Full text of Inslaw's Rebuttal to the Bua Report
TABLE OF CONTENTS
Introduction
INTRODUCTION
The attempt by the Department of Justice (DOJ) to deal with the
INSLAW case through a Special Counsel, who is required to report
to the Attorney General, and a staff of DOJ attorneys raises
significant public policy questions. These are apparent on the
face of the Bua Report.
For example, should DOJ, as one of the parties to a civil dispute,
be able to use the authority of a federal grand jury and the secrecy
requirements of its proceedings to improve its own civil litigation
posture? Should DOJ be using its own lawyers and investigators
and a federal grand jury to investigate colleagues, superiors,
and subordinates? How should the tension between the obligation
to enforce the criminal laws of the United States and the legitimate
need to safeguard intelligence and national security be reconciled?
The problems with the Bua Report, as set forth in INSLAW's Analysis
and Rebuttal, are much more concrete than the aforementioned public
policy questions. We do, however, think that the problems identified
by these questions should be carefully and thoughtfully addressed
as steps are being taken to bring the INSLAW case to a fair, final
and publicly acceptable conclusion.
The main body of this memorandum is divided into sections addressing
(1) DOJ's wrongful acquisition of an enhanced version of PROMIS
to which it was not entitled and which it has continued to use
without properly compensating INSLAW, (2) DOJ's attempt, by improper
means, to cause the conversion of the INSLAW bankruptcy from
reorganization to liquidation, and (3) the indications of a more
widely ramified conspiracy involving Earl Brian and the intelligence
and law enforcement agencies of the United States and foreign
governments.
Each of these sections examines the basis for the conclusions
reached in the Bua Report and points out errors and omissions
plainly demonstrable on the basis of evidence cited in the report
itself or readily available to the investigators in the records
of prior investigations and judicial proceedings. The sections
also identify evidentiary points as to which Judge Bua chose
to believe the self-serving statements of individuals directly
implicated in the theft of INSLAW's software, to disbelieve the
testimony on the same points by INSLAW witnesses, and to ignore
evidence supporting the findings of the Bankruptcy Court for the
District of Columbia, the United States District Court for the
District of Columbia, and the House Committee on the Judiciary.
In addition to the deficiencies apparent on its face, the report
reveals numerous failures to pursue testimony or documentary
evidence that could have contradicted its conclusions and corroborated
INSLAW's allegations. The following sections identify these
failures in at least 40 situations.
Immediately after his appointment, INSLAW called to Judge Bua's
attention the essentiality of assuring senior DOJ officials and
other government employees who had given important information
to INSLAW that they could disclose this information to him or
his staff without fear of reprisal. Any person seriously attempting
to uncover the truth would have gone to great lengths to find
a way of overcoming these apprehensions. This was not done.
Appended to this memorandum is a listing of these informants
together with a brief synopsis of information they have furnished
to INSLAW. The listing gives enough of an indication of who
they are to make clear that they deserve to be taken seriously,
but not so much as to make it possible to identify them individually.
The synopses make clear at the same time that the information
they could furnish strongly corroborates other evidence of the
wider conspiracy.
The Bua Report denigrates the findings of the Bankruptcy Court
without clearly acknowledging that those findings were affirmed
and supplemented by two other entities independent of DOJ, the
U.S. District Court and the House Judiciary Committee. Senior
U.S. District Judge William B. Bryant, Jr., issued a 44-page opinion,
in which he states in part:
It is sufficient to state that after careful review of all
of the volumes of transcripts of the hearings before the bankruptcy
court, the more than 1,200 pages of briefs and supporting appendices,
and all other relevant documents in the record, there is convincing,
perhaps compelling support for the findings set forth by the bankruptcy
court.
. . . the court has examined the bankruptcy judge's findings
of fact in the light of the entire record, and finds his account
of the evidence is eminently plausible; and this court is not
left with any notion that a "mistake has been committed,"
Id. at 574. This conclusion is reached without regard to the
deference to be accorded to the judge's opportunity to assess
credibility. The cold record adequately supports his findings
under any standard of review.
The section on the wrongful acquisition of PROMIS amply supports
its thesis that the Bua Report focuses only on those facts that
its authors deemed relevant to the conclusions they intended
to reach. It calls attention to the fact that the report based
some of its most important conclusions on interviews with unnamed
individuals and on undisclosed documentary evidence. This section
also points out the report's remarkable credulity toward professions
of innocence by the very individuals heretofore identified as
the principal culprits in the theft of the software. As the
section observes, "To accept the self-serving, long after-the-fact
and post hoc rationalizations of these individuals over their
testimony at trial, which testimony clearly evidenced their propensity
for lying and covering up the truth, as found by two federal
courts, is ludicrous."
The section on the conversion of the INSLAW bankruptcy exposes
the same pattern of justifying the DOJ version of the facts and
downplaying, misinterpreting, or ignoring evidence to the contrary.
This is particularly striking in the case of the report's attempt
to minimize the testimony of Anthony Pasciuto, Deputy Director
of the Executive Office for U.S. Trustees. In reaching for an
explanation of Pasciuto's conduct, his testimony, and his subsequent
recantation, the report avoids the one most logical explanation:
the fear that he would not get the promotion he had long sought
and the fear that he would be fired for telling the truth, as
he eventually was.
Pages 28-35 of the section on the more widely ramified conspiracy
pull together the numerous indications that INSLAW's PROMIS software
is widely used throughout the United States Government. A thorough
investigation would, at a minimum, have conducted the relatively
simple and inexpensive computer-based code comparisons between
PROMIS and its suspected clones in U.S. intelligence and law
enforcement agencies, that might have shown whether or not these
claims are true. The Bua investigation made no attempt to arrange
such comparisons.
Relevant both to DOJ's bad faith in its dealings with INSLAW and
to its involvement in a broader conspiracy is the issue of the
DOJ's complicity in the denial of reappointment to George F.
Bason, Jr., who presided over the Bankruptcy Court trial. The
report reveals that the criticisms of Judge Bason by his predecessor,
Roger Whelan, were influential in the Merit Selection Panel's
deliberations about Judge Bason's suitability for reappointment.
Whelan told the Panel that Judge Bason was a poor administrator.
Chief Judge Aubrey Robinson of the U.S. District Court, however,
told the Judiciary Committee that Judge Bason's only administrative
problems were inherited from Judge Whelan and that these were
soon brought under control by Judge Bason. In the Chapter 11
proceeding, Roger Whelan represented the INSLAW creditor which
pressed hardest for INSLAW's liquidation and which, in so doing,
appears to have acted in collusion with DOJ. The report also
discloses direct communications on the INSLAW case between a
DOJ attorney and the Chair of the Merit Selection Panel, communications
whose existence was not revealed in the course of two Congressional
investigations on the subject.
It is noteworthy in the circumstances that Judge Bua made an
eleventh-hour approach to INSLAW's lawyers in an effort to broker
a $25 million settlement between INSLAW and DOJ. The inference
that Judge Bua was aware of the weaknesses in his own report
is difficult to avoid.
I. DOJ WRONGFULLY OBTAINED AN ENHANCED VERSION OF PROMIS TO
WHICH IT WAS NOT ENTITLED AND THEREAFTER HAS USED THAT VERSION
WITHOUT PROPERLY COMPENSATING INSLAW
In assessing the validity of the so-called "tentative"
factual conclusions reached in the Bua Report, one need be mindful
of the following telling admission of the authors:
Our discussion here of the factual background of the 1982 contract
does not purport to be exhaustive. Instead, we have attempted
to focus on those facts that are relevant to the conclusions we
have reached. Where it is necessary to explain specific findings
or conclusions, we have undertaken a more detailed examination
of certain events in subsequent sections of this report. (Page
15)
In effect, the authors of the Bua Report determined, apparently
in advance, the conclusions that they intended to reach and,
thereafter, set about to "focus" on only those facts
that they deemed relevant to support those conclusions, to the
exclusion of the massive factual record that otherwise would,
and did, lead to the very opposite conclusions found not only
by two federal courts, but, in part, by the Committee on the Judiciary
of the U.S. House of Representatives and the Permanent Subcommittee
on Investigations of the Committee on Government Affairs of the
U.S. Senate.
It is remarkable that the authors of the Bua Report either ignored
or rejected every conclusion reached by the federal courts and
the two legislative committees that was contrary to the conclusions
reached by the Bua Report, while at the same time accepting those
conclusions that were supportive of the conclusions reached in
the Bua Report. It is even more remarkable that the Bua Report
could find, on the one hand, that DOJ neither obtained the enhanced
version of PROMIS through fraud nor wrongfully distributed PROMIS
while, on the other hand, Judge Bua repeatedly informed journalists
covering the INSLAW case and once conveyed directly to INSLAW's
attorneys that he had reached the opposite conclusion and had
recommended that DOJ settle its dispute with INSLAW by the payment
of $25 million to INSLAW.
The following is an attempt merely to highlight some of the most
glaring errors in the factual conclusions reached in the Bua
Report.
A. Negotiation of the 1982 Implementation Contract
The Bua Report found that DOJ had issued a Request for Proposals
(RFP) in late 1981 that solicited proposals on a contract to:
(1) implement computer-based PROMIS software in 20 "larger"
United States Attorneys' Offices and (2) create and install word
processing based case management software in the remaining 74
offices. There is no dispute that, at the time that the RFP
was issued and the contract was awarded to INSLAW, both DOJ and
INSLAW understood that DOJ intended to utilize the computer-based
PROMIS only in the 20 larger offices; it clearly was understood
that the remaining 74 offices would not receive this software.
The Bua Report acknowledged that INSLAW, in responding to the
RFP, specifically stated that:
During the life of this project-but not as part of this project-Inslaw
plans new enhancements and modifications to the basic PROMIS software
and to the original version of PROMIS for U.S. Attorneys.
. . . .[I]mprovements funded by other [i.e. non-governmental]
sources and developed and accepted for inclusion in the software
supported by Inslaw, will be made available to the U.S. Attorneys'
offices. (Page 19)
However, the Bua Report concluded, without any factual support,
that INSLAW did not clarify what it meant by "accepted for
inclusion" or "will be made available." This
is wrong.
First, the Bua Report ignores the fact that the quoted statement
was made specifically in response to the Statement of Work, which
in part required that:
All systems enhancements, modifications, and development performed
pursuant to this contract shall be incorporated within the systems
which have already been installed in the U.S. Attorneys' Offices…
(§ 3.2.4.2)
INSLAW was responding to this portion of the Statement of Work
by advising DOJ that while INSLAW planned new enhancements, they
would not be as a part of, or pursuant to, this contract. Thus,
DOJ clearly was put on notice that these new enhancements would
not be made available for free.
Second, there is ample testimony that both before and after the
PROMIS contract was signed, INSLAW specifically advised the Executive
Office for U.S. Attorneys ("EOUSA") in writing that
it had available for sale, at an additional cost, certain proprietary
enhancements to PROMIS. INSLAW provided this information to DOJ
because, by the time that DOJ issued the RFP, INSLAW had made
substantial enhancements to Old PROMIS. (Hamilton, T. 105; Merrill,
T. 763) These enhancements, which eventually included major new
functional subsystems and substantial changes to the existing
code, at a cost which INSLAW estimated to be $8.3 million, rendered
Enhanced PROMIS far superior to Old PROMIS in terms of speed,
flexibility, ease of use, breadth of function, and ability to
be modified for particular needs. (Hamilton, T. 400; Merrill,
T. 760-762; Holton, T. 1216-1219)
In its Technical Proposal responding to DOJ's PROMIS Project RFP,
INSLAW informed DOJ that it had made enhancements to Old PROMIS
which were proprietary, and as to which it had made a significant
developmental and commercial commitment. (Answer 13; PX 12;
Hamilton, T. 124-125; Gizzarelli, T. 482-483) In this regard,
INSLAW specifically made a claim of proprietary rights in such
enhancements. (Hamilton, T. 124)
The Bua Report suggests that DOJ did not understand that
INSLAW had made this claim of proprietary rights, and that INSLAW
had failed to explain in sufficient detail the basis or impact
of that claim. That is not correct. In fact, in response to
INSLAW's proposal, DOJ specifically requested a clarification
of INSLAW's claim of proprietary rights. (PX 13; Hamilton, T.
126; Merrill, T. 766-767) In an amendment to its Technical Proposal
dated January 13, 1982, INSLAW responded to DOJ's inquiry and
specifically informed DOJ that ". . . all of INSLAW's software
is proprietary to it thus far." (PX 14; Hamilton, T. 127)
DOJ did not respond further to INSLAW's amendment of its Technical
Proposal. (Gizzarelli, T. 490; Merrill, T. 767-769) INSLAW also
indicated that such programs were copyrighted and that since
May 1981 it had been developing privately financed enhancements
to PROMIS which were the exclusive property of INSLAW, and that
DOJ had no license to use these privately financed enhancements.
(PX 14)
To illustrate this point, INSLAW, in its Technical Proposal,
singled out the two-program version of the database adjustment
subsystem as an enhancement which had been developed by INSLAW
using private funds. (Hamilton, T. 125; PX 14) The database
adjustment subsystem was not required to be delivered under the
contract nor had it been required to be delivered under any prior
DOJ contracts (Hamilton, T. 125, 2575-2578; Merrill, T. 768)
By this January 13 amendment, INSLAW illustrated the concept
that INSLAW had all the proprietary rights in Enhanced PROMIS.
(Gizzarelli, T. 493)
Subsequent to receipt of INSLAW's response to DOJ, and prior to
the execution of the contract, no one from DOJ made any further
inquiry of INSLAW, or raised any questions, concerning INSLAW's
right to assert its proprietary rights in Enhanced PROMIS. (Hamilton,
T. 128; Merrill, T. 767-769; Gizzarelli, T. 490)
From the foregoing exchange of communications, it should be clear
that any rational person acting on behalf of DOJ would understand
that INSLAW was advising DOJ that the proprietary enhancements
developed by INSLAW would be made available to the Department
for a fee, should the Department desire to have those enhancements
included within the software delivered under the contract. If
there was any confusion on the part of DOJ, that confusion was
not the fault of INSLAW; had DOJ any further questions concerning
what was meant by the language in issue after having received
the January 13 clarification, it was up to DOJ to seek answers
to those questions.
Not surprisingly, after thoroughly reviewing the record, Judge
Bryant reached the same conclusion:
The parties negotiated for over two months, and finally entered
into a contract on March 16, 1982. Prior to the execution of
the contract, and for a time thereafter, there were extensive
discussions about what INSLAW claimed were privately funded enhancements
which were featured in PROMIS. In other words, INSLAW claimed
that at the time of entering into the contract their version of
PROMIS was considerably more advanced than it was at the time
of the pilot project, and that it claimed proprietary rights to
those features which were developed with other than government
funding. (D. Ct. Mem. Op., p. 4)
B. INSLAW's Continuing Assertion of Proprietary Rights and
DOJ's Improper Response
To the extent that there was any lingering confusion on DOJ's
part regarding INSLAW's assertion of proprietary rights in the
enhanced version of PROMIS, that confusion should have been removed
by INSLAW's continuing assertion of those rights. Indeed, in
April 1982, INSLAW formally notified DOJ of its intent to market
Enhanced PROMIS as a fee-generating product to public and private
sector customers. (Hamilton, T. 134-136; Merrill, T. 775) In
this connection, Roderick M. Hills, an attorney for INSLAW, wrote
to Associate Deputy Attorney General Stanley E. Morris, enclosing
a memorandum written by Hamilton (with his counsel's assistance)
describing the origin and financing of Old PROMIS, INSLAW's efforts
to substantially improve the program utilizing private funds,
and the need to market such privately financed enhancements.
(PX 21)
Hill's letter solicited any questions or objections that DOJ had
to INSLAW's plans. (PX 21) In essence, this inquiry was intended
to provide advance notice to DOJ as to INSLAW's plans and to
obtain a "sign-off" letter from DOJ to respond to concerns
raised by IBM which at that time was considering a joint marketing
agreement with INSLAW. (Rogers, T. 422-424; Hamilton, T. 277)
The purpose of the "sign-off" letter, from INSLAW's
perspective, was to give INSLAW assurance that DOJ understood
what INSLAW was proposing to do, that it agreed with INSLAW's
legal position, and that it would take no affirmative action
to disrupt or impede INSLAW's marketing efforts. (Rogers, T.
444-445) Any questions that DOJ continued to have should have
been answered by this memorandum.
The Bua Report acknowledges the above facts but fails to take
into consideration that this additional effort by INSLAW clearly
should have put DOJ on notice that there were additional enhancements
included within the PROMIS software that were not part of the
software to be delivered under the contract, absent a separate
agreement regarding that software.
There is no dispute that this plan obviously infuriated C. Madison
Brewer, DOJ's PROMIS Project Manager. The Bua Report accepts
the fact that Brewer vehemently took issue with the representations
and conclusions set forth in the Hamilton memorandum, which Brewer
referred to as "scurrilous," and further acknowledges
that Brewer's opposition to the plan was presented in an improper
manner. However, in a woefully inadequate effort to downplay
Brewer's conduct, the Bua Report proceeds to seek to justify his
opposition, while at the same time totally ignoring all of the
undisputed facts that evidence his outrageous conduct directed
at injuring INSLAW.
First, the Bua Report's conclusion that at least some of the
positions taken by Brewer appear to have been well-founded is
not only wrong, but also is a facially obvious effort to obfuscate
the fact that virtually all of the substantive positions and
actions taken by DOJ, at the direction of Brewer, were not well-founded.
In this regard, the Bua Report credits Brewer for a grand total
of two correct positions, to the exclusion of all of the incorrect
positions. More particularly, the Bua Report states that Brewer
was correct to object to the extent that the Hamilton memorandum
claimed that all software developed after May 1981 was proprietary,
since the five BJS enhancements that were under development would
have been in the public domain. INSLAW did not then, nor has
it ever, disputed this fact, and the memorandum did not take
a contrary position. Additionally, the Bua Report credits Brewer
for correctly arguing that INSLAW had received some federal funding
after May 1981. Once again, while this funding may have taken
place, INSLAW was not asserting any proprietary rights for software
developed from government funding under contracts containing
federal data rights clauses. Moreover, the specific contracts
referenced in the Bua Report did not encompass any software development
work; therefore, none of the proprietary enhancements was developed
using government money. Thus, the only two points on which the
Bua Report agrees with Brewer are non-issues, and serve only
to cloud the otherwise obvious wrongful conduct undertaken by
Brewer.
The Bua Report ignores the fact that at an April 14, 1982 meeting,
Brewer actively considered terminating for the government's convenience
the month-old PROMIS Contract in retaliation for INSLAW's letter
to Morris. (Brewer, T. 1673; PX 23) In his testimony at trial,
Brewer's deputy, Jack Rugh, acknowledged that such a termination
at that time would have been "ludicrous." (Rugh, T.
1471; Brewer, T. 1673; PX 23) In addition, Brewer discussed
reprisals against INSLAW on its several other contracts with DOJ,
one of which was the BJS Contract for specific PROMIS enhancement
development work which was not part of the PROMIS enhancements
claimed as proprietary by INSLAW. (Hamilton, T. 114; PX 24)
Another contract discussed at the April 14, 1982 meeting was
awarded to INSLAW in 1981 by DOJ to perform a needs analysis and
system design for PROMIS in the U.S. Attorney's Office for the
District of Columbia. (PX 324 [Brewer] at p. 122; Brewer, T.
1634, 1673; Hamilton, T. 141; PX 232) The authorized second phase
of this contract would have been a PROMIS implementation effort
by INSLAW at an estimated contract price of $600,000. (PX 324
[Brewer] at pp. 123-124; Hamilton, T. 141-142) It was noted during
the April 14th meeting that DOJ was undecided about whether to
proceed with the contract's second phase and that Brewer and
Rugh would meet with the District of Columbia's U.S. Attorney's
Office staff to decide what would be done on the contract. (PX
23) It was further noted that cancellation of the authorized
second phase would adversely affect INSLAW's ability to keep its
overhead rate in line with EOUSA expectations. (PX 23)
Stating that he wanted to discuss the BJS Contract with INSLAW,
Brewer demanded a meeting with INSLAW for April 19, 1982. (PX
24; Brewer, T. 1638)
At the outset of the meeting on April 19, 1982, Brewer informed
James Kelley, INSLAW's General Counsel, and Joyce Deroy of INSLAW
that his concern on the BJS Contract arose from the "scurrilous"
memorandum written by Hamilton which was attached to INSLAW's
April 2, 1982 notice to Morris of its plans to market Enhanced
PROMIS. (PX 25; PX 26; PX 324 [Brewer] at p. 137; Brewer, T.
1671)
As of this meeting, Brewer understood from Hamilton's memorandum
that INSLAW was asserting its ownership rights in Enhanced PROMIS,
as well as its right to market Enhanced PROMIS. (PX 25; PX 324
[Brewer] at p. 141)
During the April 19, 1982 meeting, Brewer again referred
to the Hamilton memo and launched into a very emotional, even
belligerent, tirade. (PX 26; Brewer, T. 1639; Kelley, T. 1397)
During this part of the discussion of the Hamilton memo, Brewer
made a number of specific statements regarding the memo. (PX
324 [Brewer] at p. 143) He stated that the Hamilton memo was
unnecessary because in Brewer's view DOJ had already acknowledged
INSLAW's right to sell Enhanced PROMIS. (PX 324 [Brewer] at pp.
144-145) Nevertheless, and despite the obvious inconsistency,
it was Brewer's further understanding, he said, that while INSLAW
had the right to sell Enhanced PROMIS, DOJ had unlimited rights
to such software, including the right "to give it away"
to those very public and private sector entities to which INSLAW
would be attempting to market PROMIS. (PX 324 [Brewer] at pp.
146-147; Brewer, T. 1683-1684) DOJ has the audacity to contend
that "[it] is in no way inconsistent" for INSLAW to
have "the right to sell . . . PROMIS" at the same time
that DOJ has "unlimited rights" to give PROMIS away
to INSLAW's intended customers. (DRPPFF 167)
Brewer also questioned INSLAW's ability to perform the PROMIS
Contract and indicated that a number of people at DOJ were upset
with INSLAW and that the Hamilton memo had caused all kinds of
problems. (PX 26; PX 324 [Brewer] at pp. 172, 174-175) Brewer
further questioned the quality and timeliness of INSLAW's work,
citing the Illinois Criminal Justice Coordinating Council, the
Michigan Prosecuting Attorneys' Association and others as sources
of this information. (PX 26; PX 324 [Brewer] at pp. 175-176)
Finally, Brewer strongly challenged INSLAW's right to claim ownership
of, and complete domain over, Enhanced PROMIS. (PX 26; PX 324
[Brewer] at p. 177)
Another matter of discussion by Brewer at the April 19, 1982
meeting was a supplemental request for payment from INSLAW in
the amount of $125,000 in regard to the BJS Contract. (PX 324
[Brewer] at pp. 141-142; Brewer, T. 1638, 1679; Hamilton, T.
144, 200) Brewer contacted the superior of the contracting officer
on the BJS Contract and asked that a "preliminary notice"
of default be issued on the contract as well as a reprimand to
INSLAW for failing to comply with the "Limitation of Cost
Clause." (PX 27) Subsequent to the meeting and at Brewer's
insistence, INSLAW agreed to absorb this $125,000 expense into
the PROMIS Contract without increasing the total cost of the PROMIS
Contract and without any additional payment under the BJS Contract.
(PX 324 [Brewer] at pp. 276-278; Brewer, T. 1640; Hamilton, T.
145)
Subsequent to the April 19, 1982 meeting, Brewer met with officials
of the District of Columbia U.S. Attorney's Office to recommend
that they not go forward with Phase II of the contract. (PX
232; PX 237; PX 324 [Brewer] at p. 123; Brewer, T. 1674) INSLAW
was not formally notified of this decision until August 25, 1982,
although it had successfully completed Phase I of the D.C. U.S.
Attorney's Contract on May 31, 1982. (Hamilton, T. 142; PX 37;
PX 38; PX 48) This formal notice was given just 13 days after
INSLAW received a letter from Deputy Attorney General Stanley
Morris dated August 11, 1982, which noted that INSLAW could
assert proprietary rights to any privately financed PROMIS enhancements.
(Hamilton, T. 138-140, 277; Merrill, T. 775-776; PX 36)
Brewer played a very important role in the decision not to go
forward with Phase II of the D.C. U.S. Attorney's Office contract.
(PX 232; PX 237; PX 324 [Brewer] at p. 124) Brewer identified
the purported basis for this decision, in part, as his understanding
that INSLAW was not able to perform because of the demands being
made upon INSLAW under the new three-year, PROMIS Contract (PX
324 [Brewer] at pp. 124-125; Brewer, T. 1635), notwithstanding
that the latter contract had only been in effect a few months.
