 22, 1983, on the same subject. Brick Brewer recently instructed me to make a copy of an LEAA version of PROMIS available to Dr. Ben Orr, a representative of the Government of Israel. Dr. Orr called me to discuss that request after my earlier memorandum was written. I have made a copy of the LEAA DEC version of PROMIS and will provide it along with the corresponding documentation, to Dr. Orr before he leaves the United States for Israel on May 16. (Emphasis added.) [111]


Given the international dimensions to the decisions, it is difficult to accept the notion that a group of low-level Department personnel decided independently to get in touch with the Government of Israel to arrange for transfer of the PROMIS software. At the very least, it is unlikely that such a transaction occurred without the approval of high level Department officials, including those on the PROMIS Oversight Committee. Interestingly, while Department documents show that "public domain" PROMIS was turned over to Israel, it is uncertain what version actually was transferred. Department managers believed that all versions of the Enhanced PROMIS software were the Department's property. The lack of detailed documentation on the transfer, therefore, only creates new questions surrounding allegations that Enhanced PROMIS may have been sold or transferred to Israel and other foreign govern-ments. It certainly raises questions, discussed infra, about allegations surrounding Dr. Brian's involvement in the sale of Enhanced PROMIS to Israel. In particular, it has been asserted by several individuals [112] that the Enhanced PROMIS had been delivered to Dr. Brian for such a transfer by Mr. Videnieks. Mr. Videnieks was asked to provide a sworn statement to committee investigators on this subject, but to date committee attempts to arrange such a statement have been unsuccessful. [113]

By memorandum dated May 12, 1983, Mr. Rugh turned PROMIS over to Mr. Brewer for submission to the Government of Israel:

Enclosed are the PROMIS materials that you asked me to produce for Dr. Ben Orr of the Government of Israel. These materials consist of the LEAA DEC PDP 11/70 version of PROMIS on magnetic tape along with the printed specifications for that tape, as well as two printed volumes of PROMIS documentation for the LEAA version of the system. [114] (Emphasis added.)


In a memoranda to Judge Bua, Elliot Richardson maintains that documentary evidence such as travel memoranda, reflect a plan by the U.S. Government for direct accessing of foreign government intelligence and enforcement activity:

One important motive for the theft of Enhanced PROMIS may have been to use it as a means of penetrating the intelligence and law enforcement agencies of other governments. The first step in this scheme was the sale to the foreign government of a computer into which had been inserted a microchip capable of transmitting to a U.S. surveillance system the electronic signals emitted by the computer when in use. . . . Enhanced PROMIS has capabilities that make it ideally suited to tracking the activities of a spy network.

Several INSLAW informants formerly affiliated with United States or Israeli intelligence agencies claim that both the United States and Israel have relied on "cutout" companies to provide ongoing support for the PROMIS software. . . . [115]


In still another departmental memorandum, reference is found to making Enhanced PROMIS available to outside sources after the contracting officer had ruled against INSLAW's claims to the enhancements. As described in Mr. Rughs August 12, 1983, memorandum:

On Wednesday, August 10, Don Manson called to inquire about the availability of our Prime (Enhanced) version of PROMIS for distribution to state and local organizations, specifically the Virgin Islands. I explained to Don that INSLAW had claimed that the U.S. attorneys version of PROMIS contains proprietary software and cannot be distributed beyond the U.S. attorneys organization. I told Don that even though I expected the dispute to be resolved in favor of the Government, we could not supply a copy of the software at this time. Don indicated that he planned to make a formal written request for the software, indicating an urgent need in the U.S. Virgin Islands. (Emphasis added.) [116]


It is uncertain whether this request was made and, if so, what the outcome was. Several individuals [117] however, have provided sworn statements that Enhanced PROMIS was in fact distributed by the Department or its agents beyond EOUSA.

1. ALLEGATIONS THAT THE JUSTICE DEPARTMENT AND EARL BRIAN CONSPIRED TO DISTRIBUTE PROMIS

Several individuals [118] have stated under oath that the Enhanced PROMIS software was stolen by high level Justice officials and distributed internationally in order to provide financial gain to Dr. Brian and to further intelligence and foreign policy objectives of the United States. While some of this testimony comes from individuals who, given their past activities and associations, might be viewed as less than credible, the committee has uncovered corroborating evidence supporting a number of the aspects of these witnesses sworn testimony. [119] Although the committees investigation could not reach a definitive conclusion regarding the motives behind the misappropriation of the Enhanced PROMIS software, the disturbing questions raised, unexplained coincidences and peculiar events that have surfaced throughout the committees inquiry into the INSLAW case raises the need for further investigation.

Finally, as documented infra, the committees investigation was unfortunately hampered by numerous obstacles which prevented it from conducting a complete review of several allegations during the investigation of the INSLAW case. This was particularly true of the allegations involving a possible criminal conspiracy by high level Government officials to steal, sell, and disseminate INSLAW's PROMIS software for secret or covert programs domestically and abroad. [120]

Other events including the arrest and conviction of a key informant and the death of a reporter covering the INSLAW matter have only generated more questions about the INSLAW matter. Numerous potential witnesses refused to cooperate, for the stated reason that they were fearful for their jobs and retaliation by the Justice Department or that attempts had already been made to intimidate them against cooperating. Other witnesses directly contradicted the statements attributed to them by the Hamiltons and were clearly distressed that their names had been drawn into the web of the INSLAW conspiracy theory. Mr. Riconosciuto and others claimed to have direct knowledge of a conspiracy by high level Department officials to turn INSLAW's PROMIS software over to former Attorney General Meeses friend and former associate, Dr. Earl Brian. [121] Finally, many witnesses have given conflicting and inconsistent testimony which may involve perjury and obstruction. The following is a brief discussion of these issues.

2. SWORN STATEMENT OF MICHAEL RICONOSCIUTO

Mr. Michael Riconosciuto, a self-described computer expert who in the past has been involved with contract computer and munitions work for U.S. intelligence agencies, was brought to the attention of the committee in June 1990. Mr. Riconosciuto alleged that he had access to information that clearly linked Dr. Earl Brian to the Department's theft of Enhanced PROMIS software. Mr. Riconosciuto alleged that Dr. Brian was given the software as a reward for work he had done for the Reagan Presidential campaign. [122] In a sworn statement to Mr. and Mrs. Hamilton, Mr. Riconosciuto stated that in the early 1980s both he and Dr. Brian were associated with the Wackenhut Corporation [123] to work on a covert project on the Cabazon Indian Reservation located near Indio, California. [124]

On March 21, 1991, Mr. Riconosciuto provided the Hamiltons a sworn affidavit detailing his involvement with Dr. Brian and Peter Videnieks, the Department's contracting official. Mr. Riconosciuto stated that while employed by the Wackenhut Corporation he was involved with the modification of proprietary Enhanced PROMIS software during calendar years 1983 and 1984. Mr. Riconosciuto further stated that the software was provided to him by Dr. Brian, who had obtained it from Mr. Videnieks. Mr. Riconosciuto alleged that the software modifications were made to facilitate implementation of PROMIS software in particular, porting PROMIS to the systems in two Canadian agencies, the Royal Canadian Mounted Police (RCMP) and the Canadian Security and Intelligence Service (CSIS). According to Mr. Riconosciuto, the modified PROMIS software was implemented by these agencies, and Dr. Brian brokered the sale to the Canadian Government. [125]

In his March 21, 1991, affidavit, Mr. Riconosciuto stated that in February 1991, Peter Videnieks told him in a telephone conversation that it would be beneficial for him to refuse a committee request for an interview. [126]


Despite the alleged interference by the Department, Mr. Riconosciuto provided a sworn statement to committee investigators on April 4, 1991. In his statement, Mr. Riconosciuto directly connected his involvement with modifying PROMIS to Dr. Brian and Mr. Videnieks. Mr. Riconosciuto also provided information concerning the February 1991 telephone conversation with Mr. Videnieks, which he referred to in his March 21, 1991, statement to the Hamiltons. Mr. Riconosciuto further alleged that he had in his possession two copies of the tape recorded conversation at the time of his arrest and that the tapes are currently in the possession of the DEA agents who arrested him. [127]

Mr. Riconosciuto described his role and work with Dr. John Nichols and the Wackenhut/Cabazon joint venture. [128] According to Mr. Riconosciuto, Dr. John Nichols was the director of the Wackenhut/Cabazon joint venture in Indio, CA. [129] Mr. Riconosciuto said that Dr. Nichols and Mr. Brian worked closely on a variety of international projects; and, during the joint venture, Dr. Nichols was constantly being visited by "high profile people currently employed in various agencies of the United States Government. . . ." Mr. Riconosciuto further stated that Dr. Nichols was able to get him into secure areas of military facilities at Picatinny Arsenal during this venture. [130] According to Mr. Riconosciuto, he obtained access to secure areas in connection with the joint venture during 1981 and this was when he first met Mr. Videnieks. Mr. Riconosciuto claimed that he was given a copy of the proprietary version of INSLAW's PROMIS by Mr. Videnieks and Dr. Brian. [131] Mr. Riconosciuto alleged that at that time Dr. Brian was spearheading plans for the worldwide distribution of PROMIS. [132]

Mr. Riconosciuto granted the committee access to storage facilities where computer software [133] and documents were recovered by committee investigators.

Mr. Riconosciuto told committee investigators that Robert Booth Nichols could provide additional information concerning the Cabazon Indian Reservation and the conversion of the PROMIS software. [134] (See page 72.)

Dr. Brian's connection to former Attorney General Meese: Mr. Hamilton alleged in his affidavit and in testimony before this committee that Dr. Brian exploited a friendship with former Attorney General Meese to gain control of INSLAW's Enhanced PROMIS. [135] In their sworn statements to the committee, Mr. Meese and Dr. Brian stated that they had previously worked together as part of Ronald Reagans cabinet while he was Governor of California, but their contacts since that time have been sporadic, limited, and social. Dr. Brian stated that he neither asked Mr. Meese to intercede on his behalf in any Government contracts nor did he discuss any Government contracts with him. Dr. Brian denied having any awareness of PROMIS during the time alluded to by Mr. Hamilton. Dr. Brian stated based on advice from his counsel that after Mr. Meese encountered problems during the 1984 independent counsel inquiry, he had no contact with Mr. Meese until after he resigned under a cloud as Attorney General in 1988. Dr. Brian further stated that he has had only a few conversations with Mr. Meese since then because their relationship had chilled.

There were, however, strong ties between Dr. Brian and Mr. Meese. An independent counsel investigation by Jacob Stein of Mr. Meese, initiated in April 1984, identified certain financial dealings involving Mr. and Mrs. Meese, Dr. Brian, and Mr. Edwin W. Thomas. [136] One major point of the investigations focus was Mr. Meeses association with Dr. Brian, who was secretary of the agency for health and welfare in Governor Reagans administration, and Mr. Edwin Thomas, who was a close friend of Dr. Brian and purchased stock in companies in which Dr. Brian was interested. Mr. Thomas loaned Mrs. Meese $15,000 to purchase 2,000 shares of stock in a company called Biotech Capital Corporation, which was a venture capital firm created and controlled by Dr. Brian. [137] Before he actually made the loan, Mr. Thomas was offered a position as Assistant Counselor to the President by Mr. Meese in or about late December 1980 or early January 1981. [138] Mr. Stein concluded that there was substantial uncontradicted evidence that the Counselor position was offered by Mr. Meese to Mr. Thomas based on a longstanding personal and professional relationship between the two men. Following the loan, Mr. Thomas was named chief of the General Service Administrations San Francisco, CA, regional office.