Based on prior discussions with DOJ officials, INSLAW had been
led to believe that it would be awarded Phase II of the D.C.
U.S. Attorney's Office contract and had planned upon $600,000
of revenue from Phase II for estimating its overhead rate for
all of its DOJ contracts and grants. (Hamilton, T. 143-144;
Merrill, T. 774) After the decision not to go forward with Phase
II had been made, Brewer was informed by INSLAW's comptroller,
Murray Hannon, that denial of the $600,000 Phase II contract
resulted in a precipitous increase in INSLAW's overhead within
a few months of the decision, as Brewer had been forewarned would
happen. (PX 324 [Brewer] at p. 125)
Finally, while the Bua Report went out of its way in an attempt
to exonerate Brewer, it is noteworthy that the Bua Report did
not even address the unrefutable fact that DOJ failed totally
to act upon, let alone consider, INSLAW's repeated assertions
of bias on the part of Brewer. As Judge Bryant found:
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 requests 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 (D. Ct. Mem. Op., p. 6)
C. DOJ Obtained Enhanced PROMIS Through Fraud and Deceit
The Bua Report concluded that "[t]he evidence we have compiled
to date does not support a finding that DOJ employees intentionally
deceived or defrauded INSLAW, or that there was a scheme to trick
INSLAW into turning over its proprietary software." (Page
125) This conclusion purportedly is supported on the basis of
a review of the deposition and trial testimony, documents and
interviews of "many of the individuals involved," and
the review of additional unspecified documentary evidence. Not
surprisingly, the Bua Report does not disclose the identity of
every one of the individuals interviewed or the "additional
documentary evidence" reviewed. In fact, however, virtually
none of the witnesses offered by INSLAW during the trial was
interviewed by the authors of the Bua Report, and those who were
interviewed commented at the time on the perfunctory character
of the inquiry. Indeed, it is astonishing that the authors of
the Bua Report could conclude, on the basis of interviews with
DOJ personnel conducted over 10 years after the events in question
and following an extensive trial and extraordinary post-trial
publicity, that those individuals acted only in the "best
legitimate interests of the government." (Page 125) To
accept the self-serving, long after-the-fact and post hoc rationalizations
of these individuals over their testimony at trial, which testimony
clearly evidenced their propensity for lying and covering up the
truth, as found by two federal courts, is ludicrous.
1. The Advance Payment Dispute
Under the PROMIS Contract, INSLAW was entitled to receive payments
in advance of the waiting period usually necessary to process
an invoice. In order to qualify for the advance payment clause,
INSLAW had to represent that it was not then capable of obtaining
financing from banks or other traditional commercial sources.
The contract also contained a provision that prohibited INSLAW
from pledging its rights under the contract.
In November 1982, INSLAW informed DOJ that it had violated inadvertently
a technical covenant in the contract by assigning its government
invoices as collateral for a bank line of credit that it had
obtained in April 1982. DOJ responded to this by threatening
to terminate the advance payment clause and by demanding that
INSLAW turn over a copy of its software to DOJ. The bankruptcy
court found that the advance payment dispute was manufactured,
without justification, as a mechanism to injure INSLAW and to
require INSLAW to provide DOJ with a copy of the software that
would, in turn, enable DOJ to implement the software in-house.
The Bua Report rejected the conclusion reached by the bankruptcy
court. In doing so, the authors of the Bua Report seek to justify
the conduct of DOJ on the basis that DOJ's action was predicated
upon its belief that INSLAW had "lied" to it. They
conclude that it was the misrepresentations by INSLAW concerning
its ability to obtain outside financing that was the primary
reason for DOJ giving notice of termination of advance payments.
The authors of the Bua Report assert that, after viewing the
"demeanor" of the contracting officer, they concluded
that his version was believable on this point. This conclusion,
however, ignores virtually all of the evidence in the record
relating to this subject.
First, the record is undeniably clear that, on February 19, 1982,
prior to the issuance of the contract, when INSLAW sought the
so-called advance payment provision, commercial bank financing
was not available. Thus, INSLAW's representation to DOJ at that
time was correct and most certainly was not a lie. In April 1982,
largely on the strength of the $10 million contract award, INSLAW
was able to secure an additional line of credit from the Bank
of Bethesda. This credit was obtained, in part, based upon the
pledge of the receivables to the Bank. Thus, contrary to the
assertion in the Bua Report, INSLAW was not in the process of
obtaining commercial financing at the time that it represented
in its formal request that it was unable to do so, and there
is no conflict in the representation made in February, prior to
the contract, and the subsequent effort to obtain financing in
April, after the contract. The effort to obtain financing took
place later, and was predicated on the award of the contract.
Thus, INSLAW neither lied nor misrepresented anything to DOJ.
Notwithstanding, there is no dispute that the pledging of the
receivables resulted in a technical violation of the contract.
In November 1982, this technical violation was discovered by
DOJ's auditor Robert Whitely and discussed by him with INSLAW.
At that time, Whitely told INSLAW that he was fully satisfied
with the foregoing explanation and that, since DOJ was in no
way negatively impacted by the line of credit or the pledge, he
would not raise any question in the current audit about this
matter. Whitely fully acknowledged these facts, and particularly
the fact that the government was not placed in any financial risk
as a result of the technical violation. (PX 345 [Whitely] at
pp. 36-38, 40-44; Whitely, T. 1673-1764; Hamilton, T. 166-167)
However, when Whitely met with Videnieks and Brewer and indicated
his discovery of the technical violation, they seized on the
issue and maneuvered it into a controversy when none really existed.
Whitely later testified at trial that he had been concerned
about INSLAW's near insolvency, but could not produce any contemporaneous
documentation to verify the truthfulness of such claims.
Second, despite considerable written discussions within DOJ concerning
this matter, there is no record whatsoever of any DOJ employees
stating their belief that INSLAW had lied to them. In fact, while
Brewer and the contracting officer purportedly were concerned
about a substantial deterioration in the financial condition of
INSLAW, as well as other concerns that they enumerated in writing,
at no time did they state their belief that INSLAW had engaged
in any misrepresentations. Nor did they seek to justify their
conduct on that basis during their depositions or at trial.
In short, while they may have asserted this so-called "lie"
argument to the authors of the Bua Report, over 10 years after
the fact, they most certainly did not raise this argument at
any earlier time.
Third, the entire premise on which DOJ threatened to terminate
the advance payment provision (i.e., the deteriorating financial
condition of INSLAW) was found by the bankruptcy court to be
a complete fabrication and a pretext for demanding access to
the computer software. Not surprisingly, this wealth of evidence
was totally ignored in the Bua Report.
For example, despite the expressed concerns about the financial
condition of INSLAW, neither Brewer nor Videnieks could identify
any evidence which led them to believe that INSLAW's financial
condition had substantially deteriorated since the award of the
PROMIS contract in March 1982, nor any evidence of any fraud.
(PX 324 [Brewer] at pp. 232-233; 241-245; Brewer, T. 1630; Videnieks,
207-208) In fact, Brewer and Videnieks were mistaken in their
assumption that INSLAW's financial condition had deteriorated
during the latter half of 1982; INSLAW was much stronger in December
1982 than at the time the PROMIS contract began. (Hamilton,
T. 162) In fact, during 1982, INSLAW was able to increase a
previously existing line of credit of $700,000 with First American
Bank to a $1.2 million line of credit from the Bank of Bethesda.
(Hamilton, T. 159; Merrill, T. 799) In addition, between August
and December 1982, INSLAW entered into the co-marketing agreement
with IBM. (Hamilton, T. 160; Merrill, T. 799) Perhaps most
important is the fact that INSLAW had obtained the PROMIS contract,
and prospects were strong for successful completion of the contract.
(Hamilton, T. 160-161; Sherzer, T. 958-959)
Notwithstanding the evidence to the contrary, Brewer informed
Tyson, Director of EOUSA, about these same unsupported concerns.
(PX 49; Hamilton, T. 156-157) In a December 9, 1982 memo to
Tyson, Brewer raised the following issues:
The December 9 memo also expressly detailed EOUSA's commencement
of planning for carrying-on the PROMIS Contract Project in-house,
using EOUSA employees ". . . in the event of trouble"
and stated that DOJ had "demanded, as is our right, from
INSLAW copies of all software documentation . . . ." (PX
49) (Emphasis added.) This planning was not disclosed at any
time by DOJ to INSLAW. (Hamilton, T. 165) Had this planning
been disclosed to INSLAW, INSLAW would not have turned its software
over to DOJ pursuant to Modification 12. (Hamilton, T. 165-166)
The December 9, 1982 Brewer memo was based on several fundamental
misconceptions. First, INSLAW had not incurred $975,000 of additional
bank debt, but $275,000, and the additional borrowing was necessary
to defray partially $344,000 that DOJ then owed INSLAW for its
time-sharing services. (Hamilton, T. 157-158) Second, Brewer
misconstrued the Advance Payments provision of the contract as
a mechanism for "payment-in-advance" when it was merely
a contractual procedure for DOJ's timely payment of INSLAW's vouchers
for work already completed. (Hamilton, T. 158) Third, Brewer
erroneously concluded that INSLAW had "reprogrammed"
$100,000 in contributions to the INSLAW employee profit-sharing
plan because INSLAW had not yet deposited the annual contribution,
when, in fact, the deposit was not yet due and owing. (Hamilton,
T. 158-159) Fourth, Brewer incorrectly concluded that the nature
of INSLAW's indebtedness had become "desperate" by December
1982, when, in fact, INSLAW believed it had just obtained DOJ's
"sign-off" to its rights to license its privately financed
enhancements, had established its first sales and marketing unit,
and had consummated a national co-marketing arrangement with
IBM for the public sector. (Hamilton, T. 159-161) Fifth, Brewer
confused a version of PROMIS developed under the Pilot contract
using a COBOL compiler that the hardware manufacturer (PRIME)
had subsequently discontinued, with a version developed by INSLAW's
European subsidiary based on current compiler technology; as
a consequence of his lack of understanding, Brewer had suggested
possible fraudulent accounting practices at INSLAW. (Hamilton,
T. 162-165) INSLAW's independent public accountants had, in
fact, reviewed and approved the accounting transactions. (Hamilton,
T. 165)
The Bua Report concludes that DOJ's actions concerning the advance
payments were fully justified by the memoranda they wrote concerning
the matter. According to the Bua Report, "[t]o believe
that DOJ's concerns about INSLAW's financial health were actually
a pretext, would require a finding that certain DOJ employees
were so prescient that they created numerous internal documents,
and indeed even misled their superiors, just so that they could
defend themselves against a claim of theft years later."
No such finding would be required. In fact, the only finding
that is necessary is that Brewer, for all of the reasons found
by the bankruptcy court, set about to manufacture a reason to
justify obtaining the software. There is nothing unusual in
employees attempting to paper the record in an effort to justify
their actions and that is exactly what happened here. The evidence
amply supports the bankruptcy court's findings that DOJ's justification
for seeking the software and cancelling the advance payments
provisions was unsupportable.
In an effort to justify the conduct of DOJ, the authors of the
Bua Report go to great lengths to rebut the conclusion of the
bankruptcy court that Brewer and Videnieks had no basis to believe
that INSLAW was near insolvency and that Whitely's testimony in
support of this argument was manufactured solely for use at trial.
According to the report, "Judge Bason stated this conclusion
after finding that Whitely never prepared any report, that Whitely
never referred to INSLAW's potential insolvency in his deposition,
and that Videnieks did not mention Whitely in his deposition."
The report concluded that "all of these factual assertions
appear to be just plain wrong." (Page 131-132) In fact,
Judge Bason was absolutely correct and it is the authors of the
Bua Report that are "just plain wrong."
Judge Bason first found that neither Brewer nor Videnieks at
their depositions could identify any evidence to demonstrate a
substantial deterioration in INSLAW's financial condition, notwithstanding
repeated opportunities during their depositions to provide such
evidence. While Videnieks did suggest that he had been informed
by the audit staff of the possibility of INSLAW's financial failure,
this was not evidence of any deterioration in the financial condition
of INSLAW. Judge Bason next found that while Whitely asserted
at trial his conclusion regarding potential insolvency, Whitely
did not prepare a written report or any other document which
"detailed" his alleged conclusions. Judge Bason concluded,
quite reasonably, that if Whitely had reached such an obviously
important, if not critical, conclusion regarding the financial
condition of INSLAW, it would have been documented in his work
papers, which it was not. In fact, on rebuttal, INSLAW adduced
the testimony of Whitely's successor, Ms. Schacht, who testified
that there was no reference to such purported insolvency in the
DOJ audit file nor any discussions on this subject within DOJ's
auditing group. (Schacht, T. 2452) Not surprisingly, DOJ was
unable to produce any such written records that supported Whitely's
trial testimony, since none existed. While Whitely may have
said he prepared "work papers," the facts prove otherwise.
Finally, Judge Bason found that Whitely's other conclusions concerning
the Irish subsidiary receivable and the capitalization of software
development costs were directly contrary to the considered opinion
of Arthur Young & Co., a recognized independent international
auditing firm, which had given INSLAW, a "clean," unqualified
audit opinion as to its financial condition, and itself was the
source of INSLAW's accounting treatment of its capitalization.
(Whitely, T. 1777-1779)
Obviously, Judge Bason was fully justified, based on the record
before him, in concluding that the basis for the advance payment
dispute was totally unjustified and manufactured. The Bua Report
does nothing to refute the conclusions reached by Judge Bason,
and its efforts to attack Judge Bason in this regard are pathetic.
2. DOJ's Demand for the Software
The bankruptcy court concluded that DOJ knowingly set out to obtain
the version of PROMIS to which it was not entitled under the contract
and which DOJ understood contained proprietary enhancements belonging
to INSLAW. The district court concurred with this conclusion:
Thus, the court is drawn to the same conclusion reached by the
bankruptcy court; the government acted willfully and fraudulently
to obtain property that it was not entitled to under the
contract. (D. Ct. Opinion, p. 34)
The Bua Report stated that this conclusion required proof that
DOJ set out to obtain something to which it was not entitled.
Because DOJ purported initially only to seek the public domain
version of the software, the Bua Report concludes that proof of
DOJ's fraudulent intent is missing. The Bua Report concludes
that INSLAW had failed to maintain a contract version of PROMIS
and that, had they done so, there would have been no proprietary
rights dispute, since INSLAW's production of such a version would
have satisfied any obligation it had under the contract. This
entire argument displays a fundamental misunderstanding of the
contract.
First, the contract contemplated that DOJ promptly would select
the computer it wished to have installed at the 20 largest U.S.
Attorneys' Offices and that INSLAW would then implement the public
domain software on that hardware. This software then consisted
of two separate parts: the Pilot Project version and the 5 BJS
enhancements. Until DOJ selected its computer hardware, there
was no reason for INSLAW to maintain a separate public domain
version consisting of these then two separate and non-integrated
parts. The integration of the five BJS enhancements with the
Pilot Project version had to be done after DOJ selected the specific
computer hardware. The Pilot Project used PRIME computers, and
DOJ had not determined what brand and model of computers it would
buy for the 20 largest U.S. Attorneys' Offices. For example,
DOJ would not have reimbursed INSLAW to create a separate Pilot
Project plus five BJS enhancement version for operation on a particular
brand and model computer such as the VAX mid-range computer from
Digital Equipment Corporation unless and until DOJ selected VAX
for the 20 U.S. Attorneys' Offices. Instead, DOJ selected PRIME.
Second, contrary to the assertion in the Bua Report, INSLAW did
have a version of public domain PROMIS that was frozen and bug
free. The U.S. Attorneys' Offices in San Diego and Newark were
each operating the Pilot Project version of PROMIS, and INSLAW
was supporting that version and keeping it "bug free."
The five BJS enhancements had not been created at the time of
the original Pilot Project implementation. Whatever hardware
DOJ selected would also be used to replace the hardware in the
San Diego and Newark Pilot Project offices. Consequently, while
INSLAW ultimately would have to implement the Pilot Project version,
as supplemented by the BJS enhancements in each of the two Pilot
Project offices as well as in the other 20 largest U.S. Attorneys'
Offices, INSLAW could not reasonably have begun to add the five
BJS enhancements to the bug-free Pilot Project version until DOJ
made its computer hardware selection. DOJ had not made its selection
of the hardware by the time DOJ demanded the time- sharing version
of PROMIS.
Third, the conclusion of the Bua Report that DOJ was unaware of
the fact that the version it sought contained the proprietary
enhancements is wrong. It is undisputed that during the period
of time before DOJ selected its hardware, it was understood that
INSLAW would accommodate DOJ by allowing the larger offices access
to INSLAW's computer in Maryland (not Virginia) on a time-sharing
basis. It was expected that DOJ would order the hardware promptly,
so that this accommodation would be short term. Since it was
not possible to implement the contracted-for version until the
hardware was selected, there was no reason to maintain a separate
copy of that version, and DOJ certainly knew this fact.
For this temporary time-sharing accommodation to DOJ, INSLAW used
its proprietary VAX version of PROMIS in which other proprietary
enhancements also had been included ("the time-sharing version").
There was no contractual requirement that INSLAW provide DOJ with
this time-sharing software, and therefore INSLAW had, quite properly,
not anticipated that DOJ would demand the underlying software
which contained these proprietary enhancements. Indeed, no one
connected to the contract ever contemplated the delivery to DOJ
of the time-sharing version, since this version was being used
merely as a short-term accommodation. As DOJ was not expected
ever to take delivery of the time-sharing version, INSLAW could
reasonably have planned to use its proprietary version in the
time-sharing service, because this improved version would enable
INSLAW to provide more responsive time-sharing services to each
of the largest U.S. Attorneys' Offices.
When DOJ demanded that INSLAW turn over its PROMIS software, DOJ
still had not selected either the minicomputer or the word processing
hardware that would ultimately be used to run minicomputer PROMIS
at the 20 larger offices and the word processor-based case tracking
software at the 74 smaller offices. Thus, DOJ was not at that
time prepared to implement the version of PROMIS called for under
the terms of the contract and, indeed, INSLAW could not prepare
the contracted-for version of PROMIS for DOJ until DOJ had decided
which minicomputer hardware to procure. Therefore, when DOJ used
the pretense of threatened termination of advance payments as
leverage to obtain the software, it had to know that it was seeking
the enhanced time-sharing version of PROMIS to which it was not
entitled under the contract, and which DOJ understood contained
proprietary enhancements belonging to INSLAW.
Finally, contrary to the assertion in the Bua Report, whether
DOJ had knowledge that it was seeking the time-sharing version
at the time it sent its initial request letter is not a critical
issue, because DOJ clearly understood that it was seeking the
proprietary version at the time it negotiated Modification 12.
By that time, there is no dispute that DOJ was aware that the
software it was demanding was the version containing the proprietary
enhancements. Even the Bua Report concedes that by the time the
parties were negotiating Modification 12, INSLAW had informed
DOJ that the VAX version of PROMIS being provided under the time-sharing
arrangements contained enhancements that INSLAW considered proprietary.
(Page 136)
In fact, beginning at least as early as February 4, 1983, when
DOJ and INSLAW met to discuss DOJ's threatened discontinuation
of the advance payment provision, DOJ specifically was put on
notice that its simultaneous demand for the underlying software
would require INSLAW to turn over the proprietary version of that
software. Immediately upon learning of this fact, there is no
dispute that DOJ refused to resolve the advance payment issue
independently of the software issue, notwithstanding that the
two issues were unrelated. Indeed, as even the Bua Report acknowledged,
"from at least this point on, DOJ collapsed the negotiations
of the advance payment dispute into the negotiations of the software
request and the proprietary rights issue." (Page 28) Thus,
when DOJ used the pretense of threatened termination of advance
payments as leverage to obtain the enhanced time-sharing software,
it knowingly set out to obtain a version of PROMIS to which it
was not entitled under the contract, and which DOJ understood
contained proprietary enhancements belonging to INSLAW.
Even if DOJ started out to obtain nothing more than the contracted-for
version (albeit for improper purposes), DOJ clearly was seeking
the proprietary version at the time it put into effect its plan
to "get the goods" via Modification 12. As such, the
absence of evidence that DOJ knew, when it initially requested
a copy of the PROMIS codes, that it would obtain something other
than the contract version is irrelevant; the evidence is undisputed
that it knew that it was going to receive the proprietary version
when it set about to obtain that version without any intention
to negotiate in good faith over its use. Thus, there is no "great
weakness" in Judge Bason's conversion theory.
3. The Negotiation of Modification 12
The parties thereafter entered into negotiations to resolve both
the proprietary rights and advance payment issues, ultimately
resulting in the execution of Modification 12 to the contract.
The Bua Report acknowledges that, without regard to whatever rights
DOJ had to the software prior to Modification 12, DOJ clearly
was "bargaining away" some of its rights when it agreed
to enter into Modification 12, and moreover, was obligating itself
to "live up" to the terms of that Modification. (Page
136-137)
Under this Modification, INSLAW agreed to turn over its proprietary
software on the basis of certain explicit commitments by DOJ.
First, DOJ was to bargain in good faith to identify the proprietary
enhancements contained within enhanced PROMIS. Second, DOJ was
to decide within a reasonable time which enhancements it wanted
to use, and to the extent that it did not want to use certain
of these enhancements, to direct INSLAW to remove the enhancements
it did not want. Third, DOJ was to bargain in good faith with
INSLAW as to the price to be paid for those enhancements it did
want.
The bankruptcy court found that DOJ never intended to meet its
commitments under Modification 12 and that once DOJ had received
Enhanced PROMIS pursuant to Modification 12, DOJ thereafter refused
to bargain in good faith with INSLAW. DOJ instead "engaged
in an outrageous, deceitful, fraudulent game of cat and mouse,
demonstrating contempt for both the law and any principle of fair
dealing." While conceding that DOJ's conduct following execution
of Modification 12 was subject to criticism and demonstrated "poor
judgment," the Bua Report rejected the bankruptcy court's
finding of DOJ fraud under Modification 12, based largely upon
its post hoc meetings with Rugh and Videnieks:
Bankruptcy Judge Bason found that DOJ "never intended
to meet its commitment" under Modification 12. We do not
believe the evidence supports this finding. The weight of the
evidence demonstrates that the DOJ employees involved reviewed
INSLAW's submissions in good faith, and responded in ways that
they subjectively believed were within the government's legitimate
rights under the contract. We find no evidence of bad faith or
intentional wrongdoing.
This conclusion is belied by any reasonable and objective review
of the facts relating to this matter. It is also belied by the
very reasoning adopted by the authors of the Bua Report. The
authors conclude that DOJ had an affirmative obligation to "live
up" to the procedures contained in Modification 12 and in
a March 18, 1983 letter written by Videnieks which provides the
foundation for Modification 12. Together, these documents clearly
obligated DOJ to negotiate in good faith with INSLAW to determine
which of the enhancements were proprietary and, thereafter, which
of those enhancements DOJ wanted to be included in the software
delivered under the contract. The Bua Report found that DOJ failed
to negotiate with INSLAW regarding an acceptable methodology for
determining which enhancements were proprietary. Indeed, the
Bua Report concluded that DOJ refused to accept the methodology
proposed by INSLAW, refused to explain the basis of that rejection,
and refused to provide INSLAW with the methodology that would
be acceptable to DOJ. In fact, the Bua Report concluded that
"[i]t is difficult for us to see a good reason not to tell
INSLAW what criticism DOJ had of INSLAW's methodology . . . it
was in neither party's interest to have INSLAW guessing about
what was the problem with the methodology." (Page 139)
Yet, notwithstanding having concluded that DOJ was obligated to
negotiate in good faith to live up to its commitments under the
Modification, and having concluded that DOJ failed to do so for
no "good reason," the Bua Report concludes that these
two failures were not done in bad faith. By definition alone,
they most certainly were. Moreover, when put in context, DOJ's
actions clearly were a continuation of the ongoing bad faith conduct
directed at INSLAW during the entirety of the contract.
By way of background, when DOJ persisted in its attempts to tie
resolution of the advance payment issue to the proprietary rights
issue, INSLAW initially proposed that the parties enter into an
escrow agreement pursuant to which DOJ would receive the software
if, and only if, INSLAW went into bankruptcy. (PX 68; Hamilton,
T. 167-168; Brewer, T. 1693-1694; Merrill, T. 791)
Although certain DOJ personnel recommended INSLAW's third-party
escrow proposal, it was rejected by Brewer and Videnieks, because
they could not thereby immediately obtain the software. (PX 73)
Videnieks and Brewer discussed this issue on or about March 28,
1983 and decided to propose a letter response to INSLAW's government
contracts counsel, Harvey Sherzer, indicating DOJ's intent "to
back off [advance payments] discontinuation and promising non-dissemination
[of PROMIS software] in return for delivery of information demanded
on 12/6" (PX 73) Videnieks prepared a draft of this letter
which Brewer then rewrote (PX 73). This letter was submitted
to William Snider, Administrative Counsel for Procurement, who
previously had indicated his preference for a bilateral agreement
between the parties embodied in a contract modification. (PX
73)
A March 28 memo further recounts that Videnieks was in full agreement
with Brewer about the letter, indicating quite significantly ".
. . why do you need signature if you got the goods?" (PX
73; Videnieks, T. 1837-1838)
Snider quickly responded to the Brewer/Videnieks proposal on March
29, "sharply disagreeing on this approach." (Videnieks,
T. 1838) At this point, Brewer "forbade" Videnieks
from entering into a "Mod" of the contract. (PX 73)
Brewer did not want a bilateral agreement if he could "get
the goods" without it. (Brewer, T. 1704-1705)
On April 5, 1983 Videnieks and Brewer had a telephone conversation
in which Brewer told Videnieks that he would "protect"
him from "backing down" to Sherzer and Hamilton. (PX
73) After this conversation, Videnieks checked with Snider and
"MH" [INSLAW's comptroller, Murray Hannon], who confirmed
that a contract modification protecting INSLAW's proprietary enhancements
was a precondition to INSLAW's delivery of the software. (PX
73; Brewer, T. 1208) Brewer understood that INSLAW wanted such
protection and that INSLAW would remove any enhancements that
DOJ did not want. (Brewer, T. 1708-1709)
DOJ's March 18, 1983 response to INSLAW's March 11 escrow agreement
proposal dismissed the proposal but did offer, in consideration
of "getting the goods," to agree not to disseminate
or disclose the PROMIS software beyond EOUSA and the U.S. Attorney's
Offices enumerated in the PROMIS contract pending resolution and
negotiation of the proprietary enhancements issue "until
the data rights of the parties to the contract are resolved."
(PX 70; PX 71; Merrill, T. 792; Brewer, T. 1689-1690; Hamilton,
T. 168) This proposal by Videnieks was basically the methodology
proposed and discussed at the February 4, 1983 meeting. (Merrill,
T. 792)
The March 18 letter also stated that once the "data rights"
issue was resolved, DOJ would review INSLAW's proprietary enhancements
to decide which (if any) enhancements DOJ desired to include in
the PROMIS Contract software. (PX 70; PX 71)
Videnieks specifically stated in his March 18 letter that after
the proprietary enhancements issue was resolved, DOJ:
. . . will review the effect of any enhancements which are
determined to be proprietary, and then either direct INSLAW to
delete those enhancements from the versions of PROMIS to be delivered
under the contract or negotiate with INSLAW regarding the inclusion
of those enhancements in that software. The Government would
then either destroy or return the "enhanced" versions
of PROMIS in exchange for the Government PROMIS software including
only those enhancements that should be included in the software.
If this course of action is acceptable to INSLAW there would
be no need for an escrow agreement. (PX 70; PX 71; Videnieks,
T. 1813-1815)
The enhancements which DOJ did not want would be removed from
the software delivered to DOJ. (PX 70; PX 71; Brewer, T. 1690-1691,
1709; Hamilton, T. 330-331)
INSLAW understood from Videnieks' letter that it was necessary
to resolve the issue of "proprietary enhancements" as
soon as possible because INSLAW was scheduled to deliver software
to the 20 largest U.S. Attorney's offices beginning in the Summer
of 1983. (PX 73; Hamilton, T. 169) INSLAW also understood from
Videnieks' letter that it was to identify the enhancements that
had been privately financed, with evidence of the source of private
funding, and an indication as to why the enhancements were not
required to be furnished under the terms of the contract. (Hamilton,
T. 170; PX 70; PX 71)
Most importantly, INSLAW understood from Videnieks' letter that
DOJ would negotiate with INSLAW to purchase any privately financed
enhancements that it desired to keep in the software deliverable
under the contract. (Hamilton, T. 171; Merrill, T. 792-793; Gizzarelli,
T. 534; Sherzer, T. 977-979; PX 341 [Tyson] at pp. 205-207, 212-214;
PX 336 [Snider] at pp. 91-96; PX 70; PX 71)
As of the time of Videnieks' letter, INSLAW was fully prepared
to delete any or all enhancements that DOJ indicated it did not
desire pursuant to the process laid out in Videnieks' letter.
(Hamilton, T. 172-173; Merrill, T. 793)
William Snider, Administrative Counsel for the Justice Management
Division ("JMD") and a prime negotiator of Modification
12, understood that Modification 12 was intended to implement
Videnieks' letter of March 18 and the intent to negotiate on proprietary
enhancements stated in that letter. (PX 336 [Snider] at pp. 7,
90-96) In that regard, Snider further understood that if DOJ
wanted INSLAW's proprietary enhancements, then it would pay INSLAW
for such enhancements. (PX 336 [Snider] at pp. 91-96) Indeed,
Snider had informed INSLAW representatives at a meeting prior
to the execution of Modification 12 that DOJ would negotiate compensation
to INSLAW for all such enhancements that DOJ wished to use. (Hamilton,
T. 177; Sherzer, T. 977; Merrill, T. 790-791)
In fact, however, notwithstanding the obligation of DOJ to negotiate
in good faith, Brewer had no intention to negotiate. Indeed,
Videnieks, Rugh and Brewer all testified that notwithstanding
Modification 12, they had no understanding of any obligation on
DOJ's part to negotiate with INSLAW concerning the time-sharing
or any other PROMIS software. (PX 324 [Brewer] at p. 163; Brewer,
T. 1691-1693) Brewer had discussed his understanding of Modification
12 with a number of people at DOJ and his views in that regard
were shared by Brewer's staff and by Videnieks. (PX 324 [Brewer]
at pp. 163-164) This glaring admission was ignored totally in
the Bua Report, since this admission made at the time of the trial
totally contradicts the purported statements made by these individuals
to the authors of the Bua Report in their post hoc interviews.
Given the fact of these admissions and the fact that DOJ's actions
subsequent to Modification 12 were consistent with the admissions,
it is impossible to conclude that DOJ's conduct was not taken
in bad faith. Moreover, this conduct at a minimum was a violation
of the contractual obligations of DOJ under Modification 12 to
negotiate in good faith.
In reviewing the entire factual record, Judge Bryant concluded:
Once the software was in the possession of DOJ, there
is no evidence that the government ever negotiated in good faith
over the existence of the proprietary enhancements claimed by
INSLAW. The DOJ put the entire onus of proof on INSLAW,
yet never indicated what methodology or proof would be acceptable.
The contract entered into by the parties entitled the government
to the version of PROMIS then in the public domain. The expert
witnesses demonstrate that INSLAW did enhance the software
with private funds. By failing to acknowledge or accept INSLAW's
claims, the government continued its fraudulent behavior
toward INSLAW. This behavior persisted long after INSLAW filed
for reorganization. (D. Ct. Mem. Op., p. 40)
In the face of the factual record before the two federal
courts, it is impossible to conclude that DOJ acted other than
in bad faith. Most of the conduct of its key employees is indefensible.
Its failure to investigate the assertion of bias also is indefensible.
Its repeated false representations to INSLAW's attorneys, as
described in detail by the two lower courts, is inexcusable.
As Judge Bryant found:
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 deposition
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. (D.
Ct. Mem. Op., p. 36)
Even the most cursory examination of the record leads to the inescapable
conclusion of bad faith on the part of DOJ. The Bua Report's
contrary conclusion, based upon its long-after-the-fact "demeanor"
interviews of the DOJ employees responsible for the bad faith,
is simply ridiculous.
4. The Implementation and Use of the PROMIS Software Beyond
the 20 Offices
Under Modification 12, DOJ agreed that it would not distribute
the software received under the Modification beyond the offices
enumerated under the contract. Subsequent thereto, DOJ began
to install this software beyond the 20 offices for which the software
was designated. The Bua Report concluded that it was neither improper
nor unreasonable for DOJ to "self" install PROMIS beyond
the 20 larger offices designated to receive this version of PROMIS
under the contract. Once again, this conclusion is belied by
any responsible understanding of the contract and the circumstances
under which Modification 12 was negotiated.
The contract between INSLAW and DOJ involved two separate, severable,
and clearly distinguishable tasks:
Thus, Paragraph 1.2 of the contract provides in part:
1.2 The Contractor shall implement PROMIS software and
procedures as modified for the U.S. Attorney's environment on
Government furnished mini-computers located in the larger U.S.
Attorneys' Offices. Case tracking systems that have been developedto operate on Government furnished word processing equipment
shall be installed in the smaller U.S. Attorneys' Offices…
The parties clearly understood that these were separate tasks,
and required the development and creation by INSLAW of two different
and distinguishable kinds of software, each to be implemented
only within the designated types of offices specified in the contract
for that particular kind of software. (PX 324 [Brewer] at pp.
215-217; Snider 54-56; Gizzarelli, T. 479, 488, 494-495; PX 341
[Tyson] at p. 41; Hamilton, T. 110-111, 115, 132-134; Merrill,
T. 770-771)
The computer-based software generated for the 20 larger computer-site
offices, as specified in the contract, was to be used only at
those offices, and the word processing based software to be developed
and created by INSLAW was to be used only at the 74 smaller offices.
(Hamilton, T. 132-134; Merrill, T. 764; Gizzarelli, T. 488, 497-499;
PX 324 [Brewer] at pp. 215-216) At no time during any meeting,
either before or after the contract was signed, did anyone from
DOJ inform INSLAW that DOJ believed that the computer-based software
could be used beyond these 20 offices. (Merrill, T. 770; Hamilton,
T. 134) The contract did provide, however, that DOJ could extend
the implementation of computer-based PROMIS to an additional 10
offices at an added price which the contract specified (and the
parties understood) would be negotiated between the parties.
(Hamilton, T. 124; PX 17; Merrill, T. 769-770; Gizzarelli, T.
496-499; PX 324 [Brewer] at pp. 215-216)
In effect, it was as if there were two contracts calling
for two types of software to be delivered to two types of offices,
a fact clearly understood by DOJ. (Hamilton, T. 110-111, 132-134;
Merrill, T. 764; Gizzarelli, T. 488, 494, 497-499) At the time
that Modification 12 was executed, both aspects of the contract
were still operative. Modification 12 required INSLAW to produce
all "computer programs" and documentation for the time-sharing
version, the computer-based version, and the word processing based
version. (Merrill, T. 786; Sherzer, T. 980; Hamilton, T. 152,
2583-2588) DOJ never told INSLAW that it was not required to
produce all of this under Modification 12 or that INSLAW was producing
too much. (Merrill, T. 787)
Contrary to the mindless conclusion reached by the Bua Report,
the provisions of Modification 12 must be read consistently with
the existing contract, the terms of which (Modification 12 unequivocally
states) were not otherwise changed. (Gizzarelli, T. 535; Sherzer,
T. 1030) Thus, DOJ's agreement not to disseminate or use the
software beyond the 94 offices has to be read in the context of
the two contract tasks that existed at that time. This means
that the computer-based software would not be disseminated beyond
the 20 designated larger offices for which this software was being
created and developed, and the word processing based software
would not be disseminated beyond the 74 offices for which that
type of software was being created and developed. (Merrill, T.
787-788; Hamilton, T. 177-178; Gizzarelli, T. 535)
Contrary to the baseless assertions in the Bua Report, Modification
12 sought to effect delivery to DOJ of all computer programs developed
under the contract, as well as INSLAW's proprietary enhancements
then incorporated in the software. The statement of work defines
the software for the word processing machines as computer programs
(Hamilton, T. 2583), and subparagraphs 3 and 5 of Modification
12 specify the delivery of software for operation on word processing
machines (Hamilton, T. 2584-2586). In addition, Modification
12 was directly related to and fully embodies the process and
intent of Videnieks' letter of March 18, 1983. (Hamilton, T.
173; Gizzarelli, T. 535-536; Merrill, T. 793-794; PX 336 [Snider]
at pp. 7, 90-96)
Subsequently, when DOJ unilaterally terminated the word processing
part of the contract for the convenience of the Government following
the execution of Modification 12, the 74 word processing offices
dropped out, and all that remained were the 20 offices that were
to receive the computer-based version of PROMIS (plus the never-exercised
option to extend the latter version to ten additional offices
at additional cost). At no time had anyone from DOJ informed
INSLAW that it was DOJ's intention to implement PROMIS beyond
the 20 offices specified in the contract. Thus, only these 20
offices were among those the parties contemplated would receive
the computer-based PROMIS, and it was only these offices that
could receive the INSLAW software until the data rights issue
was resolved. No one ever contemplated that DOJ would have the
right to disseminate the computer-based software beyond the 20
offices, and most certainly not while there was still a dispute
over the ownership rights in that software.
Finally, whether DOJ had the right to implement the software
beyond the 20 offices, while clearly relevant in the context of
an automatic stay bankruptcy proceeding, is not relevant to the
more important question of whether DOJ had the right to continue
to use the proprietary software, without compensation to INSLAW,
after the data rights issue was determined in favor of INSLAW.
During the course of the bankruptcy proceedings, extensive evidence
was introduced that demonstrated that the software used by DOJ
was the proprietary, non-public domain version created by INSLAW
using non-government funding, and that this proprietary software
was not deliverable under the contract. Thus, even if DOJ had
the right to use the software until the data rights issue was
resolved, once that issue was resolved by the court in favor of
INSLAW, DOJ no longer could continue to use the software without
appropriate payment to INSLAW. Even DOJ has conceded that its
right to use the software under Modification 12 was limited to
the period of time during which the parties were required to negotiate
the data rights issue. DOJ understood that it could not continue
to keep the software to the extent it contained proprietary enhancements
without paying INSLAW for the right to do so. Yet, notwithstanding
the extensive findings of the bankruptcy court, as affirmed in
total by the federal district court, that the software used by
DOJ rightfully belonged to INSLAW and that DOJ was not entitled
to use that software, DOJ has continued to use the software without
compensating INSLAW.
II. BUA'S INVESTIGATION OF THE EVIDENCE THAT DOJ ATTEMPTED
TO CAUSE THE CONVERSION OF THE INSLAW BANKRUPTCY BY IMPROPER
MEANS-THE "INDEPENDENT HANDLING" PROCEEDING
The Bua Report devotes 41 pages to an analysis of the factual
underpinnings of the bankruptcy court's findings in the "Independent
Handling" proceeding.
The Independent Handling proceeding in the Spring of 1987 arose
from INSLAW's request to the bankruptcy court to insulate the
handling of the INSLAW Chapter 11 reorganization by DOJ's U.S.
Trustee's program from improper influence by DOJ's Executive Office
for U.S. Attorneys. Such improper influence was reflected in
the contemporaneous handwritten notes of DOJ Contracting Officer
Peter Videnieks that INSLAW obtained during the first quarter
of 1987 in litigation discovery.
A separate adversarial hearing ensued on this subject, and the
bankruptcy court found that DOJ officials had, in fact, secretly
attempted in 1985 forcibly to convert INSLAW from a Chapter 11
reorganization into a Chapter 7 liquidation in order to prevent
INSLAW from seeking redress in the courts for DOJ's theft of the
PROMIS software in April 1983.
While noting that the covert DOJ liquidation effort was "not
free from doubt," the report concludes that there is "insufficient
evidence to support a finding that DOJ planned or attempted to
convert the Inslaw bankruptcy case or engaged in any cover-up
to conceal the conduct alleged." This portion of the report
demonstrates, once again, that the Bua investigation's focus and,
indeed, its predisposition, was not to investigate DOJ wrongdoing
previously demonstrated to two courts through fully litigated
factual findings, but, instead, to justify DOJ's conduct and exonerate
the wrongdoers.
The report correctly states that INSLAW's evidence in the proceeding
consisted essentially of six parts: (1) statements and testimony
by Anthony Pasciuto, then Deputy Director of DOJ's Executive Office
for U.S. Trustees; (2) handwritten notes of Peter Videnieks',
DOJ's Contracting Officer for the INSLAW contract; (3) testimony
and notes of Gregory McKain, a senior INSLAW computer software
engineer; (4) evidence that U.S. Trustee William White requested
that the bankruptcy court add language barring him from disclosing
INSLAW data to anyone at the Executive Office for U.S. Trustees;
(5) statements and deposition testimony of U.S. Bankruptcy Judge
Cornelius Blackshear; and (6) evidence regarding the planned transfer
of Assistant U.S. Trustee Harry Jones from New York to Washington
to work on the INSLAW case.
The core of the bankruptcy court's findings rests on the intertwined
relationship between the Videnieks notes, Rugh and McKain's testimony,
and McKain's notes. Videnieks made contemporaneous notes of a
telephone conversation he had with Brewer's deputy, Jack Rugh,
on February 20, 1985 (13 days after INSLAW filed its Chapter 11
petition):
JR called re[garding] "our computer" …Brick [Brewer]
talked to Stanton …No way "11" will be "7"
…Need home for computer …
Videnieks' notes document a conversation with "JR"
[Jack Rugh] and what Rugh, a computer system executive for EOUSA,
said "re[garding] our computer." The words following
"Brick talked to Stanton. . ." are a quote of what Stanton,
the Director of the Executive Office for U.S. Trustees, said.
Quotation marks are used to bracket what Stanton said: "no
way 11 will be 7 ." It cannot reasonably be inferred,
as the Bua investigators infer, that these four prefatory words
in a seamless line of thought and preceding an obvious quote of
Stanton are somehow disconnected from the quote they precede.
As justification for such a conclusion, the report cites "a
space in the notes between the words Brick talked to Stanton
and the words no way 11 will be 7 ." In fact, there are
three dots after the word "Stanton," indicating all
the more that the phrases following are quotes and are connected
to the rest of the conversation.
Rugh testified that the notes correctly summarized what he
had told Videnieks, but that the statement "No way 11 will
be 7" represented merely his own personal view that INSLAW
would be liquidated and not something Brewer had told him as a
result of Brewer's conversation with Stanton. Rugh also testified
about subsequently calling INSLAW's McKain and telling him that
he did not think INSLAW would survive in bankruptcy, and trying
to arrange for the future hiring of McKain by DOJ.
McKain testified, however, that Rugh told him that they had "talked
to the trustees" and that the trustees said INSLAW was not
going to make it and that INSLAW would be out of business in 30
to 60 days. McKain made contemporaneous notes which were fully
consistent with his testimony. Moreover, he acted immediately
in a manner consistent only with his version of events: He went
to Mr. Hamilton and repeated what Rugh had told him, and asked
whether this was true. Incensed, Hamilton, in turn, had counsel
contact the local U.S. Trustee, who said that he had not made
any such prediction, that it must have come from the Executive
Office for U.S. Trustees, i.e., from Stanton's office. Although
Rugh acknowledged that he may have mentioned talking to the trustees,
he categorically denied telling McKain that the trustees had said
INSLAW would likely be liquidated in 30 to 60 days.
The bankruptcy court was thus presented with a classic credibility
conflict: Rugh's testimony and McKain's testimony were irreconcilable.
The court found that McKain was telling the truth and that Rugh
was lying. This conclusion was based not simply upon the court's
assessment of the witnesses' relative courtroom demeanor, but
also upon the corroboration of McKain's version provided by his
consistent contemporaneous notes and his and Hamilton's unmistakably
consistent actions: having INSLAW's counsel contact and complain
to the U.S. Trustee. If, as Rugh maintained, Rugh had merely
said that he thought that the company would be liquidated, INSLAW
might have complained to Rugh's superior, Brewer, or to the bankruptcy
court, but not to the U.S. Trustee.
The testimony by Rugh that his statements to McKain represented
only his "personal view" that INSLAW would not survive-as
opposed to what Brewer had told him as a result of his discussion
with Stanton-was extremely suspect on its face. Rugh is a non-lawyer
who acknowledged that he had known of only one or two prior bankruptcy
cases in his life. It is surely unlikely that Rugh would have
taken the step of contacting one of INSLAW's chief computer software
engineers and offering him a job based only on his own layman's
opinion that the company would not survive. In addition, Videnieks'
notes contain the statement "need home for computer."
This reflects a seeming certainty that INSLAW would be put out
of business imminently-prompting the need for Rugh or someone
in EOUSA to take action to arrange a new site for the DOJ computer
then being used to operate PROMIS in the U.S. Attorney's Office
for the District of Maryland from INSLAW's Maryland computer center.
Finally, it was the threatened immediacy of liquidation forecast
by Rugh that provoked such an intense response by McKain and,
in turn, by Hamilton. Liquidation in 30 to 60 days was completely
inconsistent with the briefing from INSLAW's bankruptcy counsel
that McKain and all INSLAW employees had received only days before,
to the effect that INSLAW could expect to operate normally during
the Chapter 11 Reorganization. Now, according to Rugh, the employees
would be out of work in 30 to 60 days. Even if it were plausible
that Rugh had merely stated his "personal view" about
eventual liquidation, the notion that he also expressed his "personal
view" that it would happen in 30 to 60 days is simply inconceivable.
Yet, if Rugh had not stated that liquidation would likely occur
very soon, McKain would not have reacted as he did.
The bankruptcy court's resolution of the Rugh-McKain credibility
dispute is thus solidly grounded on corroborating evidence. It
is obvious that both McKain and Rugh gave the testimony at issue
under oath and subject to cross-examination in a courtroom before
a fact finder. It is hardly appropriate for Special Counsel Bua-on
the basis of interviews of some of the witnesses (McKain was not
interviewed) five years removed from that courtroom-to opine that
had he been there, he would have resolved the dispute differently.
That he would undertake to do so, reflects a transparent effort
to exonerate DOJ, whatever the evidence. For example, the report
argues that "there is no more reason to think that Rugh is
lying about this than there is to think that McKain is."
It further states, "If Rugh can be said to have lied to
help his employer, DOJ, it is equally plausible that McKain lied
to help his employer, INSLAW." This statement is preposterous
on its face. McKain's actions were taken in 1985, in response
to a call from Rugh, documented by contemporaneous notes and corroborated
by the undisputed actions of his employer promptly thereafter.
All of this occurred long before INSLAW had knowledge of any
basis for a lawsuit against DOJ. Accordingly, these statements
in the Bua Report are not only unfounded, but they also represent
a crude and totally unwarranted smear of McKain.
The bankruptcy court's findings on the Rugh-McKain conflict buttress
the court's other findings. The conclusion that Rugh, a subordinate
non-lawyer, knowingly gave false testimony about his call to McKain
to conceal the truth, supports the conclusion that it is likely
that Stanton did make a commitment to Brewer to seek INSLAW's
liquidation despite both of their denials. Stanton's actions in
trying to bring Assistant U.S. Trustee Harry Jones from New York
to work on the case were certainly consistent with such a commitment.
The court's conclusion that Judge Blackshear's testimony at his
initial deposition, and in his statements in his three prior telephone
conversations with INSLAW's attorneys and another judge-that White
had told him that Stanton was going to ask him to send Harry Jones
to Washington to seek conversion of the INSLAW case-was truthful
and that his two subsequent recantations were not truthful, is
also supported by the finding that Rugh falsely denied telling
McKain that the trustees had said INSLAW would be out of business
shortly.
The Bua Report's treatment of the Pasciuto testimony also reflects
an apparent preconception. It is perhaps difficult to fully perceive
from the cold record Pasciuto's evident anguish and emotional
turmoil in the courtroom. He was, at the time of his testimony,
Deputy Director of the Executive Office for U.S. Trustees. Out
of conscience, he had secretly met with the Hamiltons and told
them of the scheme to liquidate INSLAW two years before, expecting
that his friends, William White and Judge Blackshear, both then
no longer employed by the Trustees' Office, would candidly support
his statements. While Blackshear initially did support Pasciuto's
testimony, he quickly recanted, and White denied any knowledge
of such a scheme. Thus, at the time of his testimony, Pasciuto,
who was still employed at DOJ's Executive Office for U.S. Trustees,
had the worst of all possible worlds: being exposed as a "whistle
blower" to his boss and being left out on a testimonial limb
with no corroborative support.
INSLAW's trial team included former federal prosecutors with well
over sixty years of active trial experience. Pasciuto's testimony
was some of the most dramatic these lawyers had ever observed
in a courtroom. When confronted with the fact of his secret meeting
with the Hamiltons, Pasciuto first admitted the meeting and then
said he could not recall making the key statements he had made.
He wondered aloud whether the Hamiltons had tape recorded the
session. The Hamiltons had not. He said he had met with the
Hamiltons to hurt Stanton, whom he disliked. Finally, when confronted
with the fact that he had made the same statements at a meeting
with a judge, the Honorable Lawrence Pierce of the United States
Court of Appeals for the Second Circuit, Pasciuto admitted that
he had made the statements. Ultimately, the bankruptcy court ruled
that Pasciuto's hearsay statements were inadmissible. Yet no
one who was in the courtroom when he testified could fail to have
concluded that something was terribly wrong at DOJ.