Dr. Brian made a $100,000 loan to Mr. Thomas to fund the purchase of a Virginia townhouse during the same period; however, these funds were mostly used to purchase stock. [139] Mr. Meese stated that he knew Dr. Brian from Reagans governorship and had seen him perhaps a dozen times from 1974 through 1984. During the first 2 years of the administration of President Reagan, Dr. Brian served as the Chairman of a White House Health Care Cost Reduction Task Force which reported to Mr. Meese. Dr. Brian, at either his or Mr. Thomas behest, was nominated by the President to the National Science Board based on a recommendation by Mr. Meese. [140]

This nomination was approved by President Reagan, but later withdrawn. In his sworn statement to the committee, Dr. Brian stated that the reason he did not receive the position was due to a personality conflict between himself and the head of the National Science Foundation. Information in the FBI background report and the independent counsel report prepared by Mr. Stein directly contradicted Dr. Brian's statement to the committee about the reason his appointment was withdrawn. According to the report of the independent counsel, Dr. Brian's name was withdrawn from consideration because of issues raised in the background report by the FBI. FBI records also indicate that Dr. Brian was a candidate for a White House position in 1974 and that nomination was withdrawn as well.

During an interview by committee investigators, a confidential law enforcement source, [141] who previously had been a member of Governor Reagans cabinet, stated that he personally knew Dr. Brian and was aware of his close relationship with Mr. Meese. The source also said that he was aware of a situation in the 1970s in which Dr. Brian was accused of using computer software owned by the State of California for his (Dr. Brian) personal gain. [142] The committees investigation revealed that in 1974, Dr. Brian was involved in a controversy over the use of 3,000 reels of computer tapes owned by the State of California. According to a news account in the Los Angeles Times, [143] these tapes were transferred to Dr. Brian under questionable circumstances which on the surface share some similarity with certain aspects of the INSLAW affair, as alleged by Mr. Hamilton.


The newspaper report stated that during the final days of Governor Ronald Reagans administration, computer tapes were given to Dr. Brian under a no-cost contract awarded by then chief deputy director of the State of California Health Department, David Winston. Mr. Winston later became an employee of Dr. Brian's. After Governor Reagan left office, the new health director, Robert Gnaidza, held a news conference and stated he was canceling the contract, which entrusted the computer tapes to Dr. Brian, because the tapes were of incalculable value as a research tool and that handing them to Dr. Brian was, in effect, "a gift of public property for private purposes." [144] Dr. Brian apparently acknowledged having obtained the tapes, but he denied that the tapes were a gift to him. According to the news account, he stated:

The entire matter is a blatant political ploy intended to obfuscate the abortive Gestapo raid ordered by the (present) health director.


The independent counsel investigation did not include an inquiry into the possible connections between Mr. Meese and Dr. Brian, and the theft of Enhanced PROMIS. [146]

3. OTHER SOURCES ALLEGE WIDESPREAD DISTRIBUTION OF INSLAW'S ENHANCED PROMIS

Additional allegations of unauthorized distribution of INSLAW's Enhanced PROMIS software have been brought to the committee. Such allegations have been made by Charles Hayes (a surplus computer dealer), Ari Ben-Menashe and Juval Aviv (former Israeli intelligence officers) and Lester Coleman (self-professed writer and security consultant). These sources have stated that PROMIS has been illegally provided or sold to foreign governments including Canada, Israel, Singapore, Iraq, Egypt, and Jordan. [147]

Where possible, the allegations were investigated to the extent possible. Yet, the committees work was subject to great limitations in attempting to secure cooperation by both private and governmental sources. In some cases, the person or government providing the committee with information abruptly halted such cooperation, which had ostensibly begun in good faith. Such was the case with the Government of Canada. In other cases, individuals appeared to have withheld key documents which allegedly linked the Justice Department and CIA to the sale of the Enhanced PROMIS software internationally. The possible involvement of the CIA and foreign governments presented, in the end, insurmountable obstacles to the committees attempts to thoroughly investigate the allegations raised in this matter. The CIA was not fully responsive to inquiries from the committee, and would, under no circumstances, provide the committee or GAO with the needed access to its files and personnel. Further, Congress is generally powerless to investigate allegations regarding activities outside the United States without the assistance of the host government. For these reasons, the information presented in the following sections is limited by the restrictive conditions that prevented a fully probative inquiry necessary to resolve a host of still unanswered questions and allegations surrounding INSLAW. Where possible, sworn statements were obtained from individuals alleging information on unauthorized PROMIS software distribution.

4. DOES THE GOVERNMENT OF CANADA HAVE THE PROMIS SOFTWARE?

During November 1990, the Hamiltons informed the committee that they received information from Mr. Marc Valois, a Canadian Government Department of Communications official, that INSLAW's PROMIS software was being used to support 900 locations throughout the Canadian Government. [148] During January 1991, the Hamiltons informed the committee they were told by Mr. Denis LaChance, a Canadian Government Department of Communications official, that the Royal Canadian Mounted Police (RCMP) was using INSLAW's PROMIS to support its field offices. [149]


In a February 26, 1991, letter, the committee requested that the Ambassador of Canada, His Excellency Derek H. Burney, assist the committee investigators in contacting knowledgeable Government officials to determine what version of the PROMIS software is being used by the Canadian Government. Subsequently, Mr. Jonathan Fried, Counselor for Congressional and Legal Affairs in the Canadian Embassy (Washington, DC), contacted the committee to express reluctance to fully cooperate with the committee because "Canadians had been burned once before by Congress." Mr. Fried insisted that the following specific conditions be met: (1) that interviews for individuals be conducted only in the presence of both the legal counsel for the Department's involved and their superiors; and (2) that no Canadian public servants would be witnesses in any foreign investigative proceedings. By letter dated March 19, 1991, the committee reluctantly agreed to the Canadian Governments conditions and identified Marc Valois and Denis LaChance as the two Canadian officials the committee wished to interview.

On March 22, 1991, committee investigators interviewed Mr. Valois and Mr. LaChance, the two Canadian officials who had alleged that the Canadian Government was using INSLAW's PROMIS software. Prior to the questioning of the two witnesses, the Governments counsel informed committee investigators that Mr. Valois and Mr. LaChance could only respond to questions specifically addressing the PROMIS software. He further stated that these two officials would not respond to questions concerning any allegation that four software programs that may have been acquired by the Canadian Government may be derivatives of the PROMIS software. The Canadian counsel informed the committee investigators that the committee would have to request in writing any information concerning the Canadian Governments involvement relating to the four software programs alleged to be derivatives of PROMIS. [150]

Mr. Valois and Mr. LaChance stated that they had incorrectly identified INSLAW's PROMIS as the software being used by the Canadian Government. They further stated that, the PROMIS software identified to the Hamiltons as being their product was actually a project management software also named "PROMIS," developed by the Strategic Software Planning Corporation. [151] They also denied any knowledge, or use, of a derivative of INSLAW's PROMIS. Subsequently, the president of the Strategic Software Planning Corporation acknowledged in a sworn statement to committee investigators that his company had sold a few copies of his firms PROMIS software to the Canadian Government in May 1986. [152]


By letter dated October 23, 1991, to the Canadian Ambassador, the committee again requested full cooperation with the committees investigation. The Canadian Government was requested to provide information regarding software packages allegedly being used by the RCMP and CSIS identified as derivatives of INSLAW's Enhanced PROMIS by the Hamiltons. Additionally, it was requested that investigators be provided the names of knowledgeable RCMP and CSIS personnel who could provide insight into the software used by these agencies.

On December 4, 1991, the Ambassador responded by letter that neither the RCMP nor the CSIS were using INSLAW's PROMIS software. He further stated that none of the software packages believed to be derivatives of PROMIS were in use by any branch of the Canadian Government. According to the Ambassador:

. . . The RCMP and CSIS reported . . . they do not use any case management software. . . . [153]


The Ambassador's conclusory statement did not provide an offer or an opportunity for further verification of the allegations received concerning the Government of Canada. [154] Without direct access to RCMP, CSIS and other Canadian officials, the committee has been effectively thwarted in its attempt to support or reject the contention that INSLAW software was transferred to the Canadian Government.

5. DID THE CIA ASSIST IN THE SALE OF PROMIS?

On November 20, 1990, Chairman Brooks wrote to CIA Director, William H. Webster, requesting that the Agency:

. . . cooperate with the committee by determining whether the CIA has the PROMIS software or any derivative and to have the knowledgeable person or persons available for interviews by committee investigators. . . .


On December 11, 1990, the CIAs Director of Congressional Affairs, Mr. E. Norbert Garrett, responded that:

We have checked with Agency components that track data processing procurement or that would be likely users of PROMIS, and we have been unable to find any indication that the Agency ever obtained PROMIS software.


The chairman notified the CIA on February 15, 1991, that the committee appreciated the initial inquiry performed by Mr. Garrett. The chairman stated, however, that a more thorough and complete review was needed to determine if the PROMIS software or a derivative is, or has ever been, in the possession or control of the Agency, or any of its contractors, consultants, and operatives.

The chairman advised the Director that the committee received information that, in 1983, the Agency began operating a "floating point system" that operates a "Data Point" software program alleged to be a derivative of PROMIS. [155] The chairman also informed the Director that it has been alleged that the PROMIS software might also be operating under the name "Data Plus" or "PROMIS Plus" and it might currently be used at military intelligence locations. The chairman stated that the committee had also received information that the CIA may have assisted the Egyptian Government in acquiring this software through the Foreign Military Assistance Program (MAP). Finally, in the letter dated February 15, 1992, the chairman inquired of the Director whether the CIA had awarded several contracts to Dr. Earl Brian, or a company called Hadron, Inc.


Several months after the chairman's February 15, 1991, letter, the committee staff met with CIA representatives. They indicated that after an extensive search within the Agency, no versions of the PROMIS software were found. They also indicated that they checked specifically to see if the software had been supplied to the Government of Egypt and that no evidence of this transaction occurring exist at the Agency. [156]

A letter dated November 18, 1991, was received from the CIA Deputy Director, Richard Kerr, who denied that the Agency had any versions of INSLAW's PROMIS software. He further stated that the PROMIS software currently being used by CIA components was manufactured by Strategic Software Planning Corporation of Cambridge, MA. (This is the same firm that sold its PROMIS software to the Canadian Government, described in a previous section.) Mr. Kerr also stated that the Agency has had some contracts with Hadron, Inc., but they were not related to PROMIS and that the Agency had no record of being in contact with Dr. Earl Brian in connection with any of these contracts. [157] The Deputy Director also denied that the CIA assisted the Egyptian Government in acquiring INSLAW's PROMIS or similar software. [158] He, however, added an important caveat:

Of course, we have no way of knowing whether any Agency contractors at some point ever acquired PROMIS software, but none did so on behalf of the Agency. Moreover, although we have no indication that any such acquisition took place, we cannot rule out the possibility that an Agency employee acting on his own behalf and without any official authorization or funds acquired PROMIS for his own personal use. [159]


Thus, the CIA has not fully addressed the questions raised in the chairman's February 15, 1991, letter. While the CIA indicated that they could not locate PROMIS within the Agency, the Agency itself acknowledged that this did not preclude independent contractor usage.