That conclusion was enhanced by DOJ's subsequent treatment of
Pasciuto. An investigation by DOJ's Office of Professional Responsibility
("OPR"), incredibly, found that but for Pasciuto's conduct,
"the department would be in a much better litigation posture,"
and concluded that he should be fired. Eventually, he was allowed
to resign. Before the Congressional committees, Pasciuto maintained
that he had told the Hamiltons the truth in the first place, and
had backed away from it because of pressure from DOJ and fear
of losing his job. The House Judiciary Committee's Investigative
Report had criticized OPR's treatment of the Pasciuto case. The
Bua Report rejects this criticism of OPR, opining that Pasciuto
only professed to have told the Hamiltons the truth when he was
confronted by OPR's recommendation that he be fired for having
set out to hurt his superior, Stanton, by making false statements
to the Hamiltons.
Pasciuto's conduct, his testimony, and his subsequent recantation
are most logically explained by fear: fear that he would not
get the promotion he had long sought and fear that he would be
fired for telling the truth, as he eventually was. The claim
that he made it all up to hurt Stanton is, in light of the corroborating
evidence which exists, obviously false, as Pasciuto now acknowledges.
For OPR to accept this claim and proceed to recommend the disciplinary
action of termination based on it, was a charade-designed to avoid
the politically unpleasant task of investigating the more serious
wrongdoing that the underlying situation reflected.
In 1987, the year the bankruptcy court released its oral
opinion adverse to DOJ, three Presidential $20,000 awards were
made to Senior Executive Service employees at DOJ. One award
went to Stuart Schiffer, at the time a Deputy Assistant Attorney
General in the Civil Division who had been criticized by the bankruptcy
court in the INSLAW litigation against DOJ. A second award went
to Michael Shaheen, head of OPR and the author of the December
23, 1987 report recommending the termination of Pasciuto. A separate
$10,000 award, also one of three in DOJ for the year 1987, was
given to Lawrence McWhorter, an EOUSA official who hired Brewer
and whose testimony the bankruptcy court found "totally unbelievable."
McWhorter was also promoted that year to Director of EOUSA.
Thus, more than half -- $50,000 out of a total of $90,000 -- available
for distribution to senior executives within DOJ for the year-was
distributed to key officials involved in maintaining DOJ's claim
of a lack of wrongdoing. This startling fact is not mentioned
in the Bua Report.
III. BUA'S INVESTIGATION OF POST-TRIAL LEADS ABOUT A MORE WIDELY-
RAMIFIED CONSPIRACY INVOLVING EARL BRIAN AND THE INTELLIGENCE
AND LAW ENFORCEMENT AGENCIES OF THE UNITED STATES AND FOREIGN
GOVERNMENTS
A. Bua's Investigation of the Alleged Justice Department Distribution
of INSLAW's PROMIS Software to U.S. Government Law Enforcement
and Intelligence Agencies, Other than the U.S. Attorneys' Offices
A significant number of individuals, some employed by the Department
of Justice (DOJ), and others with claimed associations with United
States and/or Israeli intelligence, have told INSLAW that its
PROMIS software has been implemented throughout the United States
Government as the de facto standard database management software
system for the U.S. intelligence community.
Among the agencies allegedly using PROMIS as their principal case
tracking and workflow management software system are the Federal
Bureau of Investigation (FBI), the Drug Enforcement Agency (DEA),
and the U.S. Marshal's Service, all within DOJ itself; and the
Central Intelligence Agency (CIA), the National Security Agency
(NSA), the Defense Intelligence Agency (DIA), and the White House
National Security Council (NSC).
In January 1992, INSLAW summarized these claims in a written submission
to Bua in which INSLAW identified many of the sources of the allegations
and also described other informants who were unwilling to be identified
unless assured of protection against reprisals.
Since January 1992, INSLAW has been told by still more witnesses,
including additional current or former DOJ employees, that these
basic facts not only are true, but also are widely known to be
true among the Senior Executive Service (SES) career officials
in DOJ and the FBI.
Several sources have even claimed that the U.S. intelligence and
law enforcement agencies regularly exchange data from their respective
PROMIS-based systems via remote access through computer terminals
equipped with both traditional communications modems and classified
encoding equipment.
At least two journalists, Richard Fricker and George Williamson,
have told INSLAW that current or former senior-level CIA officials
have confirmed to them that the CIA is using INSLAW's PROMIS software
and that the CIA obtained PROMIS from DOJ. In the January 1993
issue of the national computer industry magazine, Wired, Richard
Fricker quotes from his interview with an unnamed former senior
CIA administrator who claimed to have first-hand knowledge of
these facts:
"On Nov. 20, 1990, the Judiciary Committee wrote a letter
asking CIA director William Webster to help the committee by determining
whether the CIA has the PROMIS software.
The official reply on December 11th: "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."
But a retired CIA official whose job it was to investigate
the Inslaw allegations internally told Wired that the DOJ gave
PROMIS to the CIA. "Well," the retired official told
Wired, "the congressional committees were after us to look
into allegations that somehow the agency had been culpable of
what would have been, in essence, taking advantage of, like
stealing, the technology [PROMIS]. We looked into it and there
was enough to it, the agency had been involved."
How was the CIA involved? According to the same source, who
requested anonymity, the agency accepted stolen goods, not aware
that a major scandal was brewing. In other words, the DOJ robbed
the bank, and the CIA took a share of the plunder.
In its September 1992 Investigative Report, The INSLAW Affair,
the House Judiciary Committee reported that the CIA finally admitted
having a software product called PROMIS but claimed that the CIA's
PROMIS was purchased from a small Cambridge, Massachusetts, software
company called Strategic Software Planning Corporation. That company
acknowledges marketing and supporting a software product called
PROMIS for project management in the construction industry. The
CIA also disclosed that the PROMIS software it claims to have
acquired from the Cambridge, Massachusetts, company included an
"Intelligence Report System," a curious capability for
construction industry project management software. This latter
CIA disclosure was contained in a letter to Mr. Terry D. Miller,
the President of Government Sales Consultants, Inc., on April
5, 1993.
Bua apparently made no effort to test the CIA's denial that its
PROMIS software product is based on INSLAW's PROMIS. Neither apparently
did he examine the claims that copies of PROMIS have been implemented
in the DIA and the National Security Council of the White House.
Bua did make very limited inquiries about the alleged use of INSLAW's
PROMIS by the DEA and the FBI within DOJ, and by the NSA. However,
Bua does not appear to have brought any of the U.S. Government
officials he contacted on this matter before the grand jury or
even to have placed them under oath. Neither did Bua have anyone
attempt to verify the denials of these officials by comparing
the source code in INSLAW's PROMIS with the source code of the
suspected cloned software systems.
1. The Implausibility that the Two Principal DOJ Investigative
Agencies, the DEA and the FBI, Would Each Have Developed a Complex
On-Line Case Tracking and Workflow Management System In-House
at Approximately the Same Time
Before discussing Bua's very limited investigation of the DEA,
the FBI, and the NSA, it is important to understand that the odds
against a federal agency developing internally, without contractor
assistance, a complex, on-line software system, such as a case
tracking and workflow management system, are very high. The odds
against two separate agencies of the same department, such as
the FBI and the DEA within DOJ, each developing a complex, on-line
case tracking system are even higher. Finally, the odds against
two such agencies developing the same kind of on-line case tracking
system in-house at virtually the same time, i.e., during 1988
and 1989, are higher still.
Before considering claims from former and current senior DOJ officials
that both the DEA and the FBI have been operating INSLAW's PROMIS
software since the late 1980's, and before examining apparent
inconsistencies, contradictions and possible dissembling in the
statements made by DEA and FBI officials on this subject, one
should keep in mind that the backdrop for their statements is
the highly implausible scenario just described.
2. Indications of Possible Dissembling to Bua by a Key DEA
Official
Bua apparently never questioned Carl Jackson, a recently retired
DEA deputy assistant administrator, about DEA's alleged use of
PROMIS, even though the September 1992 Investigative Report by
the House Judiciary Committee identified Jackson as the source
of allegations that the DEA had implemented PROMIS.
Bua did, however, ask DEA Deputy Assistant Administrator for Information
Systems Phillip Cammera, whether the DEA had implemented a PROMIS-derivative
case tracking system. Cammera assured Bua that the DEA had developed
in-house its new case-tracking system called Case Status System
(CAST). The House Judiciary Committee reported that CAST was developed
in the 1988-1989 time-frame.
Cammera told a different story in late 1990, however, when he
was contacted by a former colleague, retired DEA Deputy Assistant
Administrator Carl Jackson. According to Jackson's contemporaneous
account to Mr. and Mrs. Hamilton of INSLAW, Cammera confirmed
Jackson's own recollection on the matter. Jackson's recollection
is that the Attorney General of the United States issued "non-negotiable"
orders to both the DEA and the FBI in the summer of 1988 to "chuck"
their existing case tracking systems and replace them with PROMIS,
and that the DEA at least carried out the orders in the 1988-1989
time frame.
Jackson told the Hamiltons in 1990 that he had no way of verifying
whether the FBI had implemented PROMIS as the DEA had done, but
that he would have been surprised if the FBI had not implemented
PROMIS because the Attorney General had made it explicitly clear
that the orders were "non-negotiable."
3. Indications of Possible Dissembling to Bua by the FBI
In January 1992, INSLAW informed Bua in writing that it had a
source, described as a current senior DOJ career official, who
claims to have been told that the FBI did, in fact, at some point
in the late 1980s implement PROMIS as its investigative case management
system. The FBI calls its system FOIMS (Field Office Information
Management System). INSLAW's source, who is not willing to be
identified unless there is a guarantee of no reprisal, claimed
to have been told directly by John Otto, then one of the top FBI
officials, that the current version of FOIMS is based on PROMIS.
Otto served as Acting Director of the FBI between the departure
of William Webster and the arrival of William Sessions.
Bua interviewed Otto, who had since retired from the FBI, but
apparently did not place Otto under oath or bring him before the
grand jury. According to Bua, Otto flatly denied the account given
to INSLAW by the current senior DOJ career official. Bua simply
accepted Otto's non-sworn denial as well as Otto's claim that
he is virtually "computer illiterate" and therefore
could not have been engaged in the kind of conversation claimed
by INSLAW's confidential DOJ source. Had Bua attempted to verify
Otto's claim of computer illiteracy, however, he would have learned
that it is a highly implausible claim. For example, Otto had direct
management responsibility within the FBI for both FOIMS and the
nationwide UCR (Uniform Crime Report) system, including the computer
software that is at the heart of these systems. Moreover, until
the radical FOIMS software transplant of June 1988, the FBI's
investigative case management system reportedly suffered from
a very poor reputation among FBI agents; Otto would have had management
responsibility for correcting a software system problem that may
have been hampering the performance of the FBI mission.
In its September 1992 Investigative Report, The INSLAW Affair,
the House Judiciary Committee noted its inability to finance the
kind of independent analysis required to test the claims that
the FBI's FOIMS system is based on PROMIS. The Committee noted,
however, that the question "could be resolved quickly if
an independent agency or expert was commissioned to conduct a
code comparison of the PROMIS and FOIMS systems."
FBI Director Sessions wrote to Bua on June 23, 1992, agreeing
to permit such an examination of the FOIMS code, provided that
the independent expert was acceptable to the FBI.
Bua chose Professor Dorothy Denning, the Chair of the Computer
Science Department of Georgetown University. Bua notes in his
report that "the FBI voiced no objection to our choice and
processed her security clearance."
In his report, Bua states that he provided to Denning "a
copy of INSLAW's FOIMS analysis plan" that detailed how the
developers of PROMIS would approach the question of whether the
FBI's FOIMS system was, in fact, based on INSLAW's PROMIS.
One of the steps suggested by INSLAW was the use of a software
routine in the IBM operating system called SUPERC which is able
to do a code comparison at no cost to the Justice Department,
and the comparison can be accomplished in approximately four (4)
hours. The ease and short time within which a code comparison
could have been accomplished makes the failure to conduct such
a comparison utterly indefensible.
According to Bua, Denning, however, decided that the source code
comparison, recommended by both the House Judiciary Committee
and INSLAW, "would be a waste of her time and the government's
money."
INSLAW read the report Denning submitted to Bua, which INSLAW
obtained from FBI Director Sessions, to try to understand the
basis for this very surprising conclusion of Professor Denning.
To begin with, Denning uncritically accepted representations by
the FBI about the history and technical characteristics of FOIMS
that are contradicted by other FBI disclosures about FOIMS.
For example, Denning accepted as fact that the original 1978 COBOL-language
version of FOIMS was replaced by the claimed current NATURAL-language
version of FOIMS in 1983. Published data about FOIMS from the
national market research firm, INPUT, however, traces the current
version of FOIMS to June 1988, rather than to 1983. This timing
is consistent with the statements attributed to John Otto by INSLAW's
confidential senior DOJ source, and also consistent with Carl
Jackson's recollection that the FBI had been ordered in the summer
of 1988 to implement PROMIS in place of the then current version
of FOIMS.
Denning then uncritically accepted FBI representations that the
current version of FOIMS is written in the NATURAL programming
language, rather than in COBOL, the programming language used
in INSLAW's PROMIS. As is evidenced in the following paragraph
and its footnote, this representation also appears to be contradicted
by other published data on FOIMS.
"FOIMS now contains over 570,000 lines of code," according
to a June 7, 1991 letter from FBI Assistant Director Delbert C.
Toohey to Mr. Terry D. Miller, President of Government Sales Consultants,
Inc. The claim that an application with 570,000 lines of code
is written in the NATURAL programming language is "wrong
by an order of magnitude," according to Mr. John A. Maguire,
the founder and, until recently, the Chief Executive Officer of
Software A.G. of North America, the U.S. company that markets
the NATURAL programming language.
It is hard to escape the conclusion that the FBI dissembled to
Denning about the year of origin of the current version of FOIMS
and about the apparent use of the COBOL programming language in
the current version of PROMIS in an attempt to diminish the credibility
of the aforementioned claims that the FBI "chucked"
its earlier 1983 version of FOIMS, on orders from the Attorney
General in the summer of 1988, and replaced it with INSLAW's PROMIS
software.
There would be ample reason for both the FBI and the DEA to try
to conceal their implementations of PROMIS in 1988 and 1989. In
January 1988, the U.S. Bankruptcy Court had issued a permanent
injunction against any further unlicensed proliferation of PROMIS
by the U.S. Government. If Attorney General Meese issued the claimed
orders to the FBI and the DEA in the summer of 1988, it would
have been a willful, secret violation of a federal court order
by the chief law enforcement officer of the United States.
Denning justified her decision not to do a code comparison between
FOIMS and PROMIS primarily on her professed belief that FOIMS
and PROMIS each support "entirely different" "application
domains," with FOIMS tracking investigations and PROMIS tracking
judicial proceedings; and that it is extremely difficult to convert
software that runs one application into software that runs an
entirely different application:
Because it is extremely difficult to convert software that
runs one application into software that runs an entirely different
application, the differences in just the FOIMS and PROMIS application
domains show almost conclusively that FOIMS was not derived
from PROMIS. ("Analysis of FOIMS and PROMIS," by Dorothy
E. Denning, January 10, 1993, Page 1)
The aforementioned conclusions by Denning demonstrate that she
is misinformed about the case management application domain in
general and about INSLAW's PROMIS case management software in
particular. For example, INSLAW's PROMIS software is currently
being used for investigative case management by both state and
local governments and by nationwide property and casualty insurance
companies. Moreover, as INSLAW pointed out to Bua in its written
submission of January 1992, the PROMIS software has been successfully
applied to case management "application domains" much
more removed from PROMIS's criminal prosecution "application
domain" than FOIMS's criminal investigation "application
domain." INSLAW provided to Bua the examples of the use of
PROMIS in a nationwide credit bureau and in land conveyance record
keeping in the Republic of Ireland.
Denning's analysis makes no sense whatsoever and is totally inappropriate
given the circumstantial evidence. The methodology appears to
be designed to rationalize and support a conclusion of non-infringement
rather than the conduct of an independent objective analysis of
the software programs in question to ascertain the truth.
Bua also addressed the question of the alleged use of PROMIS by
the National Security Agency (NSA). Bua did confirm that the NSA
has a software product called PROMIS but, once again, simply accepted
the apparently unsworn statement of a U.S. Government official
that the PROMIS software in question is not a derivative of INSLAW's
PROMIS. NSA evidently claims to use a commercial database management
system (DBMS) called M204, from Computer Corporation of America,
as the "engine" for its PROMIS system, and to have written
the application code, i.e., "the car" by analogy, in
an unspecified programming language. As with many of the other
suspected PROMIS-clone software systems, NSA claims to have developed
its PROMIS application code in house. NSA also claims, according
to Bua, that its PROMIS tracks information related to its published
intelligence reports, called "products" by the NSA.
Without explaining the basis for his statement, Bua asserts that
such an application is different from the application domain of
PROMIS: "NSA's PROMIS serves different purposes . . . ."
INSLAW's PROMIS would, in fact, be easily adaptable to tracking
either the workflow that produces NSA's intelligence output or
the names, places, dates and events in the intelligence reports
or both.
Bua also dismisses the possibility that NSA's PROMIS could be
based on INSLAW's PROMIS because INSLAW's PROMIS is "used
with a different database." Bua is apparently referring to
the NSA claim that it uses the commercial M204 DBMS as the engine
for its PROMIS application system. The choice of commercial DBMS
"engine" for PROMIS, however, has very little relevance
to the question of whether the application code is a clone of
INSLAW's PROMIS. INSLAW itself has incorporated a variety of different
commercial DBMS engines into its PROMIS software. There is no
difficulty in believing that NSA might have incorporated the M204
DBMS into its copy of INSLAW's PROMIS or that the FBI may have
incorporated the ADABAS DBMS into its copy of INSLAW's PROMIS.
In actuality, NSA's admission that it too uses a software product
called PROMIS and that the application domain of NSA's PROMIS
has something to do with the tracking of its published intelligence
information lends further plausibility to the claims that virtually
every major U.S. intelligence agency is using INSLAW's PROMIS
software. Bua, of course, could have easily resolved the question
by arranging for a code comparison, but apparently chose not to
do so.
Bua's failure to arrange for the code comparisons between INSLAW's
PROMIS and its suspected clones in U.S. intelligence and law enforcement
agencies, where his federal grand jury's legal authority to conduct
such investigations was obvious, is all the more mystifying in
light of Bua's published statement that he considered trying to
do just such code comparisons with foreign governments. Although
a federal grand jury has no authority over foreign governments,
Bua made the following statement about what he claimed he considered
doing to check out the claimed international distribution of INSLAW's
PROMIS:
Theoretically, we could continue our investigation of this
subject by contacting various foreign governments, asking them
to provide us with the source code to their law enforcement
software, and then hiring an expert to compare that software to
PROMIS.
B. Bua's Investigation of the Alleged International Distribution
of INSLAW's PROMIS
There are a number of individuals, with claimed ties to U.S. and/or
foreign intelligence agencies, who have told INSLAW a remarkably
consistent story about the alleged international distribution
of INSLAW's PROMIS software.
Most of the accounts place Earl W. Brian at the center of the
worldwide sales and distribution. Virtually all of the sources
claim that U.S. intelligence, law enforcement and national security
agencies, including the Central Intelligence Agency, the National
Security Agency, the Drug Enforcement Administration, and the
White House National Security Council, have supported Brian's
worldwide sales and distribution of PROMIS. The accounts are generally
consistent about the motivations for the sales: (1) the personal
financial gain of Earl Brian and colleagues; (2) the generation
of extra funds for financing U.S. covert intelligence operations
that the U.S. Congress has declined to finance, such as the mid-1980's
covert assistance to the Contras in Nicaragua; and (3) an initiative
to penetrate the secret files of foreign intelligence and law
enforcement agencies by inducing them to acquire and implement
the PROMIS database management software and the necessary computer
hardware, after the software and hardware have been secretly modified
to permit electronic eavesdropping by the U.S. National Security
Agency.
One account even identifies the name of the individual, Lindsey,
who was allegedly appointed by the U.S. Government to package
INSLAW's PROMIS software for Brian's alleged sales to such foreign
intelligence agencies as Egypt's military intelligence agency.
Moreover, this source claims that Lindsey was instructed to package
the version of INSLAW's PROMIS that the CIA obtained from DOJ
and which has been operational within the CIA ever since 1983,
tracking U.S. and foreign covert intelligence operations.
Several of the accounts claim an important role for Israeli intelligence
in the international distribution of INSLAW's PROMIS, with Israel
brokering the sales to countries where it has significant intelligence
liaison and influence, such as Singapore, South Africa, Eastern
European countries, and Central American countries.
One source claims personally to have participated in at least
one meeting in the Justice Command Center at DOJ headquarters
between representatives of Israeli military intelligence and representatives
of DOJ regarding the use of PROMIS databases in Israel to track
terrorists in the Middle East.
An associate of the late journalist Danny Casolaro claims to have
seen U.S. Government communications intelligence documents that
Casolaro obtained from an employee of the National Security Agency
facility in Vint Hills, Virginia, concerning the sales of PROMIS
to Israel, Germany, South Africa and other countries, and concerning
the flow of the proceeds from some of the sales to bank accounts
in the Cayman Islands and in Switzerland. The NSA employee identified
by Casolaro's associate was found murdered in his car at National
Airport in January 1991.
Many of these sources express fear of reprisal by the United States
Government if they were to come forward. The specific types of
reprisals, mentioned most often by those who express fear, are
loss of security clearances vital to their employment, and criminal
prosecution by DOJ under the espionage laws of the United States
for disclosing U.S. national secrets.
Bua's consideration of the claims of the sale and distribution
of PROMIS to foreign governments was even more superficial than
his examination of whether PROMIS is being used by the FBI, the
DEA, and the National Security Agency.
The following are examples of the superficiality of the Bua investigation
in the area of international distribution: the alleged distribution
of PROMIS to Canada and the alleged distribution of PROMIS to
Israel, together with the alleged partnership between DOJ and
Israeli intelligence in the theft of PROMIS.
1. The Alleged Distribution of PROMIS to Canada
The first information that INSLAW received about the alleged international
distribution of INSLAW's PROMIS came from the Government of Canada.
In telephone calls and letters in late 1990 and early 1991, the
Government of Canada informed INSLAW that it was using its PROMIS
software in several departments and agencies and wished to learn
whether INSLAW also had available a French-language version of
the PROMIS computer software and documentation because there are
two official languages in Canada, English and French, and the
Canadian Government at that point only had the English version
of PROMIS. The Government of Canada eventually disclosed to INSLAW
that the Royal Canadian Mounted Police (RCMP) alone was using
INSLAW's PROMIS to support 900 separate office locations in Canada.
After the U.S. media began to report on this disclosure by the
Government of Canada and on INSLAW's claim that it had neither
sold PROMIS to Canada nor authorized others to do so on its behalf,
the Government of Canada retracted its earlier oral and written
statements to INSLAW. Canada attempted to explain the matter as
an unfortunate mistake on the part of the Canadian officials who
had originally contacted INSLAW. Ultimately, the Government of
Canada settled on the story that the Department of Public Works,
not the RCMP, had bought the PROMIS software; that the Department
of Public Works had purchased only six copies of PROMIS, instead
of 900 copies; and that the Department of Public Works had purchased
PROMIS not from INSLAW, but from a small software company in Cambridge,
Massachusetts, called Strategic Software Planning Corporation.
This Cambridge, Massachusetts, company is the same company that
the CIA told the House Judiciary Committee was the source of its
PROMIS software. The CIA also subsequently disclosed in an April
5, 1993 letter to Mr. Terry D. Miller, President of Government
Sales Consultants, that the PROMIS software it obtained from the
Cambridge, Massachusetts, company included an Intelligence Report
System, an unlikely subsystem for construction industry project
management, whether in Canada or the United States.
The only reference that Bua makes to the Canadian lead is in footnote
#90 on page 151 of his report, in which Bua appears to scold the
House Judiciary Committee for failing to accept at face value
Canada's claims that the original disclosures to INSLAW were simply
an unfortunate mistake.
Although INSLAW recognizes that Bua's federal grand jury had no
investigative jurisdiction over the Canadian Government, there
are other ways for a U.S. investigator to have pursued the Canadian
lead. To illustrate this point, we have attached as Exhibit A
a memorandum from John Belton, a former stockbroker in Canada
who has been attempting to investigate the Canadian PROMIS distribution
lead. In his memorandum, Belton first explains the history of
his interaction with Earl Brian and Hadron, Inc., and recounts
Brian's claims to Belton in early 1981 that Hadron's future revenue
stream was to come from Hadron's acquisition of a computer software
product for the administration of justice that Brian described
as having "great PROMIS(E)." Belton then documents the
fact that three reputable Canadian journalists have each confirmed
to him, based on their confidential informants among senior current
or former RCMP officials, that the RCMP is, in fact, using PROMIS,
despite the Government of Canada's public denials. Finally, Belton
quotes verbatim from his telephone conversations during the past
year with several U.S. businessmen. These conversations document
the existence of a business relationship between Earl Brian's
Hadron, Inc., and two Canadian computer services companies on
a large software sale to the Government of Canada in 1983. Belton's
memorandum also summarizes leads that strongly suggest that these
business transactions in 1983 involved the Privy Council of Canada
and its intelligence and security staff, and the acquisition of
PROMIS by the RCMP under the name Police Information Records System
(PIRS).
INSLAW told Bua about Belton's research in a written submission
to Bua in January 1992, but Bua made no attempt to interview Belton.
Instead of attempting to exculpate Earl Brian and Hadron of any
complicity in the theft and unauthorized distribution of INSLAW's
PROMIS software, Bua could have used the federal grand jury to
interrogate the U.S. businessmen whom Belton interviewed, and
to compel the production of potentially relevant documents by
Hadron, Earl Brian and the U.S. subsidiary of one of the two Canadian
companies that were Hadron's partners in the 1983 software sale
to Canada.
2. The Alleged Distribution of PROMIS to Israel and the
Alleged Partnership of DOJ and Israeli Intelligence in
the Theft of PROMIS
Bua devotes only a single paragraph to the alleged distribubut
of PROMIS to the State of Israel, even though Bua characterizes
this distribution as the "one documented international distribution"
by DOJ of PROMIS. Predictably, Bua accepts at face value DOJ's
contention that the May 1983 internal DOJ memorandum on the distribution
of PROMIS to Dr. Ben Orr of Israel was truthful when it memorialized
the distribution to Israel of the earlier, and by-then largely
obsolete, public domain version of PROMIS.
The first reason to be skeptical about the truthfulness of
the claim that it was the older, public domain version that DOJ
gave to Israel is that Israel is both a technologically sophisticated
country and a strategically important ally of the United States
and, therefore, may not have been satisfied with obtaining the
public domain version of PROMIS in May 1983, after that version
had already become obsolete.
The second reason for skepticism is that it would have been
an admission of wrongdoing for DOJ to have memorialized the distribution
of the proprietary version of PROMIS to Israel. In April 1983,
just one month before the internal DOJ memorandum on the transfer
of PROMIS to Israel, DOJ had stolen the proprietary version of
PROMIS from INSLAW "through trickery, fraud and deceit,"
according to the findings of the U.S. Bankruptcy Court, affirmed
by the U.S. District Court, and confirmed and supplemented by
the September 1992 Investigative Report by the House Judiciary
Committee. In modifying INSLAW's contract on April 11, 1983, DOJ
had committed itself contractually not to distribute the proprietary
version outside the 22 largest U.S. Attorneys' Offices.
The third reason for skepticism is that DOJ did not produce
for the House Judiciary Committee any of the kinds of records
that should have accompanied such an international transfer of
computer software. Examples would be an export license from the
Commerce Department and documents explaining how it came to be
that mid-echelon DOJ officials were conveying a computer software
product to a foreign government.
The fourth reason for skepticism is that Israeli intelligence
appears to have been working hand-in-glove with DOJ officials
during the winter and spring of 1983 on the theft of the proprietary
version of PROMIS from INSLAW. DOJ, in fact, sent a very high-level
Israeli intelligence official over to INSLAW in February 1983
for a demonstration of the very proprietary version of PROMIS
that DOJ misappropriated from INSLAW in April 1983.
In his report, Bua asks "why the DOJ would go to all the
trouble of documenting the fact that it was giving a copy of PROMIS
to Israel if this was some sort of covert operation." The
answer to Bua's evidently rhetorical question is that the DOJ
actions vis-a-vis INSLAW in the winter and spring of 1983 were,
in fact, apparently part of a covert DOJ-Israeli intelligence
operation, and the internal DOJ memorandum from May 1983 can be
understood as an integral part of the "trickery, fraud and
deceit" of the joint DOJ-Israeli intelligence covert operation.
INSLAW discovered the apparent 1983 DOJ-Israeli intelligence
initiative on PROMIS by following up on leads in the September
1992 Investigative Report by the House Judiciary Committee. These
leads were, of course, available to Bua too.
In February 1983, DOJ's Brewer telephoned INSLAW President
William Hamilton to ask if INSLAW would be willing to provide
a technical briefing and demonstration of the PROMIS software
to a visiting prosecutor from the Israeli Ministry of Justice.
Brewer identified this Israeli visitor as Dr. Ben Orr, the same
person to whom DOJ claims to have given the obsolete, public domain
version of PROMIS in May 1983, according to the contemporaneous
DOJ memorandum. Brewer told Hamilton that the visiting Israeli
prosecutor was heading a project to computerize the prosecutors'
offices in Israel.
Following through on DOJ's request, INSLAW demonstrated the
proprietary version of PROMIS to the Israeli visitor in February
1983. This is the same version of PROMIS, i.e., the version for
operation on Digital Equipment Corporation VAX computers, that
DOJ stole from INSLAW in April 1983. The Israeli visitor displayed
enthusiasm for the proprietary VAX version of PROMIS when INSLAW
demonstrated it to him.
After the House Judiciary Committee published its report, INSLAW
wrote to the Israeli Ministry of Justice seeking confirmation
about whether there had actually been a Dr. Ben Orr employed by
the Ministry in February 1983 and, if so, where to find him.
The Ministry replied by letter that there indeed had been a
Dr. Ben Orr employed by the Israeli Ministry of Justice in 1983,
but that Dr. Ben Orr had since retired and is currently practicing
law in Jerusalem.
Working with information supplied to INSLAW by the Israeli
Ministry of Justice, the foreign editor of a major Israeli daily
newspaper tracked down Dr. Ben Orr at his home in Jerusalem. The
foreign editor described Dr. Ben Orr as tall by Israeli standards
(5'10-1/2"), thin, having a full head of hair and possessing
a dignified demeanor. Dr. Ben Orr also disclosed to the foreign
editor that he had been stationed at the U.S. Department of Justice
in Washington, DC, for one year under an exchange program, returning
to Israel in May 1983 from his one-year stint in Washington, DC.
Most curiously, while the Israeli journalist was visiting him
in his home, Dr. Ben Orr produced what he claimed was the very
PROMIS computer tape given to him by DOJ in May 1983. This is
the kind of computer software tape that can only be operated on
large and very expensive computers, not the kind of computers
one would expect to find in a private residence.
Nothing about this Dr. Ben Orr fits the actual Israeli visitor
to INSLAW in February 1983. That visitor was very short in height
and quite stocky. He had a deeply receding hairline. His demeanor
could not easily be described as "dignified." Moreover,
unlike the real Dr. Ben Orr who had already been in Washington,
DC, for the better part of one year by the time of the February
1983 visit, the Israeli visitor to INSLAW had come directly from
Tel Aviv to Washington, DC, after a brief layover in New York
City. In fact, the visitor to INSLAW telephoned from New York
City to delay the meeting at INSLAW for 24 hours because he claimed
that some friends in New York City were giving a party in honor
of his arrival in the United States from Israel.
In retrospect, both DOJ and the visitor himself had deceived
INSLAW about the visitor's real identity.
At approximately the same time that INSLAW discovered this
apparent DOJ-Israeli subterfuge from a decade earlier, INSLAW
received a lead that the name, Dr. Ben Orr, had, from time to
time, been used as a pseudonym by Rafi Eitan, a legendary Israeli
espionage official. Rafi Eitan was, for example, the Israeli spymaster
for Jonathan Pollard, a civilian U.S. Navy intelligence analyst
convicted in 1986 of spying for the Government of Israel.
After locating a photograph of Rafi Eitan in a book on the
Pollard case, William Hamilton recognized Rafi Eitan as the February
1983 Israeli visitor to INSLAW.
Immediately thereafter, INSLAW arranged for a former INSLAW
vice president, who had spent several hours briefing the Israeli
visitor in February 1983, and who knew nothing about INSLAW's
recent investigation of the matter, to attempt to identify the
visitor from a photographic line-up of six reasonably similar
looking Caucasian males. INSLAW also arranged for the videotaping
of the process. The former INSLAW officer, without hesitation,
identified photograph #2 as the photograph of the February 1983
visitor. That, of course, was a photograph of Rafi Eitan.
This identification of Rafi Eitan as the February 1983 visitor
to INSLAW obviously increases the credibility of the sworn statements
in 1991 by Ari Ben Menashe to the effect that Rafi Eitan obtained
a copy of the PROMIS software while on a visit to the United States
in the early 1980's, and that Rafi Eitan worked with U.S. intelligence
and Earl W. Brian on the international distribution of PROMIS.
Bua, however, dismisses Ben Menashe as a credible witness.
Bua contends that Ben Menashe abandoned the clear implications
of his sworn affidavits to INSLAW and of the chapter on PROMIS
in his recently published book, Profits of War, and cynically
confessed to Bua that he had no personal knowledge of Earl Brian's
sale of INSLAW's PROMIS software. Moreover, according to Bua,
Ben Menashe altered his story to say that Earl Brian was selling
a different software product called PROMIS that was developed
by the National Security Agency, independently of INSLAW's PROMIS.
Ben Menashe has denied to INSLAW that he ever made any such
statements to Bua or Bua's staff. INSLAW has no way of knowing
for certain what Ben Menashe said or did not say before Bua's
federal grand jury, but it seems unlikely that Ben Menashe would
have made statements to Bua that are totally inconsistent with
his earlier sworn testimony both to INSLAW and to the House Judiciary
Committee, and totally inconsistent with the thrust of his recently
published book, Profits of War.
For example, in affidavits given to INSLAW in 1991, Ben Menashe
claims to have attended a PROMIS computer software sales presentation
by Earl Brian in 1987 to Israeli intelligence agencies in Tel
Aviv. Ben Menashe further claims in these sworn statements that
Earl Brian stated during this sales presentation that the PROMIS
software he was marketing to Israel was the same PROMIS software
then operating in DOJ, CIA, NSA and DIA. The DOJ version in 1987
could only have been INSLAW's proprietary PROMIS software installed
in the 42 largest U.S. Attorneys' Offices.
Ben Menashe's understanding that it was INSLAW's PROMIS software
that Earl Brian and Rafi Eitan were marketing internationally
is also clearly evidenced in his book, Profits of War. For example,
Ben Menashe claims in the book that Rafi Eitan, Earl Brian, and
Washington, DC, attorney Leonard Garment conspired in 1986 or
1987 to deprive INSLAW of the ability to seek redress in the courts
for DOJ's theft of the PROMIS software. Specifically, Ben Menashe
claims in the book that Rafi Eitan authorized the wire transfer
of $600,000 from an Israeli intelligence slush fund to Earl Brian's
Hadron, Inc., in Fairfax, Virginia, and that Hadron was thereafter
to provide this money to Leonard Garment at the law firm of Dickstein,
Shapiro and Morin in order to finance that law firm's separation
agreement with Leigh Ratiner. At the time of his firing by Dickstein,
Shapiro and Morin, where he had been a partner for 10 years, Ratiner
was the lead counsel on INSLAW's PROMIS lawsuit against DOJ, which
he had filed only four months before.
In his report, Bua refers to Ben Menashe's published claim
of a payoff which, if true, would constitute obstruction of justice.
Bua explains, however, that he felt no obligation to investigate
the claim because he had decided that Ben Menashe had very little
credibility, and because he had assessed the claim as implausible.
Even the most cursory investigation would have contradicted
Bua's assertion that this claim by Ben Menashe is implausible.
Ratiner, for example, told the Hamiltons in October 1986 that
his firing was precipitated by his naming of Deputy Attorney General
D. Lowell Jensen in the INSLAW complaint against DOJ.
Moreover, on October 6, 1986, the week before the law firm's
Senior Policy Committee met and voted to fire Ratiner, Leonard
Garment, a member of the Senior Policy Committee, had had a social
lunch with Deputy Attorney General Arnold Burns about the INSLAW
case. Garment never disclosed the lunch at the time either to
his partner, Leigh Ratiner, or to INSLAW, his firm's client. According
to the September 1989 Staff Report of the Senate Permanent Investigations
Subcommittee, Burns disclosed that he met with Garment on October
6, 1986 to signal his readiness to negotiate a settlement on the
INSLAW case, as well as to criticize the litigation strategy that
Ratiner was then pursuing in the INSLAW case.
After Ratiner was fired, the law firm sent INSLAW a letter
containing an ultimatum that INSLAW authorize the law firm to
negotiate a settlement of INSLAW's claims, on terms proposed in
the letter, or else find new litigation counsel. The proposed
terms of settlement were payment of at least $1,000,000 of the
$2,000,000 that DOJ had withheld for INSLAW's implementation services
and the acknowledgement that DOJ was not obliged to pay PROMIS
license fees to INSLAW. The proposed terms were strikingly close
to Deputy Attorney General Burns' terms, as implied by his August
1986 letter to Leigh Ratiner. INSLAW rejected the ultimatum, found
new litigation counsel, prosecuted and won the case against DOJ
at trial.
Not only did Garment have an undisclosed communication with
DOJ on INSLAW at the time of Ratiner's firing, but Garment was
also simultaneously representing the State of Israel in the Rafi
Eitan-Jonathan Pollard espionage case. Although INSLAW did not
then know it, Rafi Eitan had also apparently collaborated with
DOJ on the 1983 theft of PROMIS.
The Government of Israel reportedly hired Garment to help prevent
the Rafi Eitan - Jonathan Pollard espionage scandal from spreading
and leading to the criminal indictment of other co-conspirators,
such as Israeli Air Force Colonel Aviem Sella. The Government
of Israel and Rafi Eitan would presumably have had a strong incentive
to conceal Rafi Eitan's role as a partner of DOJ in the theft
of the PROMIS software. DOJ, for example, granted Rafi Eitan immunity
from prosecution for his cooperation in the Pollard espionage
case. If it had become publicly known that Rafi Eitan and DOJ
had, in fact, been partners in the theft of the PROMIS software
and in its illegal distribution internationally, DOJ might have
been obliged to recuse itself from the prosecution of the Pollard
espionage case. At the very least, such DOJ decisions as granting
immunity from prosecution to Rafi Eitan would have come under
intense public scrutiny.
Bua could presumably have investigated Ben Menashe's claim
by having the grand jury subpoena financial and accounting records
of Dickstein, Shapiro and Morin and Hadron, Inc., and by interrogating
appropriate individuals before the grand jury. It is difficult
to imagine a more serious instance of obstruction of justice in
the INSLAW case than that represented by Ben Menashe's published
claim. INSLAW has intelligence information that Ratiner's settlement
agreement with Dickstein, Shapiro and Morin was in the approximate
amount of the alleged wire transfer from Israel and that the funds
from which the Ratiner severance payments were drawn were provided
from outside the law firm.
C. Bua's Investigation of Leads Relating to the Role of DOJ
Officials in Either Facilitating or Covering Up the Use of INSLAW's
PROMIS in Intelligence/National Security Programs
1. Ronald LeGrand
In his report, Bua quotes extensively from William Hamilton's
December 1989 affidavit about what INSLAW had been told in 1988
by Mr. Ronald LeGrand, when LeGrand was Chief Investigator of
the Senate Judiciary Committee.
LeGrand attributed his information to a trusted source whom
he said he had by then known for 15 years and whom he described
as a senior DOJ career official with a title. The gist of the
information that LeGrand passed on from his source is that Presidential
appointee D. Lowell Jensen, who headed the Criminal Division from
early 1981 until approximately mid-1983, engineered INSLAW's contract
disputes with DOJ in order "to get INSLAW out of the way"
and be able to award the PROMIS-related case management business
to "friends." According to LeGrand, his source identified
two senior Criminal Division aides to Jensen as among the several
individuals through whom Jensen carried out the alleged scheme:
James Knapp, whom Jensen had brought with him from California
to be his principal political Deputy Assistant Attorney General
in the Criminal Division, and Miles Matthews, a Knapp subordinate
whom Jensen had elevated to the position of Executive Officer
for the Criminal Division.
According to LeGrand, his source also identified three other
senior Criminal Division officials whom he described as knowing
the whole story of the alleged Jensen-directed scheme: These officials
are John Keeney, the highest ranking career lawyer in the Criminal
Division; Mark Richard, the career Deputy Assistant Attorney General
responsible in 1983 for intelligence, national security and international
terrorism issues within the Criminal Division; and Philip White,
who served under Mark Richard as Director of International Affairs,
starting in 1983.
Bua quotes Hamilton's December 1989 affidavit as follows:
Although Richard and White were "pretty upset"
about it, the source did not believe that either of them would
disclose what they know except in response to a subpoena and
under oath. The source added that he did not think that either
Richard or White would commit perjury.
Although Bua placed LeGrand before the grand jury, he merely "interviewed"
Keeney, Richard and White, who each denied knowing anything. Bua
apparently ignored the cautionary warning that Bua himself quoted
from Hamilton's December 1989 affidavit: "The source did
not believe that either of them [Mark Richard or Philip White]
would disclose what they know except in response to a subpoena
and under oath."
U.S. Government officials who are given access to classified information
are bound by security oaths not to disclose such classified information
except to individuals who have both the required security clearance
and the "need to know." If a highly classified U.S.
Government program, considered vital to the U.S. national security,
also included U.S. Government activities that were approved at
the highest levels of the United States Government but which constituted
violations of the federal criminal laws, the security oaths could
operate so as to constrain the ability of U.S. Government officials
to volunteer information about the criminal activity embedded
within the classified U.S. intelligence/national security program.
Mark Richard's and Philip White's official duties in 1983 would
have included collaboration with foreign intelligence and law
enforcement agencies on the problem of acts of terrorism against
U.S. citizens. During the past decade, the Middle East has been
the principal center of terrorism against U.S. citizens, and Israel
has been one of the most important allies of the United States
in the fight against Middle Eastern terrorism.
If DOJ and the Government of Israel decided to collaborate on
an initiative against Middle Eastern terrorism, such collaboration
might well have included an effort to obtain whatever information
on suspected terrorists exists from the law enforcement and intelligence
files of other governments, particularly in the Middle East. If
other governments could be induced to implement the PROMIS database
management software system in their intelligence and law enforcement
agencies, and if both the software system and the computer hardware
acquired to operate the software had been secretly modified to
permit electronic eavesdropping by U.S. and Israeli intelligence,
the joint DOJ-Israeli intelligence initiative against terrorism
would have been positioned in such a way as to maximize the potential
success of the DOJ-Israeli intelligence joint venture. One of
INSLAW's sources, Ari Ben Menashe, claims to have attended a meeting
in DOJ's Justice Command Center between DOJ officials and Israeli
military intelligence officials, where data on terrorists were
exchanged between the representatives of the two governments.
Ben Menashe claims that both governments were using the PROMIS
software to track terrorists.
As noted in the preceding section, III.B.2., DOJ's PROMIS Project
Manager, C. Madison Brewer, sent over to INSLAW in February 1983,
under the guise of a visiting Israeli prosecutor, one of the top
Israeli espionage officials, Rafi Eitan. Brewer asked that INSLAW
provide a technical briefing on and demonstration of PROMIS for
this Israeli visitor, which INSLAW did. At the time, Rafi Eitan
was Anti-Terrorism Advisor to the Prime Minister of Israel. According
to the September 1992 Investigative Report of the House Judiciary
Committee, Brewer testified that Jensen pre-approved virtually
every action he took with regard to INSLAW. Although it is unlikely
that Brewer, as the computer systems executive for U.S. Attorneys'
Offices, would normally have interacted with the top Anti-Terrorism
Advisor to the Prime Minister of another country, it is not implausible
that Jensen, Mark Richard and Philip White of DOJ's Criminal Division
would have had dealings with Rafi Eitan on such subjects as extraditing
suspected terrorists from abroad for criminal prosecution in the
United States.
An American citizen's oath not to disclose classified information
must, under the law, give way to the obligation to testify truthfully
when compelled by appropriate legal process to answer questions
under oath. Bua's failure either to bring Keeney, Richard and
White before his grand jury or to place them under oath, in spite
of being warned of the necessity to do so, is difficult to understand.
Moreover, it invites concerns about a purposeful effort to avoid
placing DOJ witnesses in a position where they would have to choose
between perjury and damaging disclosures about the use of a national
security initiative to conceal violations of the federal criminal
law.
Such concerns are fueled further by Bua's silence in his report
about another disturbing development regarding DOJ and LeGrand.
In 1991, DOJ sought to block INSLAW's request to the U.S. District
Court to re-open discovery. One tactic employed by DOJ was to
sponsor a sworn statement by LeGrand purporting to cast doubt
on the accuracy of Hamilton's December 1989 affidavit about LeGrand.
Unfortunately for LeGrand and DOJ, Senator Sam Nunn had, in the
meantime, confirmed the accuracy of Hamilton's statements about
LeGrand in a letter to the editor of the New Republic magazine.
According to Senator Nunn, LeGrand had repeated the same story
that he told the Hamiltons to the staff of the Senate Permanent
Investigations Subcommittee chaired by Senator Nunn. Bua's report
devoted almost four pages to LeGrand's testimony before the grand
jury. All of it has been redacted. From the questions that Bua
reports asking DOJ officials, however, it appears that LeGrand's
grand jury testimony was consistent with his earlier statements
to the Hamiltons. Bua makes no mention of LeGrand's subsequent
contradictory statement sponsored by DOJ in 1991 in the U.S. District
Court for the District of Columbia.
2. Garnett Taylor and the Alleged DOJ Destruction of Classified
Intelligence/National Security Documents Relating to INSLAW
INSLAW urged Bua to subpoena Garnett Taylor, a former DOJ security
officer, before Bua's grand jury and to interrogate him about
several matters, including the alleged destruction by DOJ officials
of classified national security/intelligence documents relating
to INSLAW. As with LeGrand, Taylor's testimony before the grand
jury has been redacted from Bua's report, but it is possible to
draw some inferences about Taylor's grand jury testimony from
Bua's narrative about his interview with James Walker, Taylor's
former DOJ supervisor.
Bua's narrative about his interview with James Walker implies
that Walker's former subordinate, Taylor, testified before the
grand jury that Walker had instructed Taylor to retrieve classified
intelligence/national security documents relating to the INSLAW
case from the files of a Civil Division attorney who had left
DOJ, and then to destroy those documents. There is also the further
implication in the Bua Report that Taylor also alleged that Walker
later cancelled the instructions to Taylor and, thereafter, carried
out the retrieval and destruction of the classified INSLAW documents
himself.
In its September 1992 Investigative Report, the House Judiciary
Committee reported that over 50 sensitive files or documents relating
to INSLAW had disappeared from the Civil Division's litigation
files while the House Judiciary Committee sought access to the
Civil Division's files on INSLAW.
Bua states that the House Judiciary Committee's report contains
the suggestion that a missing Civil Division file on INSLAW "may
have been destroyed because it contained documents that implicated
DOJ officials in a criminal conspiracy relating to INSLAW."
Bua disposes of this suspicion by describing it as unfounded.
Bua accomplishes this by accepting at face value the account given
by Sandra Spooner, the lead Civil Division litigation counsel
on INSLAW. Bua does confirm that one file of privileged documents
is missing, but instead of conducting an investigation, Bua snidely
insinuates that the House Judiciary Committee's investigators
could have stolen it: "Even the Committee investigators had
limited access to the storage room and therefore the missing file.
By no means do we suggest that one of the investigators stole
the file."
According to Bua, James Walker confirmed that Garnett Taylor's
official responsibilities, when he worked for Walker, included
"responsibility for shredding classified documents once a
determination was made that the documents need not be retained."
Bua also claimed that "Walker stated that it was conceivable
that Taylor had been dispatched to take care of a file cabinet
belonging to a DOJ employee who had left."
When it came to Taylor's apparent claim that Walker had "reassigned
Taylor to another task and handled the disposition of the documents
in the file cabinet himself," Bua accepts at face value Walker's
statement that he had "no recollection" of such an incident.
If Walker were to recollect such an incident, of course, Walker
might well expose himself to criminal prosecution for obstruction
of justice. Bua also uncritically accepts Walker's statement that
"there were never any INSLAW documents in any of the safes
he controlled or any of the safes he knew about."
Walker is DOJ's Special Security Officer with responsibility
for administering the facility on the 6th floor of DOJ headquarters
that houses Sensitive Compartmented Information.
Walker's apparently unsworn denials of Taylor's sworn statements
were good enough for Bua. INSLAW has other U.S. Government witnesses,
however, who claim to know about the incident that Walker claims
he cannot recollect. One of these witnesses claims to have been
an eyewitness to at least part of the incident. These witnesses
are unwilling to be identified unless given guarantees that there
will be no reprisals.