In response to the allegation that the Egyptian Government obtained INSLAW's Enhanced PROMIS software using Foreign Military Assistance Program funds between 1980 and 1990, the committee requested GAO to determine if this fund was used to assist in the purchase of the software. [160] On June 14, 1991, following a study by its National Security, International Affairs Division, GAO advised the committee that their review failed to produce evidence supporting the allegation regarding the purchase of the PROMIS software by the Egyptian Government. [161] During discussions with the GAO evaluators who conducted the study, the committee learned that MAP funds cover broad categories which make it extremely difficult to identify individual purchases.
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Re: The Inslaw Affair: Investigative Report by the Committee

Postby admin » Thu Apr 28, 2016 10:37 pm

Part 2 of 2

6. Allegations of Promis Distribution to Agencies Within the Department

During this investigation, the committee received allegations that the Drug Enforcement Administration had been mandated to use the PROMIS software. Allegations were also made that the FBI Field Office Information Management System (FOIMS) is based on INSLAW's PROMIS software.


In August 1990, the committee inquired into an allegation that the DEA had been mandated to use PROMIS software. This allegation originated from the former DEA Deputy Assistant Administrator for Planning and Inspections, Carl Jackson, who told committee investigators that, in 1988, Attorney General Richard Thornburgh ordered DEA to install PROMIS software. He stated that he recalled some discussion during a monthly ADP Executive Committee of senior DEA officials in late 1988 or early 1989 concerning the mandate. [162] However, DEA eventually developed a case tracking system called CAST (Case Status System). [163] The committee investigators reviewed the minutes of the ADP Executive Committee monthly meetings conducted in late 1988 and early 1989. The review disclosed no evidence that PROMIS was discussed, [164] but did corroborate DEAs plan to implement CAST.

With regard to the allegations concerning the FBI, committee staff inquired into charges made by Mr. Terry Miller, president of government sales, Consultants, Inc. [165] On January 9, 1991, 166 Mr. Miller informed FBI Director William Sessions that he had reason to believe that the software system, FOIMS, used throughout the FBI to track cases, had been stolen from INSLAW. He offered the FBI what he called a simple solution to determine the truth of his allegation a "code compare" between PROMIS and FOIMS. The FBIs January 25, 1991, response to Millers allegation was in the nature of an unresponsive form letter. [167] In his February 5, 1991, response to the FBI, Mr. Miller accused the FBI of being very defensive. Mr. Miller further stated that the FBI had requested that he provide, among other things, descriptions of the victim and the thief, if any.

In a February 11, 1991, letter, the FBIs Deputy Assistant Director for the Technical Services Division responded to Mr. Miller. [168] The Deputy Assistant Director stated that he conferred with the Department's attorney handling the INSLAW matter and determined that the Federal courts were the appropriate forum for adjudicating his concerns.


On June 7, 1991, the FBI followed up with another letter to Mr. Miller. [169] In this letter the Assistant Director for the Inspections Division pointed out that they would need additional information before the FBIs OPR could assess the substance of his allegation. On June 13, 1991, Mr. Miller responded that he did not know if FOIMS contained stolen software, but that several people had claimed that FOIMS contains software stolen from INSLAW. [170] Mr. Miller reiterated that it would be rather easy to do a code compare between PROMIS and FOIMS to resolve this issue.

It is the committees understanding that no code comparison has been made between FOIMS and PROMIS to determine if there is any similarity. [171] FBI officials did inform committee investigators that the Bureau began developing FOIMS in-house around 1978 and that in 1981 the Bureau decided to use the ADABAS [172] data base management system. [173] These officials provided documentation to the committee which indicated that implementation at the first pilot office began during 1979, and that implementation of FOIMS at all FBI field offices began in 1985 and was completed in 1989.

According to the FBI, INSLAW demonstrated its PROMIS software in 1982 and at that time the Bureaus technical support personnel determined that the PROMIS would not meet the agencys requirements. The FBI concluded that, to use INSLAW's PROMIS, the Bureau would need to spend a considerable amount of time and money to modify and/or convert existing systems to accommodate the new software. While there is no specific evidence that PROMIS is being used by the FBI, the matter could be resolved quickly if an independent agency or expert was commissioned to conduct a code comparison of the PROMIS and FOIMS systems. [174]

However, by letter dated July 7, 1992, Judge Bua stated to INSLAW counsel Elliot Richardson that he had decided to "retain my own expert to conduct the examination necessary to compare the software." [175] This action followed the FBI Directors agreement to fully cooperate with a comparison of the FOIMS software to INSLAW's PROMIS, with a number of conditions that included:

The examiner must advise the FBI of any FOIMS software code which, in his or her judgment, was derived from the enhanced version of PROMIS. This notification will provide the FBI with an opportunity to document the existence of the questioned software code to avoid possible subsequent disputes. [176]


7. RONALD LEGRAND DENIES INSLAW'S ASSERTIONS

The committee received allegations that Ronald LeGrand, former DEA agent, former chief investigator for the Senate Judiciary Committee, and a lawyer, had received crucial information about INSLAW matters from a trusted source who was a senior Department career official "with a title" whom Mr. LeGrand had known for 15 years. [177] In the Third Supplemental Submission of INSLAW in Support of Its Motion to Take Limited Discovery (Bankruptcy case No. 85-00070), counsel for INSLAW states:

INSLAW had sought to depose these officials because of highly specific allegations that Mr. Ronald LeGrand, then Chief Investigator of the Senate Judiciary Committee, had conveyed to William A. and Nancy B. Hamilton, the principal owners of INSLAW, in May 1988.

According to LeGrand, a trusted source, described to the Hamiltons as a senior DOJ official with a title, had alleged that the two senior Criminal Division officials were witnesses to much greater malfeasance against INSLAW than that already found by the Bankruptcy Court, malfeasance on such a more serious scale than Watergate. LeGrand told the Hamiltons that D. Lowell Jensen did not merely fail to investigate the malfeasance of Videnieks and Brewer but instead had "engineered" the malfeasance "right from the start" so that INSLAW's software business could be made available to political friends of the Reagan/Bush administration. [178]


Because of the seriousness and specificity of the allegations, committee investigators invested considerable effort in obtaining cooperation from Mr. LeGrand. After 5 months of negotiations, Mr. LeGrand was interviewed by committee investigators on May 31, 1990. [179] Mr. LeGrand was asked to identify the "trusted source" so that committee investigators could contact this person to obtain his knowledge of the INSLAW matter. Mr. LeGrand stated that he would contact his source and determine whether he was willing to be interviewed. Mr. LeGrand was also asked if he would provide a sworn statement, and he indicated that he would if the committee made a request to Chairwoman Cardiss Collins of the House Government Operations Subcommittee on Government Activities and Transportation. [180] Pursuant to Mr. LeGrands request, Chairman Brooks wrote to Chairwoman Cardiss Collins on July 20, 1990. The chairman requested that committee investigators be allowed to obtain a sworn statement from Mr. LeGrand concerning his knowledge of the INSLAW matter.

After receiving an affirmative response from Chairwoman Collins, committee investigators made numerous attempts to schedule a sworn statement from Mr. LeGrand, to no avail. Mr. LeGrand then left the Washington DC, area without informing the committee. Once Mr. LeGrand was located, the committee wrote to him on November 20, 1990, and renewed its request that he cooperate with the committee by providing a statement under oath. On February 14, 1991, Mr. LeGrand provided a sworn statement to committee investigators. [181] During this statement Mr. LeGrand provided little corroboration of the Hamiltons allegations. According to Mr. LeGrand, the first problem with the remarks attributed to him was the unintentional merging of comments from different persons which the Hamiltons had attributed to Mr. LeGrands "trusted source." Mr. LeGrand stated that he gathered information from several individuals during his inquiry into the INSLAW matter. However, Mr. Hamilton attributed all the information he had received from Mr. LeGrand as coming from his "trusted source."

Mr. LeGrand, however, stated that his trusted source provided the following information pertaining to the INSLAW matter:

Then Deputy Attorney General Lowell Jensen was going to award the case tracking software business to friends. [182]


Jensen relied on some of the most senior political and career officials in both the Criminal Division and the Justice Management Division to carry out this plan. [183]

Other senior Criminal Division officials not involved in the alleged wrongdoing have knowledge of it and are upset about it but are unwilling to expose themselves to possible reprisals by coming forward with what they know. [184]

Mr. LeGrand was asked whether his source provided the following statement as described by INSLAW counsel in the Bankruptcy Court proceedings:

Shortly after DOJs public announcement on May 6, 1988, that DOJ would not seek the appointment of an independent counsel in the INSLAW matter and that it had cleared Mr. Meese of any wrongdoing, the source told Mr. LeGrand that "the INSLAW case is a lot dirtier for the Department of Justice than Watergate was, both in its breadth and in its depth."


Mr. LeGrand responded that his source indicated that there was more to this than people were currently aware of and that there was a comparison to Watergate; however, he did not recall reference to the date or the phrase "both in its breadth and in its depth." [185]

Mr. LeGrand was again asked to provide the name of his source and to date he has refused to do so. [186]

At the Department's request, Mr. LeGrand later submitted an affidavit refuting INSLAW's claim. In the affidavit, Mr. LeGrand stated, ". . . I did not convey highly specific allegations to Mr. or Mrs. Hamilton. Instead, I told them of general allegations, rumors, I had heard from different sources about various persons within the Department of Justice." [187] After several years of making statements to William Hamilton, the Senate Permanent Subcommittee on Investigations, and this committee, Mr. LeGrands latest affidavit was striking in its assertion that his source had no personal knowledge of the Department's handling of the INSLAW matter.

8. THE ALLEGATORS

The following is a discussion of the evidence provided by several additional individuals who claim to have detailed and, in some cases, firsthand knowledge of the Justice Department's alleged conspiracy to steal and to transfer or sell the PROMIS software to foreign intelligence or other parties. Not all individuals would provide sworn testimony regarding their charges. Obviously, greater weight has been given to those who provided sworn statements or affidavits to the committee.

Ari Ben-Menashe Allegations: Mr. Ben-Menashe stated under oath that he is a former Israeli intelligence officer who served in the Israeli Defense Forces and the Israeli Prime Ministers office from August 1977 through November 1989. During an initial interview with committee investigators, in February 1991, Mr. Ben-Menashe stated that he wanted to cooperate but only after the committee agreed to meet certain conditions. Mr. Ben-Menashe explained that he was in the United States by virtue of a visa that was due to expire and he asked that the committee: (1) Arrange for a visa extension and (2) provide him immunity from any prosecution relating to the information and documents he possessed regarding the illegal distribution and/or sale of Enhanced PROMIS by Dr. Earl Brian to the Israeli Government. The request was refused. On May 29, 1991, Ben-Menashe provided a sworn statement without any conditions. [188]

Mr. Ben-Menashe stated that, in 1982, Dr. Earl Brian and Robert McFarland, the former Director of the National Security Council, provided the public domain version of INSLAW's PROMIS software to the Israeli Governments special intelligence operation Defense Forces. [189] Mr. Ben-Menashe stated under oath to committee investigators that he was also present in 1987 when Dr. Brian sold Enhanced PROMIS to the Israeli intelligence community and the Singapore Armed Forces and that, after these sales were completed, approximately $5.5 million was placed in a foreign bank account to which Earl Brian had access. [190] Mr. Ben-Menashe further stated under oath that Earl Brian sold a "public domain" version of the PROMIS software to the military intelligence organizations of Jordan in 1983 and to the Iraqi Government in 1987. [191]

Mr. Ben-Menashe stated during his sworn statement to the committee that he has information about the sale of a "public domain" version of PROMIS by the Israeli Government to the Soviet Union in 1986 and the sale of the enhanced version to the Canadian Government coordinated by Earl Brian. [192] Mr. Ben-Menashe also stated that various unnamed Israeli officials would corroborate his statements. He refused, however, to identify these officials or provide evidence to corroborate his statements unless he was called as an official witness for the committee under a grant of immunity. [193]


Charles Hayes Allegations: Mr. Hayes is a surplus computer dealer with alleged ties to both United States and foreign intelligence communities. Mr. Hayes first came to the attention of the committee during August 1990, following assertions that excess Harris-Lanier word processing equipment he had purchased from the U.S. attorneys office for the Eastern District of Kentucky, located in Lexington, contained the PROMIS software. [194] Mr. Hayes stated that the U.S. attorneys office had provided him 5 1/4 -inch computer disks when he purchased the excess equipment and that he believed these disks contained INSLAW's Enhanced PROMIS software. [195]

On November 28, 1990, the committee chairman wrote to the Department requesting access to the equipment and documents seized under a search warrant served on Charles Hayes. The chairman also requested files concerning the dispute between Mr. Hayes and the Department from the Civil Division attorney handling the case. On February 12, 1991, W. Lee Rawls, Assistant Attorney General, Office of Legislative Affairs, responded to the chairman that:

. . . we can arrange for the committee staff to see the equipment and examine the manuals and other documents that were retrieved with the equipment pursuant to a civil writ of possession. We cannot, however, either arrange for committee staff to operate the equipment or provide the committee with a print-out of the information contained in the equipment, as informally requested by committee staff on January 31, 1991. We do not yet have a complete print-out of the information contained in the equipment. Moreover, disclosure of this information would compromise an ongoing criminal investigation.