It is difficult to understand why Bua would not have insisted
on inspecting the Sensitive Compartmented Information Facility
(SCIF) administered by James Walker to determine whether the SCIF
vault houses materials relating to the PROMIS software and/or
INSLAW, whether in the form of documents, microfiche or remotely-located
computer-based PROMIS data accessible by computer terminals within
the confines of the SCIF. It is difficult to justify Bua's failure
to attempt to resolve empirically the apparent discrepancy between
the grand jury testimony of Taylor and the unsworn "failure
to recollect" statements by Walker. Bua presumably could
have brought Walker and other DOJ security officers before the
federal grand jury, and also subpoenaed DOJ's records on the destruction
or relocation of classified intelligence and national security
records.
D. Bua's Investigation of Leads about Earl W. Brian, the Principal
Alleged Private Sector Co-Conspirator of DOJ and U.S. Intelligence
Agencies in the Theft and Distribution of PROMIS
As noted in Section III.B., Bua's Investigation of the Alleged
International Distribution of INSLAW's PROMIS, most of the accounts
of the foreign sales and distribution of PROMIS place Earl W.
Brian at the center of the activity.
Bua subdivides his investigation of this question into two
parts: the Claimed Direct Evidence of a Conspiracy and the Claimed
Circumstantial Evidence of a Conspiracy.
1. Bua's Investigation of the Claimed Direct Evidence of
a Conspiracy
Bua begins this section by claiming to have interviewed individuals
whom INSLAW and others have identified as having personal knowledge
of the activities of Earl Brian in connection with the distribution
of PROMIS software. Bua then addresses in particular Michael Riconosciuto,
Ari Ben Menashe, and Charles Hayes.
(a) Michael Riconosciuto
Michael Riconosciuto served as Director of Research during the
early 1980's for the Joint Venture between the Wackenhut Corporation
of Coral Gables, Florida, and the Cabazon Band of Mission Indians
in Indio, California. The Wackenhut Corporation reportedly regularly
conducts highly classified contract work for U.S. intelligence
and law enforcement agencies. Riconosciuto claims that Earl W.
Brian and Peter Videnieks, DOJ's PROMIS Contracting Officer, were
frequent visitors to the Joint Venture in Indio, California, because
the Joint Venture was modifying the PROMIS software so that Earl
Brian could sell it to foreign governments for their intelligence
and law enforcement agencies.
(1) Bua's Claimed Inconsistencies in Riconosciuto's
Various Statements about When and from Whom He Claims
to Have Obtained the PROMIS Software
Bua claims to have found inconsistencies among several sworn
statements by Riconosciuto, relating both to the number of copies
of the PROMIS software that Riconosciuto claims to have received
and to the identification of the party or parties from whom Riconosciuto
claims to have received the PROMIS software.
In both his affidavit to INSLAW and his sworn statement to
the House Judiciary Committee, Riconosciuto is apparently consistent
in claiming to have received a single copy of PROMIS, as well
as in claiming to have obtained PROMIS from Earl Brian and Peter
Videnieks, the Justice Department's PROMIS Contracting Officer.
In testimony at his criminal trial in Takoma, Washington, in January
1992, however, Riconosciuto made references to receiving several
copies of PROMIS and to receiving those copies from Dr. John P.
Nichols, the Administrator of the Joint Venture.
These accounts may not, in fact, be in conflict. Riconosciuto
may have focused his testimony to the House Judiciary Committee
and to INSLAW on the one incident that combines the proprietary
version of PROMIS and direct evidence of DOJ complicity in its
dissemination; i.e., the chain of custody from DOJ Contracting
Officer Peter Videnieks to Brian to Riconosciuto. This is the
kind of evidence that both INSLAW and the House Judiciary Committee
were seeking. Riconosciuto's testimony about receiving the proprietary
version of PROMIS from Earl Brian and Peter Videnieks would not
necessarily mean that Riconosciuto did not receive other copies
of PROMIS from individuals such as John P. Nichols. Moreover,
Riconosciuto's testimony to INSLAW and the House Judiciary Committee
would not exclude the possibility that Riconosciuto also obtained
copies of the earlier public domain version of PROMIS for modification
under the auspices of the Joint Venture. This could also account
for Riconosciuto's apparent inconsistencies about the years when
he claims to have worked on PROMIS, which Bua noted as additional
reasons to question Riconosciuto's credibility.
Bua also apparently does not realize that INSLAW had another
DOJ customer, in addition to the Executive Office for U.S. Attorneys,
to which it delivered the proprietary version of PROMIS: DOJ's
Land and Natural Resources Division. That DOJ division has been
subscribing to INSLAW's PROMIS software support services since
January 1982 and receiving proprietary enhancements to PROMIS
pursuant to the Annual INSLAW Software Support Agreements ever
since. These standard INSLAW Software Support Agreements legally
bar DOJ from copying or disseminating the proprietary enhancements
in the same way as INSLAW's standard PROMIS license agreement
does. Bua's failure to understand this point also led to the following
statement by Bua that is patently untrue:
It is undisputed that INSLAW did not produce a copy of enhanced
PROMIS to DOJ until April 20, 1983.
(2) Bua's Investigation of Riconosciuto's Claim to Have Worked
on PROMIS under the Auspices of the Wackenhut/Cabazon Joint Venture
Bua states that his investigators "interviewed a number of
people whom Riconosciuto identified as having knowledge of the
activities involving PROMIS at the Cabazon Reservation,"
including Robert Nichols and Peter Zokosky, and that his "interviews"
led him to the tentative conclusion "that there were absolutely
no activities undertaken by Wackenhut, Riconosciuto, or the Cabazons
that had anything to do with PROMIS or any other software."
Robert Nichols and Peter Zokosky have each reportedly had extensive
employment in classified U.S. Government intelligence and national
security activities. Nichols, in fact, testified under oath at
a civil trial in Los Angeles in 1993 about his claimed 18 year
association with the CIA. Each presumably took an oath not to
disclose voluntarily any classified information that he may have
acquired as part of his U.S. Government work, except to individuals
who possess both the requisite security clearances and the "need
to know." The only way to overcome that sworn obligation
to silence is to use compulsory legal process, such as a federal
grand jury, to require such an individual to answer highly detailed
questions under oath. Bua apparently did not do this.
If Riconosciuto is telling the truth about modifying INSLAW's
PROMIS software with a "trap door" for electronic eavesdropping
by the U.S. Government, the U.S. intelligence agency whose vital
interests would be most clearly implicated in any such project
is the National Security Agency (NSA).
That the Joint Venture was carrying out contract R&D for the
National Security Agency and that Michael Riconosciuto was personally
involved in such work can be inferred from statements and actions
of Robert Nichols and Peter Zokosky.
Robert Nichols told Mr. and Ms. Hamilton about an incident in
the early 1980's when a colonel from the NSA Headquarters at Fort
George G. Meade, Maryland, allegedly flew out to the Cabazon Reservation
for the day for the single purpose of assuring that FBI agents,
investigating a triple homicide of the Vice Chairman of the Cabazon
Tribe and two associates, did not attempt to probe the classified
U.S. Government work being performed under the auspices of the
Wackenhut-Cabazon Joint Venture.
Robert Nichols also told the Hamiltons about having accompanied
Michael Riconosciuto on a visit to a classified NSA contractor
facility in the Silicon Valley and to have observed Riconosciuto's
apparently unrestricted and unescorted access to both the contractor's
employees and to offices within the contractor facility that were
prominently marked as off-limits to any unescorted visitors.
Robert Nichols also told the Hamiltons about frequent alleged
telephone conversations at the Wackenhut-Cabazon Joint Venture
between Michael Riconosciuto and Bobby Inman. Bobby Inman served
in the early 1980's consecutively as Director of the National
Security Agency and Deputy Director of the Central Intelligence
Agency.
For his part, Peter Zokosky sent Mr. and Ms. Hamilton an excerpt
from Public Law 86-36 of 1959 on NSA, with the following words
highlighted:
Except as provided in subsection (b) of this section, nothing
in this Act or any other law . . . shall be construed to require
the disclosure of the organization or any function of the National
Security Agency, or any information with respect to the activities
thereof …
(3) Bua's Attempt to Discredit Riconosciuto Based on Bua's Own
Misinformation about the Wackenhut Corporation, and Bua's Failure
to Investigate Riconosciuto's Claim that He and Earl Brian Worked
Together in 1980 as Contract Employees of Wackenhut
Riconosciuto claims that he and Earl Brian made a trip to Iran
in 1980 as independent contractors with a subsidiary of the Wackenhut
Corporation known as the Wackenhut Research Corporation.
Bua states that the Wackenhut Research Corporation does not exist.
While that statement is true for 1993, what is important, is
that the Wackenhut Research Corporation did exist in 1980, as
a subsidiary of the Wackenhut Corporation, according to the 1980
Annual Report for the parent company. Rather than diminishing
Riconosciuto's credibility, the reference to a subsidiary that
has not been in existence for a decade but that was in existence
when Riconosciuto claims it was, actually enhances Riconosciuto's
credibility.
Bua further criticizes Riconosciuto for failing to produce, as
he promised Mr. and Ms. Hamilton in a May 1990 telephone conversation
memorialized by the Hamiltons, copies of Internal Revenue Service
(IRS) 1099 independent contractor forms for his and Earl Brian's
claimed contract work for the Wackenhut Research Corporation in
1980. Bua's federal grand jury presumably could have issued a
subpoena to the IRS and/or to the Wackenhut Corporation for the
records in question and, in so doing, determined whether Earl
Brian and Michael Riconosciuto each worked for the same unit of
the Wackenhut Corporation at the same time in 1980. Because Earl
Brian has repeatedly denied Michael Riconosciuto's claims, Bua
could have used this opportunity to determine empirically whether
it is Michael Riconosciuto or Earl Brian who is lying.
(4) Bua's Investigation of Riconosciuto's Claimed Involvement
with Earl Brian and Peter Videnieks
Bua states that Sam Cross, who was Chief of Police in Indio, California,
in the early 1980's, "made a point of staying aware of what
was going on at the Cabazon Reservation during that period, and
that he never heard any mention of the name Earl Brian."
If the NSA could send a colonel 3,000 miles across the United
States to make certain that FBI agents investigating a triple
homicide near the reservation did not find out anything about
the classified projects undertaken by the reservation's Joint
Venture, there is no reason to believe that a local police chief
would fare any better in gaining access to classified Joint Venture
projects. Bua's reliance on Sam Cross' ability to know about
such classified activities would, therefore, appear to be misplaced.
Bua quotes John P. Nichols, the Director of the Wackenhut-Cabazon
Joint Venture, as being "emphatic that Riconosciuto's allegations
concerning PROMIS are fabricated" "and that he had never
heard of Earl Brian or any of his companies prior to Riconosciuto's
allegations." Although Bua details Riconosciuto's criminal
history, he fails to mention that John P. Nichols was incarcerated
in the mid-1980's following a conviction for contracting with
professional "hit men" for a number of assassinations.
The disclosure of such information is relevant for anyone trying
to determine how much weight to give to John P. Nichols' statements.
Moreover, Bua apparently did not place Nichols before the grand
jury or even under oath.
Bua states that Brian's presence at the September 10, 1981 weapons
demonstration, as reported in the September 1992 Investigative
Report of the House Judiciary Committee, "would be significant"
because Brian "has steadfastly denied having been to the
Cabazon reservation, or ever having met Riconosciuto or any one
affiliated with the Cabazons."
The Indio Police Department conducted surveillance of the September
10, 1981 weapons demonstration and recorded both Earl Brian and
Michael Riconosciuto as attending, with Earl Brian arriving as
a passenger in a Rolls Royce automobile driven by Wayne Reeder,
whom Bua describes as a real estate developer. Bua reports that
Wayne Reeder claims that Earl Brian was not present with him on
September 10, 1981. Wayne Reeder's character and integrity are,
however, currently under challenge by the United States Government.
Reeder was indicted for insurance fraud by the U.S. Attorney's
Office in Rhode Island in June 1993. Moreover, Bua apparently
did not place Reeder before the grand jury or even under oath.
Bua also credits Earl Brian's denial that he was at the September
10, 1981 weapons demonstration in Indio, California, and notes
that Brian's denial is supported by various documents, including
Brian's personal calendar and expense records purporting to show
Earl Brian as being on the East Coast of the United States on
the day in question. Bua further notes that the notations on
some of these documents were made by one of Brian's subordinates.
Earl Brian's veracity and the reliability of documents furnished
by Earl Brian are open to question, however, as the result of
Brian's decision not to contest a civil lawsuit filed by the U.S.
Securities and Exchange Commission (SEC) on June 28, 1993 against
Earl W. Brian and several former subordinates at Financial News
Network (FNN). In a 60-page civil complaint filed in U.S. District
Court for the District of Columbia, the SEC charged Brian with
securities fraud, with causing the creation of fraudulent documents,
with executing and backdating fraudulent documents, with directing
a subordinate to execute a fraudulent and backdated document,
and with making materially false or misleading statements. Brian
settled his part of the SEC lawsuit the very day it was filed
by agreeing to be bound by a permanent injunction not to commit
securities fraud in the future, and not to make or cause others
to make a materially false or misleading statement in the future.
Bua determined that Riconosciuto is not to be believed, but that
Earl Brian and Peter Videnieks are "credible witnesses, both
in their demeanor and in the substance of their statements."
In reaching that conclusion, Bua apparently did not speak to the
former FNN Director of Administrative Services, Ms. Margaret Wiencek.
INSLAW, however, not only spoke to Margaret Wiencek but also
obtained from her a copy of a sworn statement she gave recently
to the U.S. Customs Service Internal Affairs investigators who
were interviewing Wiencek about Peter Videnieks. Videnieks left
DOJ in September 1990 to become Director of Operational Procurement
at the U.S. Customs Service.
In her sworn statement, Wiencek describes a file at FNN Headquarters
that contained copies of correspondence to and from Dominic Laiti,
then Chairman of Earl Brian's Hadron, Inc., relating to the PROMIS
software and INSLAW, Inc. Wiencek also claims personally to have
taken telephone messages at FNN Headquarters from Peter Videnieks
and Michael Riconosciuto during the first quarter of 1987. That
is the quarter when INSLAW filed a pleading in U.S. Bankruptcy
Court for the District of Columbia concerning the covert DOJ effort
in 1985 to force INSLAW into Chapter 7 liquidation.
(b) Ari Ben Menashe
Section III.B.2., Bua's Investigation of the Alleged International
Distribution of INSLAW's PROMIS, contains a detailed analysis
of Bua's statements about Ari Ben Menashe's claims and alleged
claims. That analysis is not repeated in this section. One example
of Ben Menashe's credibility regarding the international distribution
of PROMIS is his sworn statement in 1991 about the pivotal role
played in this area by an Israeli espionage official, Rafi Eitan.
In early 1993, INSLAW was able independently to corroborate Eitan's
collaboration with DOJ in the 1983 theft of PROMIS.
Bua states that Ben Menashe's claims have been "convincingly
denied by two witnesses whose statements we believe," . .
. "Earl Brian, under oath, and Robert McFarlane, in a telephone
interview."
As noted earlier, Brian's acceptance on Monday, June 28, 1993
in U.S. District Court for the District of Columbia of the permanent
injunction sought by the U.S. Securities and Exchange Commission
(SEC) not to engage in securities fraud in the future, raises
valid questions about the veracity and integrity of Earl Brian,
one of the witnesses upon whom Bua relied.
Although Bua detailed Riconosciuto's criminal record, he failed
to mention that the other witness upon whom he relied in dismissing
Ben Menashe's claims, Robert McFarlane, also has a federal criminal
record, arising from his conduct in the Iran/Contra affair as
National Security Advisor to the President of the United States.
McFarlane's conviction was for lying.
© Charles Hayes
The Bua Report contains several redacted pages relating to the
grand jury testimony of Charles Hayes.
INSLAW, of course, has no way of knowing what Charles Hayes said
or did not say before Bua's grand jury, but Hayes executed an
affidavit on November 30,1992 claiming that on or about August
26, 1992 he had appeared to testify before the grand jury in Chicago;
that he gave testimony concerning his "direct knowledge of
the commission of felonies" "related to the INSLAW affair";
that he submitted a list of names of witnesses who have direct
knowledge of the INSLAW affair and supplied the addresses and
telephone numbers of those witnesses; and that none of the witnesses
had been contacted as of November 30, 1992.
Hayes had previously told Mr. and Ms. Hamilton that he met with
Earl Brian, Richard Secord and Oliver North in Sao Paulo, Brazil,
in the mid-1980's while those three individuals were purchasing
weapons for the Contras in Nicaragua, and Brian was marketing
INSLAW's PROMIS software to the Government of Brazil.
(d) Richard Babayan
Bua apparently did not bring before the grand jury or even interview
Richard H. Babayan, who provided an affidavit to INSLAW on March
22, 1991, concerning a PROMIS software sales presentation by Earl
W. Brian and Richard Secord to the Government of Iraq during 1987.
In his affidavit, Babayan also claims that a Miami, Florida,
resident, Sarkis Saghanolian, assisted Earl Brian in completing
the sale of the PROMIS software to Iraq "for use primarily
in intelligence services, and secondarily in police and law enforcement
agencies."
INSLAW furnished a copy of this affidavit to Bua in January 1992,
but Bua apparently never interrogated Babayan; Richard Secord,
named by both Babayan and Hayes as a Brian colleague during PROMIS
marketing forays abroad; or Sarkis Saghanolian.
2. Bua's Investigation of the Claimed Circumstantial Evidence
of a Conspiracy
(a) The September 1983 Fund-Raising Trip to New York City by
Earl Brian, Dominick Laiti, and Paul Wormeli
Bua quotes from William Hamilton's December 1989 affidavit about
Earl Brian, Hadron Chairman Dominick Laiti, and Hadron Executive
Paul Wormeli gathering in New York City in September 1983 to raise
equity capital from the Wall Street Investment Bank, Allen and
Company. In his affidavit, Hamilton quotes Wormeli as stating
that the equity capital was to finance Hadron's expansion in criminal
justice information systems. In his affidavit, Hamilton also
quotes Wormeli's former secretary, Marilyn Titus, as stating that
the purpose of the trip was "to raise capital to buy the
court software."
Bua quotes Titus as stating that "she does not believe she
ever told William Hamilton that the purpose of the 1983 fund raising
trip was to raise capital to obtain PROMIS or INSLAW." (Emphasis
added.) Titus was apparently not placed under oath, and she was
also apparently asked to confirm a statement that is different
from the one that Hamilton claims that Titus made.
Bua states that Laiti insisted the equity capital was intended
to be used by Simcon, Hadron's police information systems subsidiary
in 1983. Bua also claims that "Wormeli essentially confirmed
what Laiti told us." What Wormeli had told INSLAW, however,
is that he was shocked to discover that Laiti was seeking to raise
$7 million in equity capital for criminal justice information
systems because Simcon could only use $2 million. Wormeli told
INSLAW that he never was told how the other $5 million was going
to be used.
Wormeli also told INSLAW that during the September 1983 fund raising
visit to Allen and Company, he and Laiti not only met with Mark
Kesselman, a Vice President, but also met with Herbert A. Allen,
Jr., then the Chief Executive Officer of Allen and Company. Wormeli
told INSLAW that at the time of the 1983 visit, Allen and Company
owned about $5 million of Hadron's common stock.
Bua apparently did not subpoena records of Allen and Company about
the Hadron fund raising effort in 1983, and did not interview
Herbert A. Allen, Jr. What Bua did do is have a trans-Atlantic
telephone interview with Kesselman in Switzerland. Kesselman
claims that he could not even remember the name of the company
seeking the funds. With a $5 million equity investment in Hadron,
Herbert A. Allen, Jr., presumably, would have been able to remember
the name of the company and possibly important details concerning
the intended use of the proceeds. With such a substantial investment
in Hadron in 1983, Allen and Company may also have had documents
relating to Hadron's planned expansion in criminal justice information
systems that could explain the $5 million for which Wormeli cannot
account.
(b) The 53rd Street Ventures Connection
(1) Patricia Cloherty's Alleged Claims about Earl Brian
On Thursday, May 5, 1988, the CBS Evening News with Dan Rather
broadcast an unusually long, approximately seven minute, segment
on the INSLAW affair, highlighting the alleged role of Earl W.
Brian in the DOJ theft of the PROMIS software.
The annual meeting of the National Association of Venture Capitalists
was at that very time taking place in Washington, DC, and both
Richard D'Amore and Patricia Cloherty were in attendance. D'Amore
was on INSLAW's board of Directors and was a partner in Hambro
Venture Capital, then the lead venture capital investor in INSLAW.
Cloherty and her husband, Daniel Tessler, controlled 53rd Street
Ventures, which also then had an equity investment in INSLAW.
Cloherty also had by this time become the Chief Operating Officer
of Alan Patricoff and Associates, a very large venture capital
firm in New York City that had controlled 53rd Street Ventures
until 1984, when Cloherty and Tessler took it over.
On Friday, May 6, 1988, Richard D'Amore visited William Hamilton
at INSLAW's offices in Washington and told him that he had seen
Patricia Cloherty at the venture capitalists conference and had
mentioned to her the previous evening's telecast on INSLAW and
the alleged role of a venture capitalist by the name of Earl Brian.
According to D'Amore, Cloherty responded by stating, in words
or substance, that she "knew all about Earl Brian's role
in the INSLAW case."
According to William Hamilton's desk calendar for Tuesday, May
10, 1988, Hamilton telephoned Patricia Cloherty at Alan Patricoff
and Associates. Without disclosing to her that D'Amore had recounted
his conversation with Cloherty, Hamilton asked whether Earl Brian
or his InfoTechnology, Inc., venture capital firm had ever done
any deals with Alan Patricoff and Associates or 53rd Street Ventures
through early 1984 when Patricoff and Associates managed 53rd
Street Ventures. Cloherty claimed not to know and did not commit
to try to find out when Hamilton asked that she do so. Hamilton
did tell Cloherty about the alleged role of venture capitalist
Earl Brian as a partner in the DOJ corruption against INSLAW,
and Cloherty did not disclose to Hamilton that she knows Earl
Brian and, in fact, had served on a board of directors with him
during the 1980's, disclosures that Cloherty made to Bua.
In his December 1989 affidavit, Hamilton quotes the statement
about Earl Brian that Cloherty allegedly made to D'Amore in May
1988, without providing the aforementioned background details
about the CBS Evening News story being telecast while Richard
D'Amore and Patricia Cloherty, each with venture capital investments
in INSLAW, were in Washington, DC, for a national conference of
venture capitalists.
According to Bua, both Cloherty and D'Amore denied having had
such a conversation in May 1988, and D'Amore denied having told
Hamilton about such a conversation.
Bua apparently did not place Cloherty or D'Amore under oath.
Bua never asked Hamilton for further information, such as some
of the contextual details described above, that Bua could have
used in trying to refresh the recollections of Cloherty and D'Amore
or, alternatively, in trying to impeach their testimony. Moreover,
Bua could have easily verified the CBS telecast on Brian and INSLAW
occurring while Cloherty and D'Amore were together in Washington,
DC, at a venture capital conference.
Instead of doing such work, however, Bua uncritically accepted
Cloherty's and D'Amore's non-sworn denials and then irresponsibly
used those denials to support his conclusion that Hamilton's
sworn representations cannot be relied upon.
Bua quotes Daniel Tessler as stating that "his wife, Patricia
Cloherty, has no knowledge of Earl Brian . . . ." Bua then
quotes Patricia Cloherty as not only admitting that she knows
Earl Brian but also admitting to have served with Earl Brian during
the 1980's on the Board of Directors of the National Association
of Small Business Investment Companies. 53rd Street Ventures
is, in fact, a Small Business Investment Company.
Bua should also have wondered how Hamilton could have correctly
associated Patricia Cloherty with Earl Brian, when Cloherty's
own husband professes not to have known of any such association,
unless Hamilton's highly plausible account of his May 1988 conversation
with D'Amore in Washington, DC, is true and accurate.
(2) Daniel Tessler's Non-Sworn Denial of Hamilton's Sworn Statement
about Tessler Demanding Voting Rights to the Hamiltons' Common
Stock on the Eve of INSLAW's Chapter 11 Bankruptcy Filing
In his December 1989 affidavit, Hamilton states that Daniel Tessler
appeared at INSLAW in December 1984, just several weeks before
INSLAW was finally forced to file for Chapter 11 bankruptcy protection,
and gave William Hamilton an ultimatum to turn over to Tessler
by the close of business that day the voting rights to Mr. and
Ms. Hamilton's controlling interest in INSLAW. Otherwise, neither
53rd Street Ventures nor Hambro Venture Capital would even attempt
to help INSLAW raise new capital to avoid financial collapse,
according to Hamilton's sworn statement about Tessler's ultimatum.