Mr. Rawls also stated that:

We cannot arrange for committee access to certain documents in the Civil Division files because their disclosure might adversely impact a pending criminal investigation relating to this matter. These include non-public witness statements prepared by the witnesses, portions of Civil Division attorney notes of witness statements, Civil Division attorney notes about conversations with Criminal Division prosecutors, drafts of pleadings and memoranda that would disclose thought processes of the Criminal Division attorneys, and other material that could compromise the pending criminal investigation. We also are unable to disclose the exhibits that were sealed by the court. [196]


On February 13, 1991, Mr. Hayes provided a sworn statement to the committee attesting to his assertions. During the statement Mr. Hayes explained that he believed the PROMIS software had been copied onto the disks from the original PROMIS software by personnel at the U.S. attorneys office. At this time, Mr. Hayes gave the disks and related material to committee investigators. [197] Committee investigators identified the 5 1/4 -inch disks and related materials as nothing more than training programs for the Lanier computers used by the Lexington office. Mr. Hamilton told committee investigators that it was "highly implausible" that the 5 1/4 -inch disks would contain Enhanced PROMIS. Mr. Hamilton further stated that if PROMIS was being used on the Lanier word processing equipment, it would have to be the public domain version which is not the subject of the legal dispute with the Department.

Mr. Hayes continued to have frequent conversations with Mr. Hamilton and his attorneys. Mr. Hamilton provided the committee staff a memorandum, dated October 22, 1990, that memorialized several telephone conversations in which Mr. Hayes allegedly told Mr. Hamilton that: [198]

He can identify about 300 places where the PROMIS software has been installed illegally by the Federal Government.

Dr. Brian sold PROMIS to the Central Intelligence Agency in 1983 for implementation on computers purchased from Floating Point Systems and what the CIA called PROMIS "Datapoint."

Dr. Brian has sold about $20 million of PROMIS licenses to the Federal Government.

Department officials hinted to CIA officials that they should deny that they are using PROMIS.


In addition, Mr. Hayes repeated to committee investigators on numerous occasions many of the same claims that were contained in Mr. Hamiltons October 22, 1990, memorandum. Mr. Hayes also told committee investigators that he had received information from unnamed sources within the Canadian Government that Dr. Brian sold the PROMIS software to the Canadian Federal Government in 1987. He made numerous promises to committee investigators that the documentation regarding these sales by Dr. Brian would be provided to the committee by the unnamed Canadian officials. However, on August 16, 1991, Mr. Hayes stated that the Canadian officials decided not to cooperate with the committee.

While these allegations are intriguing, Mr. Hayes has not provided any corroborating documentation.

Lester K. Coleman: As part of the bankruptcy proceeding involving INSLAW a sworn affidavit was obtained from Lester K. Coleman. (Adversary Proceeding No. 86-0069.) Mr. Coleman described himself as a freelance writer, editor and security consultant, who, in 1988, was an employee of the Defense Intelligence Agency. Mr. Coleman stated that during April and May 1988, he worked with Eurame Trading Company, Ltd., a DEA proprietary company in Nicosia, Cyprus. Mr. Coleman said that at that time he found that the DEA was using the trading company to sell computer software called "PROMISE" or "PROMIS" to drug abuse control agencies in Cyprus, Pakistan, Syria, Kuwait, and Turkey. Mr. Coleman also said that he witnessed the unpacking of reels of computer tapes and computer hardware at the Nicosia Police Force Narcotics Squad. The boxes bore the name and red logo of a Canadian corporation with the words "PROMISE" or "PROMIS" and "Ltd." According to Mr. Coleman, the DEAs objective in aiding the implementation of this "PROMIS(E)" system in these Middle East countries drug abuse control agencies was to augment the United States ability to access sensitive drug control law enforcement and intelligence files.

Mr. Coleman further stated that a DEA Agent (Country Attache1), was responsible for both the Eurame Trading Company, Ltd., and its initiative to sell "PROMIS(E)" computer systems to Middle East countries for drug abuse control. Mr. Coleman stated to the court under oath that he believed the agents reassignment in 1990 to a DEA intelligence position in the State of Washington prior to Michael Riconosciutos March 1991 arrest there on drug charges was more than coincidental. Mr. Coleman stated he believes that the agent was assigned to Riconosciutos home State to manufacture a case against him. Mr. Coleman stated he believes this was done to prevent Mr. Riconosciuto from becoming a credible witness concerning the U.S. Governments covert sale of PROMIS to foreign governments.

Mr. Coleman stated under oath that he had been contacted by a reporter named Danny Casolaro on August 3, 1991. Mr. Coleman stated that Mr. Casolaro told him that he had leads and hard information about (1) Department of Justice groups operating overseas, (2) the sale of the "PROMIS(E)" software by the U. S. Government to foreign governments, (3) Bank of Credit and Commerce International (BCCI), and (4) the Iran/Contra scandal. [199]

Juval Aviv: Mr. Juval Aviv stated to the committee that he is a former member of the Israeli Mossad who currently serves as president and chief executive officer of Interfor, Inc., a private investigative firm specializing in international investigations. In January 1991, Mr. Aviv told committee investigators that he could provide information that Dr. Brian sold INSLAW's Enhanced PROMIS software to U.S. Government agencies outside the Department, including the CIA, National Security Agency, National Aeronautics and Space Administration, and the National Security Council. Mr. Aviv also stated that Dr. Brian sold the PROMIS software to Interpol in France, the Israeli Mossad, the Israeli Air Force, and the Egyptian Government. [200]

Mr. Aviv stated that Dr. Brian sold the software to Egypt through the use of the foreign military assistance program and that the software was called either Data Plus or PROMIS Plus. He also stated that INSLAW's Enhanced PROMIS software was converted for use by both the United States and British Navy nuclear submarine intelligence data base.


Mr. Aviv stated that there are witnesses and documents to corroborate his allegations. Following Mr. Avivs meeting with committee investigators in January 1991, he has refused to provide a sworn statement or any further information.

John Schoolmeester: The committee received information from Mr. and Mrs. Hamilton that John Schoolmeester, a former Customs Services program officer, had direct knowledge of ties between Mr. Videnieks and one of Dr. Brians computer companies called Hadron, Inc., prior to Mr. Videnieks employment with the Justice Department. [201] Mr. Hamilton asserted that Mr. Videnieks conspired with Dr. Brian and other Hadron, Inc., management to transfer INSLAW's PROMIS software to the company. In two sworn statements provided to the committee, Mr. Schoolmeester stated that Mr. Videnieks, as a contracting officer for the Customs Service, was involved with several Hadron, Inc., contracts, and that Mr. Videnieks would necessarily have met with Dominic Laiti (a former Hadron, Inc., chief executive officer) on a regular basis because that was the way Mr. Laiti conducted business. However, Mr. Videnieks stated under oath that he did not know or have any conversations with Dominic Laiti or Dr. Brian. [202] Mr. Schoolmeester stated that Dr. Brian was "the behind the scenes guy at Hadron, Inc.," but he was not certain whether Mr. Videnieks had met with him. [203] Mr. Schoolmeester also stated that Dr. Brian was well connected in Washington and that he had connections with Mr. Meese and several congressional figures. [204]

Lois Battistoni: The committee also received allegations from Mr. Hamilton that Ms. Lois Battistoni, a former Justice Criminal Division employee, had information which could support the allegation that Dr. Brian had arranged with Justice officials to transfer PROMIS to Hadron, Inc. According to Mr. Hamilton, Ms. Battistoni stated that a Criminal Division employee had told her that there was a company chosen to take over INSLAW's contracts and that this company was connected to a top Department official through a California relationship. Mr. Hamilton stated that she believed that Hadron, Inc., was a possibility because Dr. Brian and Mr. Meese served together in Governor Reagans administration. [205]

Ms. Battistoni, however, stated under oath to committee investigators that she has little firsthand knowledge of the facts surrounding these allegations, nor did she provide the name of the Criminal Division employee who had provided her with the information about this matter. She indicated that Department employees are afraid to cooperate with Congress for fear of reprisals by the Justice Department. [206]

Ms. Battistoni also raised a number of allegations about the involvement of Department employees in the destruction (shredding) of documents related to the INSLAW matter. [207] While the committee was unable to obtain any direct information about the alleged shredding provided by Ms. Battistoni, the issue stands open and calls for further investigation.

C. OTHER IMPORTANT QUESTIONS REMAIN

1. THE DEATH OF DANIEL CASOLARO


On August 10, 1991, the lifeless body of Mr. Daniel Casolaro, an investigative reporter investigating the INSLAW matter, [208] was discovered in a hotel room in Martinsburg, WV. Mr. Casolaros body was found in the bathtub with both of his wrists slashed several times. There was no sign of forced entry into the hotel room nor of a struggle. A short suicide note was found. Following a brief preliminary investigation by the local authorities, the death was ruled a suicide. [209] The investigation was reopened following numerous inquiries by Mr. Casolaros brother and others into the suspicious circumstances surrounding his death. On January 25, 1992, after expending over 1,000 man-hours investigating his death, the local authorities again ruled Mr. Casolaros death a suicide.