Bua reports that Tessler denied Hamilton's sworn testimony, and
Bua apparently accepts Tessler's non-sworn denial without any
further investigation. Someone who cannot remember his wife's
business relationship with Earl Brian may not, however, have the
most reliable memory. Moreover, if Tessler was acting secretly
on behalf of Earl Brian when he sought the voting rights of the
Hamiltons' controlling interest in INSLAW, he may have violated
the Federal Banking Criminal Statute, 18 U.S.C. § 215 because
Tessler was then an officer of a Small Business Investment Company
(SBIC). 53rd Street Ventures, as an SBIC, is a "financial
institution" as defined in section 103 of the Small Business
Investment Act of 1958. Section (2) of 18 U.S.C. § 215 makes
it a federal crime for anyone who
"as an officer, director, employee, agent or attorney
of a financial institution, corruptly solicits or demands for
the benefit of any person, or corruptly accepts or agrees to accept
anything of value from any person, intending to be influenced
or rewarded in connection with any business or transaction of
such institution;"
It may be unrealistic to expect Tessler to admit to Bua conduct
that could arguably expose Tessler to prosecution under 18 U.S.C.
§ 215.
(3) Bua's Investigation of Hamilton's Claims about Jonathan Ben
Cnaan of 53rd Street Ventures
In his December 1989 affidavit, Hamilton recounts a conversation
with Jonathan Ben Cnaan of 53rd Street Ventures. According to
Hamilton, Ben Cnaan disclosed to Hamilton, in October 1983, a
meeting that Ben Cnaan had had in September 1983 in New York City
with someone whom Ben Cnaan described at the time as a businessman
with ties to the highest level of the Reagan Administration.
Ben Cnaan said that the businessman had told 53rd Street Ventures
about Hadron's acquisition overture to INSLAW in April 1983; about
his absolute determination to gain control of the PROMIS software
for use in federal government contracts; about the contract disputes
having arisen in INSLAW's contract with DOJ following INSLAW's
refusal to sell out to Hadron; and about the fact that those disputes
would never be able to be resolved as long as INSLAW refused to
let the unnamed businessman use PROMIS for federal government
contracts.
Bua describes at length his efforts to find Ben Cnaan. He states
that he would have liked to have talked with Ben Cnaan but then
implies that it is not that important because Earl Brian has already
denied being the businessman depicted in the statements attributed
to Ben Cnaan, and, moreover, Hamilton does not actually quote
Ben Cnaan as claiming that the unnamed businessman was Earl Brian.
Earl Brian, Dominic Laiti, and Paul Wormeli were in New York City
the very same month that Ben Cnaan had the meeting with the unnamed
businessman. Brian was, according to the Bua Report, on the Board
of Directors of the National Association of Small Business Investment
Companies. 53rd Street Ventures is a Small Business Investment
Company.
Conducting a sworn interrogation of Ben Cnaan, under the circumstances,
would have been extremely important. If Ben Cnaan were to identify
either Earl Brian or Dominic Laiti as the businessman to whom
he referred in his October 1983 meeting with William Hamilton
and if Ben Cnaan would confirm the essence of the statements attributed
to him in Hamilton's affidavit, it would directly tie Earl Brian
and Hadron into the DOJ use of contract disputes with INSLAW as
leverage to help Hadron wrest control of the PROMIS software.
Ben Cnaan apparently visited New York City in early 1993, from
Israel where he currently lives. With a modest effort, INSLAW
was able to discover Ben Cnaan's current address and telephone
number in Israel:
Ha'Adamit #6 Herzlia, Israel Telephone
258-7787.
© The Systems and Computer Technology, Inc. (SCT) Connection
Bua professes not to understand how INSLAW's "allegations
about SCT would fit into INSLAW's theory of a Hadron conspiracy."
Bua further states that "there would be no apparent reason
for Brian or Hadron to be attempting to control INSLAW (through
SCT) in 1986."
SCT launched a "hostile takeover" bid for INSLAW in
May 1986, the very month that DOJ issued its Request for Proposals
for the Uniform Office Automation and Case Management Project,
code-named Project EAGLE. This was the largest procurement in
DOJ history. INSLAW believes that the PROMIS software was intended
by DOJ to be the uniform case management software for the Project
EAGLE computers. INSLAW further believes that Earl Brian's Hadron,
Inc. was originally slated to receive the Project EAGLE contract
award by DOJ as a sweetheart gift from Brian's long-time friend,
then Attorney General Meese. INSLAW believes that Brian and DOJ
abandoned the plan to use Hadron as the vehicle for the contract
in the fall of 1985, following the failure of the covert DOJ effort
to force INSLAW's liquidation.
INSLAW believes that, by January 1986, Brian and DOJ had substituted
Tisoft, Inc. as the vehicle for the planned sweetheart Project
EAGLE award. That month, Tisoft was awarded a $30 million computer
systems contract by Meese's Justice Department, and Tisoft also
amended its articles of incorporation to permit the sale of common
stock to new outside owners who would then have majority control
of the company.
Margaret Wiencek, the former Director of Administrative Services
at Earl Brian's Financial News Network (FNN), claims that Patrick
R. Gallagher of Tisoft, Inc. was also someone who regularly telephoned
the chairman's office at Earl Brian's FNN Headquarters in Los
Angeles during at least 1987.
INSLAW believes that DOJ encouraged the SCT hostile takeover bid
for INSLAW in 1986 in order to preclude INSLAW from seeking redress
in the courts for DOJ's 1983 theft of the PROMIS software and
to remove INSLAW as an obstacle to the planned award of Project
EAGLE to Tisoft and the planned implementation of PROMIS on the
Project EAGLE computers.
Bua placed quotation marks around the word "hostile"
in referring to SCT's effort to purchase INSLAW in early 1986,
suggesting that he doubted INSLAW's characterization of the SCT
initiative as a "hostile takeover" initiative. Through
third-party discovery in 1987, however, INSLAW obtained an internal
SCT document prepared in conjunction with SCT's investment bankers
in December 1985. That SCT document uses the words "hostile
takeover" to describe the then-planned effort to acquire
INSLAW.
E. Bua's Investigation of the Death of the Investigative Journalist,
Danny Casolaro
1. Evidence that Casolaro Broke the INSLAW Case the Week
He Died
In August 1990, Mr. Terry D. Miller, President of Government Sales
Consultants, Inc., encouraged a free-lance investigative journalist
by the name of Danny Casolaro to consider investigating DOJ's
theft of the PROMIS software. Casolaro and Miller had previously
worked together on the publication of a newsletter that focused,
at least in part, on federal government computer procurement fraud,
and Miller thought Casolaro had the ideal background for the INSLAW
investigation. Miller is also a friend of Mr. and Ms. Hamilton.
On Saturday, August 10, 1991, approximately one year after Casolaro
began his full-time, self-financed investigation of the INSLAW
affair, Casolaro was found dead in the bathtub of his room in
the Sheraton Hotel in Martinsburg, West Virginia. Casolaro's
wrists on both arms had been slashed, with almost a dozen slashes,
some deep enough to have severed the tendons. The local Martinsburg,
West Virginia, authorities ruled Casolaro's death a suicide.
In the late afternoon of the Monday before his death, i.e., on
August 5, 1991, Casolaro had telephoned Miller to tell him that
the INSLAW case, to which Miller had directed him one year earlier,
had proved to be the story of his lifetime.
Later that night, Casolaro telephoned Robert Booth Nichols in
Los Angeles. Nichols has a background in CIA covert intelligence
operations and, in the course of about 100 hours of telephone
conversations with Casolaro during the previous 12 months, Nichols
had served as a sounding board for Casolaro's probe of the clandestine
world of U.S. and foreign intelligence operations. According
to Nichols' statement to William Hamilton, Monday night's telephone
call from Casolaro was the first time in their year-long colloquy
when Casolaro was not seeking any information. Casolaro told
Nichols that he had just come back from a meeting with a source
on the INSLAW case, that he now knew everything there was to know
about the INSLAW case, that the Hamiltons were going to be quite
excited, and that Casolaro had to return right away for another
meeting with the same source to collect the final piece of documentary
evidence. Nichols described Casolaro that night as "euphoric."
Also Monday night, Casolaro met with Ann Klenk, a fellow journalist
and long-time friend, at a pub frequented by Casolaro. According
to Klenk, Casolaro said he had just returned from West Virginia,
where he had met with a source on the INSLAW case, and that he
had already broken the INSLAW case, but that he had to return
right away to West Virginia to pick up a final piece of the evidence.
The next day, Tuesday, August 6, 1991, Casolaro telephoned William
Turner in Winchester, Virginia, and told him that he would be
having a follow-up meeting later in the week in Martinsburg, West
Virginia, with some employees from the office of Senator Robert
Byrd of West Virginia. Casolaro described one of the employees
as a relative of Ms. Barbara Videnieks and further described that
person as his source on INSLAW. According to Turner, Casolaro
asked him to remove two numbered and sealed packets of Casolaro's
INSLAW documents from Turner's home safe and bring them the 20-mile
distance to Martinsburg, West Virginia, on the afternoon of Friday,
August 9, 1991 so that Casolaro could show them to Ms. Videnieks'
relative. Ms. Barbara Videnieks is the Chief of Staff to Senator
Robert Byrd. Her husband, Peter Videnieks, was the DOJ Contracting
Officer on INSLAW's PROMIS contract. According to Michael Riconosciuto,
Peter Videnieks was also a close associate of Earl Brian in Brian's
alleged international sales and distribution of PROMIS. Ms. Margaret
Wiencek, former Director of Administrative Services at Financial
News Network (FNN) Headquarters in Los Angeles, claims, in sworn
testimony, to have taken telephone messages from Peter Videnieks
in 1987 in the office of the FNN Chairman. Earl Brian was Chairman
of FNN in 1987. Both Videnieks and Brian have, however, denied
under oath even knowing each other.
On Wednesday, August 7, 1991, Casolaro socialized with a friend
by the name of Ben Mason. Casolaro told Mason that he had broken
the INSLAW case but had to return to Martinsburg, West Virginia,
the following day for a final meeting with some individuals with
whom he had just recently met.
On Thursday, August 8, 1991, Casolaro traveled to Martinsburg,
West Virginia, and checked into the Sheraton Hotel.
On Friday afternoon, August 9, 1991, Turner met with Casolaro
in the parking lot of the Sheraton Hotel and delivered both sealed
packets of Casolaro's INSLAW documents, as well as documents relating
to Turner's own case. Turner's own case involved alleged federal
contract fraud at Hughes Aircraft, where Turner had apparently
been employed as a flight simulation engineer. Casolaro reconfirmed
to Turner that his meeting with Ms. Barbara Videnieks' relative
and one other employee from Senator Byrd's office was still on
for Friday night. Casolaro warned Turner "to watch his rear,"
and made arrangements to meet Turner the following day, Saturday,
in the Washington, DC, area to celebrate.
On Saturday morning, August 10, 1991, Casolaro was found dead
in the bathtub of his Sheraton Hotel room.
Turner has contemporaneous handwritten notes about his conversations
with Casolaro on Tuesday and Friday of the week Casolaro died.
Bua neither questioned Turner nor sought copies of his notes.
Bua never questioned Terry Miller or Ben Mason either. Although
Bua or one of his Assistant U.S. Attorneys spoke by telephone
with both Ann Klenk and Robert Nichols, no one from Bua's team
ever attempted to probe their knowledge of Casolaro's investigative
work in the days preceding his death.
Notwithstanding these facts, Bua stated that he was persuaded
from his review of the investigative records of the local Martinsburg
authorities "that Mr. Casolaro's death was fully and fairly
investigated and that the conclusion of the local authorities
that his death was a suicide was amply supported by the facts."
Bua details various items of physical evidence from Casolaro's
hotel room that he claims "strongly supports the conclusion
of the local authorities that the death was a suicide."
Bua fails, however, to take any cognizance of the fact that none
of Casolaro's investigative working papers was found in the hotel
room. Casolaro always carried such files with him, was seen leaving
Washington for Martinsburg with the files, and was seen in Martinsburg
with the files. Moreover, the two packets of Casolaro's sensitive
INSLAW documents and the Hughes aircraft documents that Turner
claims to have personally delivered to Casolaro in Martinsburg,
West Virginia, Friday afternoon were also missing.
Riconosciuto claimed in a sworn affidavit, prior to his arrest
in early 1991, that Peter Videnieks had threatened him with prosecution
and conviction if he testified about the INSLAW matter. Casolaro
was evidently having a secret follow-up meeting in Martinsburg,
West Virginia, with someone in Senator Byrd's office who is related
to Peter Videnieks' wife, Barbara.
In a telephone conversation one weekend shortly before his death,
Casolaro read to William Hamilton detailed biographical data about
various employees in Senator Robert Byrd's office and told Hamilton
that he believed he could break the INSLAW case by penetrating
Senator Byrd's office.
Casolaro had told the Hamiltons of other connections to Peter
and Barbara Videnieks and Senator Robert Byrd's office during
the final two months of his life. On June 12, 1991, for example,
Casolaro said that he had spoken by telephone with Peter Videnieks
at Videnieks' office at the U.S. Customs Service but that Videnieks
had declined to answer Casolaro's questions about INSLAW and had,
instead, referred Casolaro to Charles Ruff, the Washington, DC,
attorney whom DOJ was paying to represent Peter Videnieks in the
House Judiciary Committee's investigation of the INSLAW case.
Casolaro also told the Hamiltons about a series of meetings he
had had during the final month of his life with a covert intelligence
operative of the U.S. Army Special Forces whose name is Joseph
Cuellar. According to Casolaro, Cuellar, during a purportedly
chance encounter at Casolaro's neighborhood pub in mid-July 1991,
asked Casolaro what line of work he was in and, upon hearing Casolaro
describe his journalistic investigation of the INSLAW case, asserted
that he knew all about INSLAW because Peter Videnieks was one
of his closest friends. According to Casolaro, Cuellar also stated
that his ex-wife worked for Ms. Barbara Videnieks in Senator Byrd's
office. Casolaro told the Hamiltons that Cuellar had later persuaded
Peter Videnieks to meet Casolaro and discuss the INSLAW case with
him. The Hamiltons never heard whether the meeting actually took
place, however.
Lynn Knowles, a friend of Casolaro's, attended at least two of
the meetings between Casolaro and Cuellar. Bua never sought to
interview Knowles, and there is no reason to suspect that Bua
sought to interrogate Cuellar either. She told William Hamilton
that she and Cuellar had spoken by telephone several days after
Casolaro's death and that Cuellar said the following to Knowles,
in words or substance:
What Danny Casolaro was investigating is a business. If you don't
want to end up like Danny or like the journalist who died a horiffic
death in Guatemala, you'll stay out of this. Anyone who asks
too many questions will end up dead.
2. The Question of the FBI's Role in the Investigation of
Casolaro's Death
Bua also absolves DOJ of having exerted any influence on the investigation
executed by the West Virginia authorities, "beyond the normal
and expected assistance law enforcement agencies typically provide
one another." Bua further describes this exception as "assistance
and information sharing between the local authorities and the
regional FBI office…"
Bua apparently did not look into the FBI's role in the execution
of a search warrant in William Turner's home in September 1991
or in the refusal, long after criminal charges against Turner
were dismissed, to return to Turner documents taken from Turner's
home safe. About six weeks after Casolaro's death, Turner, who
has one artificial leg, was arrested and charged with the robberies
of two local area banks. That same month, the FBI assisted local
authorities in executing a search warrant in Turner's home. The
official inventory of the search lists the seizure of a spiral
notebook that Turner claims contains detailed notes about his
collaboration with Casolaro and that Turner says was taken by
the FBI from Turner's home safe. This is the same home safe where
Turner claims he stored sealed packets of Casolaro's sensitive
documents on INSLAW.
The local authorities dropped the bank robbery charges against
Turner after keeping him in pre-trial incarceration in the county
jail for over six months. FBI "enhancements" of the
photographs taken by hidden bank cameras reportedly established
that Turner was not the robber. At a preliminary hearing, an eye
witness to one of the robberies, a bank teller, also reportedly
acknowledged that Turner could not have been the robber she saw
run out the bank because his artificial leg would obviously have
prevented Turner from running.
Turner claims that the local FBI office in Winchester, Virginia,
has refused to return the documents seized from his home in September
1991, on the grounds that the Martinsburg, West Virginia, authorities
do not wish to have those documents returned. On May 26, 1993,
Turner filed a motion in the U.S. District Court for the Western
District of Virginia in Harrisonburg, Virginia, seeking to compel
the FBI to return his documents and other personal property.
The motion is pending.
In its September 1992 Investigative Report, the House Judiciary
Committee stated that it had deposed for two days FBI Special
Agent Thomas Gates, who had been discussing the INSLAW investigation
with Casolaro during the final four weeks of Casolaro's life.
Gates evidently testified that Casolaro had told him about a
specific threat on his life, shortly before Casolaro was found
dead. Gates also testified to the House Judiciary Committee that
the FBI may have jurisdiction to investigate the possible murder
of Casolaro under the Interstate Transportation in Aid of Racketeering
(ITAR) statute.
Bua, apparently, inexplicably failed to interview FBI Special
Agent Thomas Gates. Notwithstanding this failure, Bua makes the
following statement in his report on page 247:
A private citizen's death, whether a suicide or a murder, is
outside the normal jurisdiction of the federal government. Instead,
it is a state or local matter. Accordingly, we find nothing unusual
in the fact that DOJ did not undertake to investigate Casolaro's
death.
F. Bua's Comments about the Alleged Sham Contract Disputes
In Section III,C.1., INSLAW details Bua's seemingly superficial
investigation of specific allegations from a credible source
that Presidential appointee D. Lowell Jensen engineered INSLAW's
contract disputes in the spring of 1983 in order to force INSLAW
out of business so that DOJ's PROMIS-based business could be awarded
to political friends and supporters of the then current administration.
As demonstrated in this section, there is an obvious contrived
quality to each of the two major contract disputes and additional
evidence suggestive of a key role for Jensen in either engineering
the dispute, e.g., the dispute about the amount of fee owed INSLAW
in light of the termination for convenience of the word processing
part of the contract, or in perpetuating a wholly contrived dispute,
e.g., apparently refusing to allow DOJ attorney Janis Sposato
to act independently in seeking to resolve the computer time-sharing
billing dispute on the merits.
In Section III,D.2(3), INSLAW details Bua's failure to interrogate
Jonathan Ben Cnaan about what he was told in September 1983 by
someone he would only identify as a "businessman with ties
to the highest level of the Reagan Administration" who was
determined to wrest control of PROMIS from INSLAW for use in federal
government contracts. Ben Cnaan, in a meeting with William Hamilton
in October 1983, quoted the unnamed businessman as boasting that
INSLAW had been hit with contract disputes at DOJ right after
INSLAW refused to be purchased by Earl Brian's Hadron and further
boasting that the contract disputes would prove insoluble unless
and until INSLAW agreed to allow the businessman to use the PROMIS
software in federal government contracts.
Either of the two aforementioned investigative leads could, if
properly pursued, have produced external evidence in support of
INSLAW's claim that the contract disputes that arose in the spring
of 1983 were sham disputes concocted in order to drive INSLAW
out of business so that DOJ could award the PROMIS case management
software business to political friends and supporters.
Bua stated that he "did not believe it was appropriate .
. . to attempt to determine the esoteric government cost accounting
issues . . . ." underpinning those contract disputes, but
that he did examine the disputes sufficiently in order to be able
"to determine whether the DOJ's positions and actions leading
up to the parties' disputes were so clearly baseless or without
foundation as to give rise to a reasonable inference that the
origins of the disputes must have been motivated by improper purpose
and a desire to force INSLAW into baniam tcy."
1. DOJ's Refusal, Apparently at the Behest of Presidential
Appointee D. Lowell Jensen, to Resolve, on the Merits, Its Main
Contract Dispute with INSLAW, a Dispute That is Self-Evidently
Contrived
Bua's inquiry led him to conclude that "the government's
positions about overcharging and cost overruns were founded upon
legitimate, good faith concerns and the desire to protect the
government's interests, and not out of the desire to bankrupt
INSLAW or to force its liquidation."
Bua bases his conclusion in part, at least, on the fact that
both DOJ's Audit Staff and the Defense Contract Audit Agency (DCAA)
agreed that INSLAW's computer time-sharing costs under its PROMIS
Implementation Contract were "essentially unauditable."
Moreover, Bua quotes DCAA as finding that DOJ overpaid INSLAW
for the computer time-sharing services by approximately $590,000.
In examining the criticism that INSLAW's computer time-sharing
costs are "essentially unauditable," it is important
to position that criticism in context: The U.S. Government has
never had any problem auditing the costs in INSLAW's computer
cost center, and there has never been any material disagreement
between DOJ and INSLAW on the "actual and allowable"
costs in the computer cost center. For the peak year of INSLAW's
PROMIS time-sharing services under the DOJ contract, i.e., Fiscal
Year 1983, the computer cost center had slightly more than $2.5
million in "actual costs, allowable under U.S. Government
contracts." (This amount includes $344,229 of Fiscal Year
1982 computer center costs that DOJ "carried forward"
into Fiscal Year 1983 for reimbursement purposes.)
Almost all of the business of INSLAW's computer center in
1983 was with various U.S. Government customers, and, in light
of the fact that INSLAW and the U.S. Government have always been
in basic agreement about the amount of "actual and allowable"
computer center costs that fiscal year, one might reasonably ask
what is the problem.
The problem is what subset of the $2.5 million in actual
and allowable computer center costs during Fiscal Year 1983 should
be allocated to one particular U.S. Government contract, i.e.,
DOJ's PROMIS Implementation Contract.
When DOJ and INSLAW negotiated the PROMIS Implementation
Contract during the winter of 1982, DOJ officials told INSLAW
that DOJ wished to pay only for successful use of INSLAW's computer
time-sharing services by U.S. Attorneys' Offices as measured by
such indices as the number of successfully completed update or
inquiry transactions and the number of devices used to access
the time-sharing service by the U.S. Attorneys' Offices. DOJ
told INSLAW, further, that it would not reimburse computer time-sharing
costs except in relationship to such measures of successful use
of the time-sharing service by U.S. Attorneys' Offices.
Based on these DOJ guidelines, INSLAW and DOJ negotiated
a time-sharing billing formula that both parties believed would
fairly compensate INSLAW for its expected computer time-sharing
costs by measuring not costs, but the aforementioned indices of
successful use of the PROMIS time-sharing service. Once the parties
to a contract negotiate the terms for the computer time-sharing
billing formula or algorithm, the vendor writes a piece of computer
software that automatically keeps track of the very indices that
the parties have agreed will serve as the basis for the billings.
Conversely, the piece of the computer software is not written
to track factors that are not to be taken into consideration in
computing the computer time-sharing billings such as the subset
of the computer center's actual and allowable costs that are allocable
on any given day to the PROMIS Implementation Contract.
DOJ has consistently refused to acknowledge the fact that
the reason that the subset of INSLAW's actual and ndeewable computer
center costs that should properly be allocated to the PROMIS Implementation
Contract cannot be verified through a standard U.S. Government
cost- incurred audit is that the time-sharing billings were not
supposed to be either based on incurred costs or subject to an
incurred cost audit.
In 1985, Deputy Attorney General D. Lowell Jensen arranged,
at INSLAW's request, an effort to negotiate a settlement of the
computer time-sharing billing question and the other disputes
under the contract. Janis Sposato, who chaired the negotiations
for DOJ, insisted on DOJ's right to try to reconstruct, by rule
of thumb, the estimated subset of actual and allowable computer
center costs for Fiscal Year 1983 that were actually incurred
in performance of the computer time- sharing service under the
PROMIS Implementation Contract. DOJ and INSLAW had about 10 negotiation
sessions in 1985, with most of the time spent on trying to reconstruct
the actual time- sharing costs for 1983. DOJ and INSLAW had already
managed to establish the reasonableness of most of the Fiscal
Year 1983 computer time-sharing billings under the DOJ contract
when Sposato and INSLAW discovered another cost category that
was sufficiently large by itself to remove any remaining question
about the billings under the negotiated formula. In other words,
the negotiations had led to the inescapable conclusion that DOJ
would not have overcompensated INSLAW for computer time-sharing
costs during Fiscal Year 1983 if DOJ had honored its Negotiated
Agreement on computer time-sharing billings under that contract.
Instead of disposing of the computer time-sharing question,
however, Sposato announced shortly thereafter, in words or substance,
as follows: "My management upstairs is unwilling to allow
me to make any more concessions." At the time, Sposato reported
directly to the Assistant Attorney General for Administration,
whose offices were on the same floor as Sposato's. That individual,
however, reported, in turn, directly to Deputy Attorney General
Lowell Jensen, whose offices were several floors upstairs. INSLAW
inferred then and infers now that Sposato was alluding to Deputy
Attorney General Lowell Jensen's unwillingness to permit a resolution
on the merits of the Fiscal Year 1983 computer time-sharing issue
because it was DOJ's main "fig leaf" for its wrongful
withholding of payments under the contract.