The committee did not include the death of Daniel Casolaro as part of its formal investigation of the INSLAW matter. Nevertheless, it is a fair statement to observe that the controversy surrounding the death continues to be discussed in the press and to other figures connected to the INSLAW litigation. These questions appear to be fostered by the suspicious circumstances surrounding his death and the criticism of in the Martinsburg Police Department's investigation. [210]

Other sources have been quoted in the media indicating that Mr. Casolaro did not commit suicide, and that his death was linked to his investigation of INSLAW, Bank of Credit and Commerce International (BCCI), and other matters such as the Iran/Contra affair. [211] It has been reported that Mr. Casolaro had confided to several people that he was receiving death threats because he was getting close to concluding his investigation. Furthermore, he told family and friends not to believe that, if he died, it was by accident. According to his brother, Mr. Casolaros investigation began to come together during the summer of 1991. Several people indicated he was upbeat and that on the weekend of August 10, 1991, he was in Martinsburg, WV, to receive significant information for his project from a source. [212]

Mr. Casolaro died on August 10, 1991, and his death was officially ruled a suicide on January 25, 1992, over 5 months later. The criticism of the investigation of Casolaros death by the Martinsburg, WV, police center on the following areas: Prior to any coroners investigation and before his family was notified, Mr. Casolaros body was embalmed, which may have limited the effectiveness of autopsies or toxicological examinations. Some evidence has also surfaced indicating that immediately following the discovery of the body, the room was not sealed by the Martinsburg authorities, potentially allowing for the contamination of the possible crime scene. Additionally, it was reported that the room in which Mr. Casolaro was found was cleaned before a thorough criminal investigation could be conducted.

Information received from other sources reveal other curious circumstances surrounding Mr. Casolaros death that may or may not have been considered by Martinsburg authorities. In a sworn statement to the committee, Richard Stavin (a former Department of Justice Organized Crime Strike Force prosecutor) stated:

I received a call from Danny Casolaro approximately 1 week before he was found dead. . . . He spoke to me about INSLAW. He spoke to me about a group he called, the Octopus. I believe he mentioned Robert Nichols, and possibly also John Phillip Nichols, in this conversation, and was extremely interested, intrigued and frustrated in his inability to get a grasp on what he called the Octopus.

He had indicated that he had met with again I believe it was Robert Nichols on several occasions, that Robert Nichols was extremely talkative to a point, but when Mr. Casolaro would ask specific questions, he (Nichols) would become somewhat evasive. [213]


William Hamilton and Michael Riconosciuto both told committee investigators that Robert Booth Nichols was Danny Casolaros primary source of information in his investigation into the theft of the PROMIS software system. In a later telephone interview, Mr. Nichols told committee investigators that he was acting as a sounding board for Mr. Casolaro and providing direction and insight for his investigation into the INSLAW matter. [214] Mr. Nichols would not provide a sworn statement to committee investigators.

In addition, the committee was informed by three separate individuals Mr. Riconosciutos attorney, a private investigator and a FBI agent that a current FBI field agent, Thomas Gates, likely had information relating to Danny Casolaros efforts to investigate the INSLAW matter. At the request of the committee, Director Sessions agreed to allow Special Agent Gates to provide the committee a sworn statement. Though Special Agent Gates statement covered a broad range of subject matter areas, some speculative and some reflecting first person accounts, he indicated under oath that he had received several calls from Mr. Casolaro, beginning approximately 4 weeks before his death. [215]

Special Agent Gates stated that he was very suspicious about Mr. Casolaros death for several reasons, including:

In his conversations with Casolaro, even days before the reporters death, Gates had felt that Casolaro sounded very "upbeat" and not like a person contemplating suicide.

Mr. Casolaro had a phone book which contained his (Special Agent Gates) telephone number. Special Agent Gates said that the phone book had not been located during the police investigation.

The Martinsburg Police Department told him that the wounds to Mr. Casolaros arms were "hacking" wounds. Special Agent Gates felt that the amount of injury to the arms of Mr. Casolaro were not consistent with injuries inflicted by an individual who had slit his own wrists. Special Agent Gates said he was told by Martinsburg Police investigators that:

. . . he (Mr. Casolaro) hacked his wrists . . . the wrists were cut, but they were cut almost in a slashing or hacking motion. . . .


An open bottle of wine was allegedly found in the room, but the contents had not been tested at the time of Special Agent Gates conversation with Martinsburg authorities.

Special Agent Gates said that he made his suspicions known to Martinsburg authorities, and that he called the local FBI office and suggested that they investigate because it was possibly related to criminal activity which falls within the jurisdiction of the FBI. [216]

In his sworn statement, Special Agent Gates concluded that:

. . . based upon my prior testimony concerning my contacts with Casolaro and also with the Captain of the Martinsburg Police Department, there is cause for suspicions to be raised. . . . [217]


2. POSSIBLE CONNECTION BETWEEN EARL BRIAN, MICHAEL RICONOSCIUTO, ROBERT BOOTH NICHOLS AND THE CABAZON INDIAN RESERVATION

Mr. Riconosciuto has alleged in a sworn statement to the committee [218] that Dr. Brian and Mr. Peter Videnieks secretly delivered INSLAW's PROMIS software to the Cabazon Indian Reservation, located in California, for "refitting" for use by intelligence agencies in the United States and abroad. Mr. Riconosciuto could not provide evidence other than his eyewitness account that Dr. Brian was involved in the PROMIS conversion at the reservation. Dr. Brian flatly contradicts Riconosciutos claims in his own sworn statement to committee investigators. [219] In addition, in a sworn affidavit provided on April 2, 1991, in connection with the INSLAW bankruptcy case, Dr. Brian stated that he had never heard of, or was associated with, the so-called Wackenhut/Cabazon Indian joint venture, nor had he ever met, or had conversations with Peter Videnieks [220] all in direct opposition to the Riconosciuto deposition as well as to certain law enforcement information on file at the committee. [221] In light of these disputed versions of events, the committee is not in a position to make findings of fact on Dr. Brians role, but would strongly recommend that further investigation be given to ascertaining the role, if any, of Dr. Brian in INSLAW-related matters including, but not limited to, questions surrounding the Department of Justices alleged conversion of the PROMIS software and its possible dissemination to other customers beyond the intended usage of the public domain version. [222]
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Re: The Inslaw Affair: Investigative Report by the Committee

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V. ALLEGATIONS OF PERJURY, COVERUP, AND RETRIBUTION: A WEB OF CONTRADICTION AND DECEIT

The committee encountered numerous situations that pointed to a concerted effort by Department officials to manipulate the litigation of the INSLAW bankruptcy, as alleged by the president of INSLAW. For example, there were several possibly perjurious conflicts and contradictions among witnesses of the alleged Department attempt to convert INSLAW from a chapter 11 reorganization to a chapter 7 liquidation. [223] During this controversy, one key Department witness was harassed and, ultimately, fired because the Department decided, based on its own information, that the findings of the Bankruptcy Court were erroneous and the witness information sharing to INSLAW was a dismissible offense.

On March 17, 1987, William Hamilton and his wife Nancy met with Anthony Pasciuto, then-Deputy Director of the Justice Department's Executive Office for U.S. Trustees (EOUST). Mr. Pasciuto provided them information obtained during a January 12, 1987, conversation with Judge Cornelius Blackshear, the U.S. Bankruptcy Court judge for the Southern District of New York. [224] This conversation led to an allegation that Thomas Stanton, the EOUST Director, sought to have INSLAW's bankruptcy status converted from a chapter 11 reorganization to a chapter 7 liquidation of the companys assets, allegedly through the help of Harry Jones, [225] the Assistant U.S. Trustee for the Southern District of New York and an expert in chapter 11 bankruptcy law. [226] According to Mr. Pasciuto, Judge Blackshear stated that Mr. Stanton had pressured Judge Blackshear to have Mr. Jones sent to Washington to take over the INSLAW case, and that Judge Blackshear didnt like it. During sworn testimony to committee investigators on June 4, 1991, Mr. Pasciuto stated that he attended a January 1987 luncheon meeting with Judge Blackshear, Judge Lawrence Pierce (a U.S. Circuit Court judge and a long time associate of Pasciuto), Mr. Pasciuto, Mr. Jones and Mr. Elliott Lombard (an acquaintance of Pasciuoto's). Mr. Pasciuto stated that Judge Blackshear described Mr. Stantons attempt to pressure him into sending Mr. Jones to work on the INSLAW bankruptcy, and that it was clear in his mind that Judge Blackshear implied that Mr. Stanton wanted INSLAW converted to chapter 7 status and needed Mr. Jones to accomplish this. [227]

Judge Jane Solomon, a New York City judge, told committee investigators that on March 18, 1987, Judge Blackshear provided her an identical story on the key points of INSLAW's conversion and the Jones transfer to Washington. According to Judge Solomon, Judge Blackshear stated that he had been asked by Mr. Stanton to assign Mr. Jones to the INSLAW case, and he refused without an Attorney General directive. Judge Blackshear also told Judge Solomon that Mr. William White, the U.S. Trustee for the Washington, DC, area, told him that Mr. Stanton pressured Mr. White to move in court to convert the INSLAW bankruptcy from chapter 11 to chapter 7 and steal the PROMIS software. [228] While she was willing to provide a limited and hostile interview to committee investigators, Judge Solomon refused to provide a sworn statement to the committee about Judge Blackshear's discussion with her on the INSLAW matter.


On March 23, 1987, Mr. William White provided his first deposition to INSLAW counsel. Mr. White stated that he received an inquiry from Stanton about the INSLAW case, and he reported back to EOUST on the cases status. Mr. White denied that he was ever directed to take any action regarding INSLAW by the EOUST or anyone else, including filing to convert. Mr. White did state that Judge Blackshear told him that Judge Blackshear's assistant, Harry Jones, was going to be detailed to Washington. [229] Mr. White was involved with the INSLAW case when the company filed a confidentiality motion with the Bankruptcy Court to protect certain proprietary information from public disclosure. INSLAW filed this motion because of allegations that confidential information was being provided to the Department by the EOUST. Mr. White stated that INSLAW's confidentiality motion raised the perception that his office was not independent and, because of this concern, White inserted language in the order that restricted Justice Department access to confidential INSLAW information to his immediate staff. Mr. White also believed this would preclude Mr. Harry Jones from having access to INSLAW materials if he were detailed to Washington.

On March 25, 1987, Judge Blackshear stated, under oath, to INSLAW counsel that Mr. White told him that Mr. Stanton pressured Mr. White to move in court to convert the INSLAW bankruptcy from chapter 11 to chapter 7. Judge Blackshear also stated that Mr. Stanton planned to have Harry Jones loaned to Washington to manage the INSLAW case and to arrange for INSLAW's conversion. [230] As previously indicated, Judge Blackshear spoke with Judge Solomon on March 18, providing her an identical story on the key points of INSLAW's conversion and the Jones transfer to Washington.

A. Judge Blackshear's Recantation


Judge Blackshear stated that he called Mr. White immediately after he gave his deposition to INSLAW's attorneys to discuss his statement. At that point, according to Judge Blackshear, Mr. White told Judge Blackshear that he was mistaken because they never discussed converting INSLAW. [231] The next morning, Judge Blackshear's attorney James Garrity, an assistant U.S. attorney received a call from Dean Cooper, a trial attorney in the Department's Civil Division. According to Mr. Garrity, Mr. Cooper told him that Judge Blackshear's statement was wrong, and the Department wanted something undertaken (such as a letter) to correct the error. Mr. Garrity spoke with Judge Blackshear by telephone, and Judge Blackshear took the advice of his attorney and decided to correct his alleged errors. [232] It is highly questionable how the Department could ethically represent both itself and Judge Blackshear in the INSLAW litigation. In effect, the Department was a defendant in the case while one of its attorneys (Mr. Garrity) at the same time was representing a key witness (Judge Blackshear) for the plaintiff (INSLAW).

On March 26, 1987, Judge Blackshear submitted an affidavit to the court correcting his previous statement. In this affidavit Judge Blackshear stated that Mr. White never told him that Mr. Stanton was pressuring him to convert INSLAW to a chapter 7 bankruptcy, and that he had confused such an effort with Internal Revenue Service (IRS) pressure on Mr. White to convert United Press International (UPI) to a chapter 7. [233]

B. JUDGE BLACKSHEAR'S STATEMENT TO COMMITTEE LACKS CREDIBILITY

Judge Blackshear provided a sworn statement to committee investigators on January 25, 1991. In contrast to Mr. Stantons assertion that he contacted Judge Blackshear directly about Mr. Jones, Judge Blackshear stated that the information he provided in his prior depositions was not based on personal knowledge but on hearsay information provided by other sources. [234] Judge Blackshear attributed much of this information to Mr. Pasciuto, and he stated that he first became aware of the INSLAW case when Mr. Pasciuto told him that Mr. Stanton was attempting to have Mr. Jones assigned to the case. [235]

Judge Blackshear stated that he informed Judge Solomon that he had heard that the Department was attempting to get INSLAW converted and that he gave her most of the information he provided during his March 25, 1987, deposition. He also confirmed that he gave similar information to INSLAW attorneys on separate occasions prior to his March 25 deposition. [236] Judge Blackshear stated that he obtained his ideas about INSLAW from Mr. Pasciuto and the story changed because:

At the time I was telling the story before the recantation, in my mind, thats the way it had occurred. My mind changed after having talked to Bill White. But my statement (the recantation) did not change the facts of the matter, but just basically changed as to the fact that Bill White did not tell me that. Now I remember that it was Tony Pasciuto that told me those things. [237]


Judge Blackshear stated that he never discussed the INSLAW conversion issue with Mr. White. Judge Blackshear stated, however, that Mr. White discussed with Judge Blackshear how Mr. Stanton attempted to interfere in U.S. Trustee operations managed by Mr. White and several other U.S. Trustees. Judge Blackshear also stated that he had heard that Mr. Stanton had reduced funding for certain U.S. Trustees, but he could not specifically identify the situations or trustees involved. [238]

Judge Blackshear could not explain to committee staff why Mr. White contends that he did not discuss the UPI bankruptcy case with him. Judge Blackshear could not recall who brought up the UPI issue when he contacted Mr. White after the March 25 deposition. He was also confused as to the general timeframe when Mr. White supposedly described the UPI bankruptcy case to him. Judge Blackshear said, however, he was certain that he used UPI as an example at the ABA (American Bar Association) conference and on several other occasions (although he could not specifically recall these other occasions). [239] Judge Blackshear, in discussing the PSI findings [240] regarding Judge Blackshear's "implausible" statements, told committee investigators:

. . . my statement concerning INSLAW was probably consistent with Tonys (Pasciuto) because Tony advised me as to what was going on with INSLAW. As far as the statement concerning the UPI case, all I can say is that I was told that by Bill White. It may have come up at the ABA meeting, and it may have been informal as opposed to (being) formally on the record. [241]


Judge Blackshear stated under oath to committee investigators that Mr. White became extremely upset when Judge Blackshear described what he had said about converting INSLAW. Mr. White responded that they never had a conversation about an INSLAW conversion and told Judge Blackshear that his (Whites) deposition indicated that Mr. Stanton never pressured him to convert INSLAW. Mr. White then asked Judge Blackshear to remember when they discussed INSLAW, and Judge Blackshear could not pinpoint such a conversation. It was at this point that Judge Blackshear says he recalled some discussions with Mr. White about the UPI case and, with Mr. Whites prompting, decided that he had confused INSLAW with UPI. [242]

Judge Blackshear also indicated to committee investigators that the opposing statements raised difficult questions in his mind about whether his story would be perceived as more credible than Mr. Whites in court. The judge stated:

. . . I knew that if we had to go to court, and he (Mr. White) was saying that Tom Stanton did not pressure him, and I was saying that he told me that he did, that it would become a credibility question. They would probably give my story more credibility than his. I did not wish to put it at a place where they would be judging our credibility and taking mine over his. [243]


C. COMMITTEE ANALYSIS OF ATTEMPT TO ASSIGN HARRY JONES TO THE INSLAW CASE

Numerous witnesses involved in the Jones reassignment issue provided conflicting sworn statements; however, Judge Blackshear is clearly at odds with everyone on this allegation. Judge Blackshear maintains that (1) Mr. White had contacted him to advise that Mr. Stanton was going to ask that Mr. Jones be sent to Washington, (2) he spoke only with Mr. White and Mr. Jones and (3) he never talked to Mr. Stanton about the Jones issue. Judge Blackshear stated that he told Mr. Jones that if he were contacted regarding an assignment to the Washington office for handling INSLAW, he was to decline and refer the matter to Judge Blackshear.

In contrast to Judge Blackshear's statements, Mr. Stanton stated under oath that he called Judge Blackshear regarding the Jones detail, and he is sure that he told Judge Blackshear why he wanted Mr. Jones assigned. Also, Mr. White stated that Judge Blackshear called him about Mr. Stantons request, and he had no knowledge of this request before his discussion with Judge Blackshear. Mr. White stated that Judge Blackshear told him that the call had been made by Mr. Stanton directly to Mr. Jones, which would fit Judge Blackshear's pattern of denying any firsthand knowledge of INSLAW matters.

In contrast to Judge Blackshear's and Mr. Whites statements, Mr. Jones claims in his sworn statements that he could not recall any discussions regarding his possible assignment to the INSLAW case. Mr. Jones denies having been contacted by either Mr. Stanton, Judge Blackshear or Mr. White regarding an assignment to the INSLAW case, or being aware that such a request had been made. Judge Solomon also provided a recollection that indicates that Judge Blackshear was contacted by Mr. Stanton to request Mr. Jones. However, as mentioned earlier, she has refused to provide a statement under oath.

D. BASON ALLEGATIONS AGAINST BLACKSHEAR NOT ADEQUATELY CONSIDERED

Bankruptcy Judge Bason ruled that he believed INSLAW's witnesses had told the truth, while the Department's witnesses had not. The judge thought that the witnesses stories ranged from intentionally lying to failure of recollection. According to Judge Bason, Judge Blackshear in particular had conducted himself in a way that called for strong action. On January 2, 1991, Judge Bason filed a complaint to the Judicial Council of the Second Circuit U.S. Court of Appeals against Judge Blackshear. In the statement of facts accompanying the complaint, the judge stated that: [244]

I have now regretfully concluded that Judge Blackshear recanted not because of an honest mistake but because he made a conscious choice to testify falsely. . . .

Nor can I now escape the conclusion that Judge Blackshear attempted by his deliberately false testimony to prejudice and obstruct the administration of justice in the INSLAW bankruptcy-court proceeding. [245]


Judge Bason added in his complaint that:

As the presiding trial judge in INSLAW I was outraged at Department of Justice employees attempts to obstruct justice by deliberately giving false testimony. That this charge can now legitimately be made against a sitting judge is even more disturbing. [246]


Unfortunately, there was no meaningful investigation of Bason's allegations. The Judicial Council of the Second Circuit appointed a special committee consisting of several judges to consider Judge Bason's allegation and provide a comprehensive written report. However, both groups refused to address Judge Bason's complaint because Judge Blackshear's alleged perjury dealt with matters outside of his judicial activities. On that basis Judge Bason's complaint was dismissed in its entirety on October 3, 1991.

Mr. Pasciuto's Firing: Mr. Anthony Pasciuto was the Deputy Director for Administration in the Justice Department's Executive Office for U.S. Trustees. As discussed previously, prior to the bankruptcy trial, Mr. Pasciuto told the Hamiltons at a March 17, 1987, breakfast meeting that Judge Blackshear had told him that Mr. Stanton had pressured Mr. White to convert INSLAW to chapter 7 liquidation, and had retaliated against Mr. White for refusing to do so. However, under strong pressure from senior Department officials, Mr. Pasciuto recanted his statement at the trial to say that neither Mr. White, Judge Blackshear nor anyone else from the Department had told him that Mr. Stanton had pressured Mr. White to convert the case to a chapter 7. [247]

In a March 17, 1988, letter, Mr. Pasciuoto's attorney asserted that what Mr. Pasciuto had told the Hamiltons was true. The attorney stated that Mr. Pasciuto had backed away from his original statements at the trial because Judge Blackshear and Mr. White would not acknowledge the truth and because Mr. Stanton was putting pressure on Mr. Pasciuto to cooperate if he wanted to receive his appointment as an Assistant U.S. Trustee.

Mr. Pasciuoto's sworn statement to committee investigators on June 4, 1991, was consistent with his previous statements to the Hamiltons. Mr. Pasciuto stated that at the January 1987 luncheon meeting, Judge Blackshear described Mr. Stantons attempt to pressure him into sending Mr. Jones to work on the INSLAW bankruptcy, and that Judge Blackshear definitely implied that Mr. Stanton wanted INSLAW converted to chapter 7 status and needed Mr. Jones to accomplish this. [248] Mr. Pasciuto also told committee investigators under oath that, prior to the January luncheon meeting, Mr. White told him Mr. Stanton was putting pressure on him regarding the INSLAW bankruptcy.

Mr. Pasciuto stated that he believed that the process to approve his Albany, NY, appointment was manipulated to influence his statement at the bankruptcy trial. [249] He cited as support his appointment which was held up for months but was signed by Mr. Stanton and given to him 2 days before he was to testify. It was then made clear to him that Mr. Burns would have final approval of his appointment; however, after Mr. Pasciuto provided his statement, Mr. Burns did not provide this approval and Mr. Pasciuto was eventually forced out of the Department as a result of an OPR investigation. [250]

Mr. Pasciuto now regrets being coerced by the Department into recanting his original statements to the Hamiltons, and has stated under oath to committee investigators that he stands by his original statements made to the Hamiltons that Judge Blackshear had informed him that the Department wanted to force INSLAW out of business.

OPR Investigation of Mr. Pasciuto: In July 1987, the Department's Office of Professional Responsibility (OPR) received a referral from Deputy Attorney General Arnold Burns to begin an investigation into allegations of misconduct by Anthony Pasciuto, then Deputy Director of the EOUST. On December 18, 1987, OPR, based on its inquiry, recommended that Mr. Pasciuto be terminated from his position in the Department. [251]

On January 20, 1988, Boykin Rose, the Associate Deputy Attorney General, sent a notice to Mr. Pasciuto proposing his removal from the Department. On March 17, 1988, Mr. Pasciuoto's attorney wrote to the Department on Mr. Pasciuoto's behalf, reaffirming Mr. Pasciuoto's allegations to the Hamiltons about the Jones transfer and INSLAW conversion. [252] On March 23, 1988, Mr. Pasciuoto's attorney also provided an oral reply to Mr. Pasciuoto's proposed termination. [253] After the brief oral hearing, the Department position remained unchanged, and Mr. Pasciuto, who was actively looking for alternative employment, agreed to leave the Department on April 1, 1988. [254]

The Department fired Mr. Pasciuto based on its internal analyses and conclusions drawn from evidence presented in the INSLAW litigation. Significantly, the Department ignored evidence that may have resulted in a less harsh course of action. OPR unilaterally concluded that:

Based on the interviews during our inquiry, and on our review of the Civil Divisions June 18 memorandum addressing the June 12 ruling, we conclude that the bankruptcy courts remarks were unsubstantiated and unfair. Although the blame for this injudicious result appears to rest squarely on the courts shoulders, it is clear that the environment for his ruling was created largely because of Pasciuto's own totally irresponsible statements and inactions. [255]


OPR came much closer to describing the real basis for Mr. Pasciuoto's termination when it concluded that:

In our view, but for Mr. Pasciuoto's highly irresponsible actions, the department would be in a much better litigation posture than it presently finds itself. Mr. Pasciuto has wholly failed to comport himself in accordance with the standard of conduct expected of an official of his position. [256]


The Department's conclusion that Mr. Pasciuoto's statements on the INSLAW case, which he believed to be accurate, were "irresponsible" because it hurt the litigation posture of the Department is highly questionable. [257] Mr. Pasciuoto's statements held considerable credibility with the court. Further, there is significant evidence indicating that Mr. Pasciuto was telling the truth when he told the Hamiltons about a high level effort within the Department to force INSLAW into chapter 7 liquidation. This is particularly evident given the contradictory statements made under oath by Judge Blackshear and other key witnesses regarding this matter. Unfortunately, the Department decided to fire Mr. Pasciuto rather than conduct an independent investigation of the matter.

Mr. Pasciuoto's firing undoubtedly sent a chilling message to Justice employees that the Department reserved the right to ignore court rulings and arrive at its own conclusions about the credibility of witnesses statements. Further, it was apparent from this case that the Department planned to administer the harshest possible punishment to those it perceived were disloyal while it conveniently overlooked inconsistent and possibly perjurious statements made by witnesses that supported the Department's position. As stated during the oral hearing, Mr. Pasciuoto's attorney, who had considerable expertise in personnel law, concluded that:


. . . I could certainly understand a reprimand for what he did specifically. That would be comprehendible (sic); that would be in some way humanly understandable. . . . I would understand that in a way that I would not understand a removal. I think the removal is punitive . . . I cannot understand somebody firing Mr. Pasciuto for this. [258]


Fundamentally, the Department held Mr. Pasciuto very accountable for his discussion with the Hamiltons which was corroborated by other witnesses, including Judge Blackshear while Judge Blackshear was excused for making identical statements to Judge Solomon and, under oath, to INSLAW attorneys. The Department concluded that no perjury charge could be brought against Judge Blackshear and Mr. White because it could not find evidence that their statements were false. [259]
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Re: The Inslaw Affair: Investigative Report by the Committee

Postby admin » Thu Apr 28, 2016 10:47 pm

VI. THE DEPARTMENT HAS PROVEN TO BE INCAPABLE OF A FORTHRIGHT INVESTIGATION OF THE INSLAW MATTER

Several requests were made to the Department to investigate the INSLAW matter. However, the Department focused its investigations on defending its supporters and either ignoring or attacking whistleblowers. Further, the Department's review of the need for an independent counsel investigation appears to have been deliberately shallow, which allowed the Department to conclude that it lacked sufficient evidence to warrant even a preliminary investigation of wrongdoing by the Department officials.


The Department also did little to resolve numerous conflicts and contradictions that arose during INSLAW's investigation of an alleged Department effort to liquidate INSLAW. A more thorough study would have revealed a troubling pattern of incomplete, contradictory, and possibly perjured testimony of key Government witnesses. A more indepth investigation of Department witness statements is clearly warranted to determine who lied and who told the truth. Also, in a show of extraordinary force, the Department fired an employee who merely relayed information to the Hamiltons from what should have been a highly credible source. This action no doubt had a chilling effect on other potential Department witnesses.

A. JENSEN FAILED TO ADEQUATELY INVESTIGATE INSLAW'S CONCERNS

On March 13, 1985, Elliot Richardson and Donald Santarelli, the former Administrator of LEAA, met with Acting Deputy Attorney General D. Lowell Jensen and requested that: (1) He authorize immediate, fair, and expedited negotiations between the Department and INSLAW to resolve the disputes that caused the withholding of moneys and INSLAW's bankruptcy, (2) the Department give immediate consideration to a new INSLAW proposal, and (3) he appoint someone to investigate INSLAW's repeated assertions that Department officials particularly C. Madison Brewer were biased against INSLAW. [260]

Judge Jensen stated in a June 1987 deposition that he appointed Jay Stephens, a Deputy Associate Attorney General, to conduct an investigation of the bias allegations, and he recalled discussing the results of Mr. Stephens review. He added that, based on Mr. Stephens investigation, he did not consider that an investigation by OPR was warranted. Judge Jensen stated that he wanted to be sure that the Department's actions were not driven by personal considerations or bias but were based on the merits of INSLAW's concerns. On the point of Mr. Brewers alleged bias, Judge Jensen stated that:

I would think that the better path of wisdom is not to (hire an alleged fired employee to monitor the contract of his former employer) do that if thats possible to do. . . . I think that its better to have these kinds of issues undertaken by people who . . . dont have questions raised . . . whether they are not biased in favor of or against the people they deal with. [261]


However, Judge Jensen concluded that, based on Mr. Stephens investigation, he was satisfied that decisions were made on their merits and were justified, and Department officials did not intend any personal animosity. [262] It is also interesting, in light of Mr. Meeses denials that he was ever involved in the details of the INSLAW matter, [263] that Judge Jensen stated that:

I have had conversations with the Attorney General (Meese) about the whole INSLAW matter . . . as to what had taken place in the PROMIS development and what had taken place with the contract and what decisions had been made by the department with reference to that. [264]


Mr. Stephens stated under oath that, in March 1985, Judge Jensen handed him an INSLAW proposal

265 and asked him to check out INSLAW's proposal for new business and determine if there was anything the Department could do with it. Mr. Stephens stated under oath in direct contradiction of Judge Jensens statement that he was never asked to investigate the bias issue. [266]

Mr. Stephens stated that, after Judge Jensen asked him to review the INSLAW new business proposal, he received several telephone calls from both Charles Work and Elliot Richardson, who are attorneys for INSLAW. He felt that they were lobbying the Department very hard because they believed that INSLAW had some special relationship with the Department. He added that they attempted to convey that based on a longstanding relationship between the Department and INSLAW, the Department should look favorably on INSLAW's new business proposal. [267]

Mr. Stephens stated he reported to Judge Jensen that the need for INSLAW's business proposal was questionable and that it was the Department's position that INSLAW's new business proposal could be done in-house. Judge Jensen informed Mr. Richardson by letter stating that the Department reviewed the proposal but it didnt have an immediate need and would not act on the proposal. [268]

Because the Department did not adequately investigate INSLAW's allegations, the company was forced into expensive, time-consuming litigation as the only means by which the Department's misappropriation of INSLAW's Enhanced PROMIS could be exposed. During an interview with the committee, Judge Jensen was asked if he agreed with Judge Bason's ruling pertaining to allegations of bias by the Department (which the Hamiltons claim is an indication of misbehavior by the Department). Judge Jensen stated that just because the Judge (Bason) made a ruling, he didnt automatically agree that the allegations of bias were correct; however, the decision does raise concerns that there may have been more bias toward INSLAW than he was aware of. [269] The Bankruptcy Court found that he "had a previously developed negative attitude about PROMIS and INSLAW" from the beginning (Finding No. 307-309) because he had been associated with the development of a rival case management system while he was a district attorney in California, and that this affected his judgment throughout his oversight of the contract.

B. OPR'S INSLAW INVESTIGATIONS ARE DEFICIENT

As early as June 1986, OPR [270] was aware of the allegations of bias by senior Department officials including then Deputy Attorney General Jensen. These allegations included a claim that Judge Jensen had encouraged INSLAW's bankruptcy and disliked PROMIS. [271] In spite of a number of inquiries from Congress and the issue being raised in both Judge Jensens and Mr. Arnold Burns 1986 confirmation hearings, OPR did not begin to investigate the matter until November 1987. [272]

Ironically, in 1986 OPR delayed investigating the INSLAW bias issue because it planned to rely on the judgment of the Bankruptcy Court. [273] Robert Lyons, acting counsel for OPR, stated that the bias allegation was not an issue OPR would normally review and that it would be more appropriate for the Bankruptcy Court to resolve the issue. [274] OPR changed its position after the Bankruptcy Court concluded that there was serious bias up to Judge Jensens level. During its investigation OPR chose to ignore the courts findings and conclusions that there was bias against INSLAW at the Department. Instead, OPR stated in its March 31, 1989, report that it agreed with the Department's brief on appeal to the District Court that:

The bankruptcy court's credibility determinations are unbalanced, inexplicably savage, and based on unreasonable inferences. They amount to nothing more than . . . attacks on virtually every person who testified for DOJ. . . .


OPR concluded that the courts findings of misconduct on the part of specified Department employees, and of the Department generally, were wholly erroneous. Instead of investigating the possibility of Department collusion to misrepresent witnesses sworn statements, OPR attacked the Bankruptcy Court position concluding that it mistrusted the Department's witnesses. [275] OPR concluded in its report that:

. . . based on our review of the record, this finding, (of the Bankruptcy Court) and the subsidiary findings on which it is based, are clearly erroneous. [276]


OPR also concluded that the allegations of misconduct on the part of Mr. Meese, Judge Jensen, and Mr. Burns were unsubstantiated. OPR limited its investigation to the allegations of misconduct and, incredibly, it excluded any consideration of the merits of the contract disputes (such as the data rights issue and possible misappropriation of the PROMIS software). [277] Although it did not investigate such issues, OPR gratuitously stated that:

There is no credible evidence that the Department took, or stole INSLAW's Enhanced PROMIS by trickery, fraud and deceit. Additionally, we have found no credible evidence that there existed in the Department a plot to move to convert INSLAW's Chapter 11 bankruptcy to one under Chapter 7 of the Bankruptcy Code. [278]


District Judge Bryants November 22, 1989, memorandum in favor of INSLAW contradicted the conclusions reached by OPR. Judge Bryant stated that Judge Bason's record was clear and that:

. . . the Department violated the automatic stay when it claimed Enhanced PROMIS to be its property and installed it in at least 45 offices throughout the United States. [279]


Even Department management recognized that the Enhanced version of PROMIS was INSLAW's property. Mr. Burns stated in his OPR deposition that the Department's attorneys involved in the INSLAW case were (sometime in 1986):

. . . satisfied that INSLAW could sustain the (data rights) claim in court, that we had waived those rights. . . . [280]


Committee investigators were informed that Michael Shaheen and Richard M. Rogers, Counsel and Deputy Counsel for OPR, respectively, recused themselves from the INSLAW investigation because of their association with Deputy Attorney General Burns, who was named in the allegations. [281] However, Mr. Rogers was present during a sworn statement provided by then-Attorney General Meese, which contradicts his claim that he had recused himself from the investigation.

C. GAO STUDY OF THE OFFICE OF PROFESSIONAL RESPONSIBILITY

The type of problems the committee found with OPRs investigation of the INSLAW matter were illustrated in a 1992 GAO study of the Office. GAO reviewed OPRs operations, [282] and several of its findings paralleled the one-dimensional nature of the OPR investigation of INSLAW. GAO found that:

OPR operated informally, did not routinely document key aspects of its investigations, and provided little background information in its case documentation.

OPR generally did not record the complete scope of and rationale behind the investigations or of the decisions reached in the course of the investigations.

OPRs conclusions that allegations were or were not substantiated were generally not explained.

In many instances, OPR did not pursue all available avenues of inquiry.

OPR counsel relied on the attorneys judgment and informal consulting among attorneys within OPR as the basis for making decisions and reaching conclusions about specific investigations. [283]


GAO concluded that OPRs informal approach to investigations, the limited scope of many of its investigations, and the minimal documentation contained in its files expose it and the Department to a range of risks, including: [284]

If OPRs informality were to lead it to conclude an investigation prematurely, the integrity of the Department could be compromised.

If asked to defend an investigation against a charge that it was not aggressively pursued, OPR probably would not have sufficient documentation to defend its efforts. A review of the quality of an investigation based on the documentation would yield little information.


GAO recommended, among other matters. that OPR:

Establish basic standards for conducting its investigations, which could be obtained from other Department components.

Establish case documentation standards.

Follow up more consistently on the results of misconduct investigations done by other units and what disciplinary actions, if any, were taken as a result of all misconduct investigations.


The Department, INSLAW and others would have been better served had OPR conducted a full and complete investigation of the INSLAW bias allegations rather than the cursory review it conducted. Instead, OPR chose to attack the credibility of the Bankruptcy Court rather than investigate wrongdoing by high level Justice officials.

D. THE DEPARTMENT DID NOT SERIOUSLY CONSIDER THE NEED FOR AN INDEPENDENT COUNSEL


On December 5, 1990, in testimony before the Subcommittee on Economic and Commercial Law of the Committee on the Judiciary, former Attorney General Elliot Richardson, representing INSLAW, stated that he believed that "these attempts to acquire control of PROMIS were linked by a conspiracy among friends of Attorney General Edwin Meese to take advantage of their relationship with him for the purpose of obtaining a lucrative contract for the automation of all the Department's litigation divisions." As a result of this belief, Mr. Richardson advised his client, INSLAW, to contact the Department in an attempt to obtain a fair and complete investigation of the matter.

Mr. Richardson stated that INSLAW's attempts included (1) a referral to the Public Integrity Section of the Department's Criminal Division; (2) a referral to the Office of Independent Counsel McKay; (3) an appeal to the U.S. Court of Appeals to request an independent counsel; (4) letters to the Attorney General; and, as a last resort, (5) a petition for a writ of mandamus.

In February 1988, INSLAW submitted allegations raised from the Bankruptcy Courts January 1988 Findings of Facts and Conclusions of Law and other information developed by INSLAW to the Public Integrity Section. In its complaint, INSLAW charged the Department with (1) procurement fraud, (2) violation of the automatic stay invoked by the Bankruptcy Court and (3) Department attempts to change INSLAW's chapter 11 (reorganization) to a chapter 7 (liquidation).

Procurement Fraud: INSLAW alleged that the Department's acts criticized by Judge Bason were part of a larger "procurement fraud" perpetrated by the Department. [285] INSLAW alleged that Attorney General Meese and D. Lowell Jensen schemed to ensure that INSLAW's proprietary enhancements to PROMIS be obtained by the Department without payment and be made available to Dr. Earl Brian, a businessman and entrepreneur who owns and controls several businesses including Hadron, Inc., a software company which has contracts with the Justice Department and other agencies.

Violation of the Automatic Stay: INSLAW further alleged that the Department violated the automatic stay under Federal bankruptcy law by using INSLAW's proprietary enhancements to PROMIS after the bankruptcy case was filed. Judge Bason's opinion found that the Department violated the automatic stay under Federal bankruptcy law, an act that could constitute an obstruction of the bankruptcy proceedings. Although Judge Bason's ruling was upheld by the District Court, it was ultimately overruled by the Circuit Court. (See infra.)

INSLAW's Conversion: INSLAW also alleged that the Department unsuccessfully attempted to have Harry Jones detailed from the U.S. Trustees office in New York to Washington to take over the INSLAW bankruptcy for the purpose of causing INSLAW's liquidation. INSLAW's proof of this claim consisted of:

The sworn statement (later recanted) of Judge Blackshear that he was pressured to detail Harry Jones to Washington to convert INSLAW's bankruptcy status, and

Director Stantons alleged unsuccessful pressure on U.S. Trustee William White to convert the bankruptcy case into a chapter 7 liquidation.


The Public Integrity Section (the Section) notified INSLAW that it would investigate some of the allegations made by the Hamiltons. Subsequently, the Department reviewed INSLAW's allegations under the independent counsel statute to determine whether the information provided was sufficient to trigger a preliminary investigation of any person covered by the statute, [286] including Edwin Meese, Arnold Burns, and Lowell Jensen. By memorandum dated February 29, 1988, William Weld, the Department's Criminal Division Assistant Attorney General, stated that the Section concluded that INSLAW did not provide specific information sufficient to constitute grounds to begin a preliminary investigation of the need for an independent counsel. [287] The Department stated that the facts presented were essentially unsupported speculation that persons covered by the independent counsel statute were involved in a scheme to defraud. The Assistant Attorney General concurred with a recommendation that the review be closed "due to lack of evidence of criminality."

The Department's investigation of these charges was shallow and incomplete. Further, it appeared to have been more interested in constructing legal defenses for its managerial actions rather than investigating claims of wrongdoing which, if proved, could undermine or weaken its litigating posture.
Mr. Richardson also stated that the Section had not, in fact, conducted a comprehensive, thorough, or credible investigation, and that the investigation was a cursory review of INSLAW's charges. In a May 11, 1989, letter to Attorney General Thornburgh, Richardson repeated those concerns. He stated he believed that there was a conflict of interest arising from the Department defending itself against a civil suit brought by INSLAW while at the same time dealing with allegations of criminal conduct by top management that would, if proven, destroy the Department's defense. He also stated that it was apparent that the Department's all-out, no-holds-barred defense in INSLAW's civil suit had been given priority over the criminal investigation.

Mr. Richardson noted in this letter that no one from the Section contacted him or Mr. Charles Work, INSLAW's counsel, nor did they seek information from the Hamiltons. In addition, they failed to contact witnesses who had provided information to INSLAW. In fact, in December 1988 the Hamiltons provided the Section with the names of thirty individuals who could provide information pertinent to this investigation. In his letter, Mr. Richardson concluded that the only solution would be the appointment of an independent counsel. On August 10, 1989, Mr. Work also wrote to the Department, calling attention to the inadequacies of the Sections purported investigation, but the Department did not reopen the matter.

E. DEPARTMENT'S RESPONSE TO COURT FINDINGS OF POSSIBLE PERJURY

In a parallel initiative, Judge Bason recommended on July 17, 1987, to Attorney General Meese that he designate an appropriate official outside the Department to review the disputes between INSLAW and the Department and to give the Attorney General independent advice on this matter. [288]

Judge Bason stated in his Findings of Facts and Conclusions of Law that during the trial he observed the witnesses very closely and reached certain "definite and firm convictions" based on their demeanor, as well as on an analysis of the inherent probability or improbability of their testimony. On pages 172 through 177 of his Findings of Facts, Judge Bason commented on the credibility of the Department's witnesses and pointed strongly to a pattern of deception and coverup by Department employees. This pattern of deception suggests the possibility of perjury and coverup that can only be completely investigated by someone who is independent of the Department of Justice.

The following are extracts from Judge Bason's statements:

Lawrence McWhorter, Deputy Director for the Executive Office for U.S. Attorneys (EOUSA) was "totally unbelievable."

Jack Rugh, Assistant Director, Information Systems Staff for EOUSA was "also not believable."

William Tysons (Director EOUSA), statement that Mr. Brewers attitude toward INSLAW was positive, constructive and favorable ". . . is so ludicrous in light of the evidence taken as a whole it is difficult for this court to believe any of Mr. Tysons testimony."

C. Madison Brewer, Director, Office of Management Information Systems & Support, EOUSA ". . . was most unreliable, and entirely colored by his intense bias and prejudice against Hamilton and INSLAW."

Peter Videnieks, Contracting Officer, Justice Management Division was ". . . substantially unreliable. Videnieks was under Brewers domination and was thoroughly affected by Brewers bias."

The testimony of Janis Sposato, Administrative Counsel, Justice Management Division, "is to be viewed with considerable skepticism. Given Sposatos position as a DOJ ethics officer, her casual treatment of repeated serious allegations of outrageous misconduct by Brewer can only be described, even charitably, as willful blindness to the obvious."


Judge Bason concluded his comments by stating that:

The acts of DOJ as described in the foregoing findings of fact were done in bad faith, vexatiously, in wanton disregard of the law and the facts, and for oppressive reasons to drive INSLAW out of business and to convert, by trickery, fraud and deceit, INSLAW's PROMIS software.


Apparently in response to Judge Bason's charges as well as INSLAW's request for the appointment of an independent counsel, Arnold Burns, the Deputy Attorney General, asked the Civil Division for advice on the question of the appointment of an outside party to review the INSLAW matter. The Deputy Assistant Attorney General of the Civil Division, Stuart Schiffer, wrote to Richard Willard, Assistant Attorney General, Civil Division, that the idea "would not achieve productive results." Both Mr. Schiffer and Mr. Willard agreed that taking this "extraordinary step" would only serve to highlight the matter and give those criticizing the Department an opportunity to argue that resorting to this remedy proved by inference that events warranted an investigation.

Mr. Schiffer crystallized the Department's defensive posture on this matter when he wrote that his reasons for supporting the denial of an outside investigation were founded on whether the Department could achieve any benefit from such a study. According to Mr. Schiffer:

I remain convinced that this idea would not achieve productive results. . . . I have serious doubts whether we could achieve any benefit from the outside persons study. . . . (T)he outside person might find instances in which the Department could have better handled the contract (with 20/20 hindsight this is not unlikely). These deficiencies, no matter how minor, would be seized upon and magnified by the court as admissions "at last" of the Governments wrongdoing. [289]


Mr. Schiffer concluded that the use of an outside person to investigate and report on the Department's handling of the INSLAW contract was, a "no-win" option and the leadership of the Civil Division passed this recommendation on to Deputy Attorney General Burns. [290]

F. INSLAW REQUEST FOR INDEPENDENT COUNSEL

INSLAW filed a Petition for Writ of Mandamus on December 20, 1989, requesting that the District Court order a full and thorough investigation of the INSLAW allegations and direct the Attorney General to appoint an independent counsel. The petition asserted that the Department had not made a serious effort to determine whether or not INSLAW's allegations, which were supported in court, were true. The Department moved to dismiss the petition.

A thorough investigation of the Department's handling of the PROMIS contract was again denied INSLAW on September 8, 1989, when the D.C. Court of Appeals turned down INSLAW's request for an independent counsel to investigate alleged misconduct by top Department management. This request was an appeal of the Department's May 4, 1988, determination that the appointment of an independent counsel was not warranted. The court denied the request because the Attorney General had not applied to the court for the appointment of an independent counsel as required by law. Therefore, the court concluded that it had no jurisdiction in the matter.

On September 27, 1990, the court denied the petition. The court added in a footnote that:

. . . the House Judiciary Committee is presently investigating the activities of the Department and its then-officials, employees, and friends as to the extent of a conspiracy of the type and magnitude alleged by INSLAW. The Washington Post reports that "(a)fter months of negotiations, Attorney General Dick Thornburgh has now assured the Judiciary Committee Chairman Jack Brooks (D-Tex.) that his inquiry will have the full cooperation of the department. Committee investigators will have direct access to department personnel and documents, and employees will be assured that they can testify without fear of retribution. . . . Clearly, this house committee is a body far better placed in the governmental scheme of things than the court (with resources unmatched in the judiciary) to undertake such an evaluation." [291]


Sadly, such cooperation with this committee never materialized. In fact, the committee remains embroiled in a conflict with the Department over full access to information. As stated earlier in this report, in July 1991 a subpoena even had to be issued to compel the production of key Justice Department documents and files related to INSLAW. This occurred 2 full years after the initial request to Attorney General Thornburgh to cooperate with the committees INSLAW investigation. Even today, sensitive documents are missing and certain files which the Department claims are related to ongoing criminal investigations and to sensitive law enforcement matters are still being denied the committee.
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