Although Sposato did not disclose it to INSLAW, DOJ already
knew that INSLAW's computer time-sharing billings for Fiscal Year
1983 were reasonable. In 1987, INSLAW obtained through discovery
an internal DOJ memorandum authored in 1981 by the Assistant Attorney
General for Administration, purporting to estimate what it should
cost for a vendor in Washington, DC, to provide 12 months of PROMIS
computer time-sharing services to the very same U.S. Attorneys'
Offices supported by INSLAW in Fiscal Year 1983. DOJ's "should
cost" estimate was slightly higher than INSLAW's billings
for Fiscal Year 1983 under the Negotiated Agreement for time-sharing
billings. The DOJ memorandum also explicitly anticipated the
need for the very kinds of contractor technical support personnel
that DOJ had ignored in determining that INSLAW's computer time-sharing
costs were excessively high.
How, then, did DCAA decide that DOJ had overpaid INSLAW for
such services? Number one, DOJ strenuously resisted INSLAW's
repeated requests before the Department of Transportation Board
of Contract Appeals (DOTBCA) to produce to INSLAW and to DCAA
DOJ's records and notes on the 1985 so-called negotiations on
this very subject. DOJ never produced the documents, and the
DOTBCA judge declined to order DOJ to produce them. Number two,
DCAA, in applying its own rules of thumb without talking to INSLAW,
made some very significant mistakes of fact. Although Bua makes
no mention of it, INSLAW filed before DOTBCA a sworn affidavit
from the senior DCAA auditor on INSLAW acknowledging such material
errors of fact in the DCAA audit and stating that DCAA "should
have considered the materiality of such reallocations of cost
once it had been advised of the issues above and of the cost impact
to the PROMIS Implementation Contract for Fiscal Year ended 30
September 1983."
The total costs under the three-year PROMIS Implementation
Contract that are in dispute between the DCAA audit report and
INSLAW are about $1.2 million. The computer time-sharing billing
question alone accounts for all but $100,000 of that amount.
2. Presidential Appointee D. Lowell Jensen Leads DOJ Effort
to Withhold Payment of INSLAW's Profit by Blaming INSLAW for DOJ's
Own Delays in the Word-Processing Part of the INSLAW Contract
DCAA and INSLAW also have a disagreement on one other issue:
the amount of fee or profit payable to INSLAW under the PROMIS
Implementation Contract. As with the negotiated time-sharing
billing algorithm, the amount of fee earned is not properly subject
to an incurred cost audit. INSLAW is claiming $1,145,000 in fee,
and DCAA has recommended $687,000 in fee, a difference of $458,000.
The amount of fee earned by INSLAW is related primarily to the
legal effect on "target costs" under INSLAW's contract
of the DOJ's February 1984 termination, for the convenience of
the government, of the word processing part of the PROMIS Implementation
Contract. In other words, it is primarily a legal question, not
an incurred cost audit question. As with the computer time-sharing
billing issue, however, an honest decision by DOJ would expose
the truth about the contrived and wrongful basis for the withholding
and, thereby, deprive DOJ of its other principal "fig leaf."
DOJ had required the winning vendor to implement in each of the
70 smaller U.S. Attorneys' Offices, on government-furnished word
processing machines, a rudimentary case management software capability.
In February 1984, Presidential appointee D. Lowell Jensen approved
a DOJ decision to terminate the word processing part of the contract
for the convenience of the government. The legal effect of a
convenience termination is that the contractor bears no financial
responsibility for the partial termination.
In December 1983, however, Jensen had secretly pre-approved a
plan for DOJ Contracting Officer Peter Videnieks to terminate
INSLAW's PROMIS Implementation Contract, apparently in its entirety,
for INSLAW's alleged default on the word processing part of the
contract. INSLAW did not find out about this until it obtained
DOJ documents in litigation discovery in 1987.
What prompted the Jensen decision to transform an apparent, planned
complete termination for default into a partial termination for
convenience was an internal February 1984 legal opinion by DOJ's
internal contract administration counsel, William Snider. Snider
pointed out that DOJ could not sustain a case against INSLAW for
delay in the word processing phase of the contract because DOJ
itself had been late in selecting the word processing hardware
for this portion of the contract, a prerequisite to INSLAW's ability
to begin the work, and because DOJ had failed thereafter to negotiate
with INSLAW a new, legally binding schedule for the word processing
part of the contract.
DOJ Administrative Counsel William Snider authored the internal
legal opinion in the month of February 1984, when the Senate Judiciary
Committee commenced its hearings on the confirmation of Edwin
Meese as Attorney General of the United States, and when Judiciary
Committee member, Senator Max Baucus, sent a team of General Accounting
Office auditors into DOJ on an emergency investigation of INSLAW's
PROMIS Implementation Contract. Senator Baucus' office had received
a tip from a DOJ whistleblower to the effect that as soon as Meese
was confirmed as Attorney General, he and Jensen planned to award
a "massive sweetheart contract" to unnamed "friends"
to implement the PROMIS software in every litigative office of
DOJ.
Jensen's wrongful role in the word processing dispute is even
more obvious than his role in the computer time-sharing billing
dispute. DOJ has been unwilling, however, to admit the increasingly
inescapable fact that DOJ officials concocted the contract disputes
in order to get leverage over INSLAW in DOJ's theft of the PROMIS
software.
G. Bua's Investigation into Possible DOJ Complicity in the Failure
of Judge Bason to Obtain Reappointment to the U.S. Bankruptcy
Court
A Merit Selection Panel, headed by U.S. District Judge Norma Johnson,
was appointed in 1987 to make recommendations to the D.C. Judicial
Council, as well as to the ultimate appointing authority, the
U.S. Court of Appeals for the District of Columbia, about the
ranking of various applicants, including incumbent Judge George
F. Bason, Jr., for the new, 14-year term of sole U.S. Bankruptcy
Judge for the District of Columbia.
The Merit Selection Panel gave its number one ranking to a DOJ
attorney, S. Martin Teel, who had no judicial experience and very
little bankruptcy law experience. Teel had represented the U.S.
Government before Judge Bason in the INSLAW bankruptcy proceeding
in an attempt in 1987 to convince Judge Bason to force INSLAW
into liquidation.
On September 18, 1987, while the Merit Selection Panel was sitting,
Judge Bason announced his oral ruling in the adversary proceeding
of INSLAW, Inc. v. the U.S. Department of Justice. In that ruling,
Judge Bason found that DOJ officials "took, converted, stole"
INSLAW's proprietary PROMIS computer software product "through
trickery, fraud and deceit." S. Martin Teel argued for INSLAW's
liquidation before Judge Bason approximately a month after the
aforementioned oral ruling.
1. The Merit Selection Panel Determined that It Would Be Inappropriate
to Permit Judge Bason's Inslaw Ruling to Influence Its Evaluation
of Bason
Bua reports that the Panel members agreed that the Inslaw opinion
should not influence their evaluation of Judge Bason and that
based on his inspection of the notes of the Panel and of the Judicial
Council, "There is no indication that the Inslaw ruling played
any role in the process."
Bua noted that the Merit Selection Panel extended invitations
to both DOJ and to INSLAW counsel Charles R. Work to appear before
the Panel to discuss their respective views of Judge Bason and
that INSLAW counsel Charles Work did make such an appearance,
but that DOJ declined the opportunity. Bua then makes the following
statement:
It would be odd, however, if DOJ had foregone an opportunity
to fully express its views of Judge Bason in an ex-parte proceeding
with a pledge of confidentiality, in favor of a covert mission
to unseat him. We found no evidence of any such covert effort
by DOJ.
In view of Bua's aforementioned statement that Panel members
did not consider it appropriate for Judge Bason's adverse ruling
against DOJ to influence their evaluation of Bason's candidacy,
DOJ would have been well advised not to have proceeded openly.
As is explained hereafter, Bua found that DOJ did, in fact, wish
to unseat Judge Bason, and that one DOJ attorney, at least, conveyed
his negative view of Judge Bason directly to the Chair of the
Merit Selection Panel.
2. DOJ Civil Division Attorney Stuart Schiffer, Currently the
Acting Assistant Attorney General for the Civil Division, Assumes
the Leadership Role to Separate the Inslaw Case from Judge Bason
According to the House Judiciary Committee's September 1992 Investigative
Report entitled The INSLAW Affair, Deputy Attorney General Arnold
Burns, in approximately July 1987, asked the Civil Division to
"consider initiatives for achieving a more favorable disposition"
of the INSLAW adversarial proceeding against DOJ being tried before
Judge Bason. The Committee also reported that, based on Burns'
request, Stuart Schiffer, Deputy Assistant Attorney General in
the Civil Division, initiated research by Civil Division attorneys
in July 1987 "to investigate the possibility of having Judge
Bason disqualified from the INSLAW case on the grounds of bias."
3. Schiffer Had a Long-Term Friendship with the Chair of the
Merit Selection Panel
In addition to being the chief DOJ official concerned with finding
a way "to achieve a more favorable disposition" by separating
the INSLAW case from Judge Bason," Schiffer also had a long-term
personal relationship with Judge Norma Johnson, the Chair of the
Merit Selection Panel. For example, according to Bua, "Judge
Johnson and Stuart Schiffer were office partners when both began
their legal careers as staff attorneys with DOJ in the early 1960's,"
and "they have stayed in touch over the years, mostly when
Judge Johnson has called Schiffer to recommend one of her clerks
for employment with DOJ."
According to Bua, "Judge Johnson did call Schiffer during
the merit selection process," but Judge Johnson was only
seeking "Schiffer's candid appraisal of two candidates from
DOJ who were in the panel's short list." According to Bua,
Judge Johnson told Schiffer "that she was not calling about
Bason and that she did not want to hear anything about Bason,"
and that "Schiffer said nothing about Bason."
4. After Discussing the Inslaw Case with Schiffer, Another DOJ
Attorney Contacts the Chair of the Merit Selection Panel about
INSLAW
According to Bua, Schiffer did make known "his displeasure
with Bason" to another DOJ attorney, Royce Lambreth, who
subsequently turned over directly to Judge Johnson a copy of a
transcript of Judge Bason's September 25, 1987 oral ruling against
DOJ, using "a tone of voice that allowed Judge Johnson to
surmise Lambreth's negative view of Bason's ruling." Shortly
thereafter, Lambreth was confirmed as a U.S. District Judge for
the District of Columbia.
According to Bua, "although Judge Johnson presented the opinion
without commentary, at least one Panel member perceived that the
opinion was presented, not because it revealed great wisdom and
scholarship but because it reflected unfavorably on Judge Bason's
suitability for the bench."
According to Bua, Judge Lambreth cannot recall where he obtained
the transcript of Judge Bason's oral ruling in the INSLAW case.
Retired Assistant U.S. Attorney Froman "has no recollection
of being asked to obtain or of obtaining the INSLAW ruling,"
although she was the subordinate to Lambreth with responsibility
for maintaining the file on INSLAW within the U.S. Attorney's
Office for the District of Columbia.
Until the Bua investigation, Judge Johnson, according to the Bua
Report, had maintained to the Senate Permanent Investigations
Subcommittee and possibly also to the House Judiciary Committee
"that she had no contacts with DOJ regarding Judge Bason
and she received no negative input from DOJ regarding the INSLAW
case."
Bua states that "the Senate and the House Reports both found
no evidence that anyone from DOJ had attempted to influence the
selection process." According to the Bua Report, however,
the failure of Judge Johnson to recall the communication from
then DOJ Attorney Royce Lambreth would have deprived the two investigations
of any knowledge of just such an attempt.
"It was the only judicial opinion that was circulated,"
according to the Bua Report. During his tenure on the U.S. Bankruptcy
Court, Judge Bason reportedly had approximately 70 published opinions.
Bua absolves Royce Lambreth of any questions of impropriety in
regard to his previously undisclosed communications with the Chair
of the Merit Selection Panel about his criticism of Judge Bason's
ruling against DOJ in the INSLAW case. Bua separately absolves
Lambreth whether he was acting in his then capacity as a DOJ attorney
or in his then future capacity as a U.S. District Court judge.
Bua was apparently ready to absolve Lambreth of wrongdoing irrespective
of any final determination of the facts about his motivation.
5. The Attempt by Judge Bason's Predecessor, Roger Whelan, to
Disparage Bason to the Merit Selection Panel for the Administrative
Disarray in the Clerk's Office That the Chief Judge of the U.S.
District Court Traces to the Tenure of Whelan Himself
The House Judiciary Committee stated as follows in its September
1992 Investigative Report: "According to [then Chief U.S.
District] Judge Robinson, Judge George Bason inherited a mess
(administratively) in the clerk's office when he took over from
former Judge Roger Whelan."
According to the House Judiciary Committee's report, Chief Judge
Robinson also stated that "Judge Bason was getting the system
under control" . . ." by May 1986, and so reported that
fact in the Judicial Conference report for the D.C. Circuit that
year." The Committee also quotes Mr. Martin Bloom, who took
over as clerk of the D.C. Circuit Bankruptcy Court in 1986, to
the effect that by "the latter part of 1987, administratively,
I think the court was up to par."
With Chief Judge Aubrey Robinson blaming the administrative problems
in the bankruptcy court clerk's office on the tenure of former
Judge Roger Whelan and with both Judge Robinson and the new clerk,
brought in by Judge Bason, agreeing that the administrative problems
had been cured at the latest by the latter part of 1987, it is
curious that the Merit Selection Panel had concluded that the
administrative problems still existed and that they were the fault
of Judge Bason. Even more disturbing is the evidence from the
Bua Report that the Panel reached this conclusion in large part
on the basis of ex-parte communications from Judge Whelan himself:
One lawyer who commented negatively about Judge Bason to the
Panel was Roger Whelan, the bankruptcy judge who preceded Bason.
What is relevant is the perception that Judge Bason was a poor
administrator. That perception, accurate or not, was made known
to the Panel at least by former Judge Whelan.
We note only that the Panel's apparent perception that Judge
Bason was an inefficient administrator was not totally baseless,
and, more importantly, was not attributable to a DOJ campaign
against Bason. The Panel had heard that criticism at least from
former Bankruptcy Judge Whelan . . . .
The Bua Report makes it clear that Whelan's ex-parte criticisms
of Judge Bason to the Merit Selection Panel were influential in
the Panel's deliberations about Judge Bason's suitability for
reappointment. This fact makes it most unusual that the Panel
failed to interview any of the individuals most responsible for
the administration of the court about Whelan's allegations that
Judge Bason was a poor administrator. According to the House
Judiciary Committee's September 1992 Investigative Report, the
Panel failed to interview Judge Bason, Bankruptcy Court Clerk
Martin Bloom, the former bankruptcy court clerk, or Chief Judge
Robinson about Whelan's representations concerning Judge Bason's
responsibility for the administrative problems. Moreover, according
to the Committee, the Panel also failed to examine any statistics
in order to determine empirically the administrative condition
of the court.
6. At the Time of Whelan's Effort to Discredit Judge Bason to
the Merit Selection Panel, Whelan Was Representing One of INSLAW's
Creditors, a Creditor That Appeared to Have Been Acting in Collusion
with DOJ in the INSLAW Affair
During 1987, Roger Whelan became counsel of record for AT&T
in the INSLAW bankruptcy. AT&T has employed no fewer than
five law firms of record to represent its interests in the INSLAW
bankruptcy. AT&T's interests arose from its having contracted
in August 1984 with INSLAW to port the INSLAW case management
software for operation on AT&T's then- new line of mini-computers
and from AT&T's having advanced to INSLAW that month approximately
$380,000 to perform the software port. AT&T expected to recover
the advance from future royalties payable to INSLAW on the basis
of AT&T's sale of the INSLAW software to AT&T's law firm
customers.
On February 8, 1985, the day after INSLAW filed for bankruptcy
protection, AT&T's first outside counsel in the INSLAW bankruptcy
proceeding filed his Notice of Appearance with the U.S. Bankruptcy
Court in Washington, DC. Kenneth Rosen had previously been employed
in DOJ's U.S. Trustee's Office for the Southern District of New
York under Cornelius Blackshear, and Blackshear's then First Assistant
Harry Jones. In a deposition, Jones, whom Bankruptcy Judge Bason
ruled was supposed to relocate temporarily to Washington, DC,
in 1985 in order to force INSLAW into a Chapter 7 liquidation,
acknowledged that he and Rosen had continued a close social relationship
since working together in the DOJ Trustee's Office in New York
City, but denied ever discussing the INSLAW matter with Rosen.
AT&T had become a member of INSLAW's Unsecured Creditors Committee
in an unusual fashion, through assistance from DOJ itself. DOJ's
U.S. Trustee's Office for the Washington, DC, area appointed the
Unsecured Creditors Committee from the creditors listed by INSLAW,
in a mandatory filing with the bankruptcy court, as the 20 largest
unsecured creditors. AT&T was not on the INSLAW list. After
announcing the appointment of the Committee, DOJ's Trustee's Office
announced the supplementary appointment of AT&T to the Committee.
Between February and August 1985, when the covert DOJ scheme
to force INSLAW into liquidation was under way, Rosen was extraordinarily
active in the INSLAW bankruptcy. For example, Rosen deluged INSLAW,
its bankruptcy counsel, the counsel for the Unsecured Creditors
Committee, and the bankruptcy court with written and/or telephonic
questions and objections relating to the most routine business
decisions by INSLAW such as hiring a replacement financial controller.
Rosen's behavior was so striking that it elicited two letters
of rebuke from the Unsecured Creditors Committee, the first from
the Committee's counsel and the second from a businessman on the
Committee. Rosen's co-counsel in the INSLAW bankruptcy was Shea
and Gould, a firm that does not normally represent AT&T.
Shea and Gould had, however, served for many years, including
1985, as the mergers and acquisition counsel for Hadron, Inc.
and for Earl Brian's other companies. This was also Rosen's first
time representing AT&T.
In June 1986, AT&T told INSLAW that it had fired Rosen as
its counsel in the INSLAW case.
In April 1986, Dixon and Dixon, an Omaha, Nebraska, law firm,
filed its Notice of Appearance in the INSLAW bankruptcy on behalf
of AT&T. Roger Whelan became Washington co-counsel for Dixon
and Dixon in the INSLAW bankruptcy, although INSLAW does not know
the exact date of Whelan's retention by AT&T.
The first move that Dixon and Dixon made on behalf of AT&T
was an attempt to strip INSLAW of protection against hostile takeover
bids, by trying to convince the Unsecured Creditors Committee,
which had always supported INSLAW's periodic requests for extensions
in the "period of exclusivity," to refuse any more extensions.
This AT&T initiative occurred in April 1986. Several weeks
after this unsuccessful effort by AT&T's new lead counsel,
a Pennsylvania-based computer services company, Systems and Computer
Technology (SCT), secretly approached INSLAW's Unsecured Creditors
Committee with an offer of several millions of dollars in cash
for INSLAW's creditors if the Committee would support the forced
sale of INSLAW to SCT. SCT had met with DOJ officials, in advance
of its hostile takeover attempt, to discuss the prospects for
settling INSLAW's contract disputes once SCT acquired INSLAW and
removed William A. Hamilton as President. One of the DOJ officials
that SCT met with was a Presidential appointee from the same California
county as Edwin Meese and Lowell Jensen.
Sidley and Austin, which normally serves as AT&T's outside
general counsel and bankruptcy counsel, became the fifth counsel
of record for AT&T in the INSLAW bankruptcy. Sidley and Austin
and Dixon and Dixon attended virtually every bankruptcy court
hearing on INSLAW during 1988 and early 1989 and sought aggressively
to block INSLAW's Plan of Reorganization on behalf of their client,
AT&T.
7. At the Time of Roger Whelan's Ex-Parte Denigration of Judge
Bason to the Merit Selection Panel, Thomas C. Papson, a member
of the Panel, was Counsel of Record to AT&T in an Unrelated
U.S. Government Contract Appeals Proceeding, and Whelan was Counsel
of Record to AT&T in the INSLAW Bankruptcy
Thomas C. Papson, a member of the Merit Selection Panel, was counsel
of record for AT&T at the General Services Board of Contract
Appeals (GSBCA) during 1987 on litigation relating to contract
awards. The contracts in question were precursors to the award
by the General Services Administration of the massive FTS-2000
contract for a new telephone service for the United States Government,
one of the largest, if not the largest, contracts in the history
of the United States Government.. AT&T eventually won the
majority position in the FTS-2000 contract award.
8. The Mysterious "Read and Destroy" "Confidential
Memorandum" to the Chair of the Merit Selection Panel Highly
Critical of Judge Bason, a Memorandum That No One Acknowledges
Authoring
According to the House Judiciary Committee, a federal judge gave
the Committee a "Confidential Memorandum" dated December
8, 1987, that contained instructions at the top that it should
be destroyed after reading. The judge who furnished the copy
to the Committee told the Committee that "it was an important
document and that it would be improper to destroy it." The
memorandum was addressed to Judge Norma Johnson, but the author's
name is not shown on the document. The author of the unsigned
confidential memorandum is a member of the Merit Selection Panel,
according to the federal judge who furnished the copy to the Committee
and according to one other member of the Merit Selection Panel,
as reported by the House Judiciary Committee.
The November 24, 1987 written report of the Merit Selection Panel
did not include any of the observations contained in the December
8, 1987 Confidential Memorandum, according to the House Judiciary
Committee. One of the observations in the confidential memorandum,
according to the Committee, reads as follows:
Judge Bason evidenced no inclination to come to grips personally
with the management challenge posed by the terrible shortcomings
of the Office of the Clerk of our Bankruptcy Court.
The Bua Report disclaims knowledge of who authored the confidential
memorandum, except to say that "the heart of the memo suggests
that it is intended to reflect only an individual Panel member's
views."
Although Bua claims not to know who authored the confidential
memorandum that appears to contain untrue, derogatory information
about Judge Bason's administrative abilities, he is prepared to
absolve DOJ of any role in the creation or distribution of the
memo:
There is no indication that someone from DOJ either prepared
or planted the memo. The views expressed in the memo do not contain
any criticism of Bankruptcy Judge Bason's rulings in the INSLAW
matter.
Bua apparently did not entertain the possibility that DOJ could
have "prepared or planted" or otherwise caused to be
"prepared or planted" by others a confidential memorandum
that would derail Judge Bason's appointment on grounds that, however
spurious and unfounded, would obscure any possible linkage to
DOJ's real motivation in getting rid of Judge Bason: anger at
his ruling against DOJ in the INSLAW case.
A sitting federal bankruptcy judge was denied what should have
been a relatively routine reappointment to the bench. His replacement
was a clearly less qualified DOJ attorney who had unsuccessfully
argued just weeks earlier for INSLAW's liquidation before the
very same federal bankruptcy judge. This overt DOJ effort to
force INSLAW's liquidation occurred shortly after Judge Bason
had condemned DOJ for an earlier, covert effort to force INSLAW's
liquidation.
The written record of the Merit Selection Panel's deliberations
indicates that the failure of Judge Bason to win reappointment
was largely the result of criticisms of Judge Bason's administrative
abilities. According to the House Judiciary Committee's published
interviews with the individuals best able to assess the conditions
of the Office of the Clerk of the Bankruptcy Court during Judge
Bason's tenure, the criticisms are without foundation. The Merit
Selection Panel, however, accepted them as true without subjecting
the allegations to even the most minimal due diligence verification.
Roger Whelan, the primary source of the disparagement of Judge
Bason to the Merit Selection Panel, either knew or should have
known that the criticisms he was voicing to the Panel were without
foundation, because the problems he was attributing to Judge
Bason were, in fact, the legacy of Whelan's own tenure as sole
bankruptcy judge for the District of Columbia, according to then
U.S. District Court Chief Judge Aubrey Robinson. Moreover, Judge
Bason had already remedied the administrative problems he had
inherited, according to the House Judiciary Committee.
Confidence in the reliability of the Merit Selection Panel's
written record is, moreover, called into question by the House
Judiciary Committee's discovery of a "Read and Destroy"
"Confidential Memorandum" containing harsh and false
criticism of Judge Bason's administrative abilities. Both the
House Judiciary Committee and the Bua Report agree that the Confidential
Memorandum appears to have been written by a member of the Merit
Selection Panel. No member of the Panel has, however, acknowledged
authorship.
Although the reasons cited in the record of the Merit Selection
Panel for replacing Judge Bason do not withstand any serious scrutiny,
there is evidence that DOJ was seeking to remove Judge Bason because
of his unfavorable rulings against DOJ in the INSLAW case, combined
with the fact that there were more cases still be tried in the
INSLAW case. DOJ, in fact, had secretly communicated to the Chair
of the Merit Selection Panel its strong disapproval of Judge Bason's
then recent oral ruling against DOJ in the INSLAW case. The Chair
thereafter circulated to the other members of the Panel a transcript
of Judge Bason's oral ruling, secretly furnished by a DOJ attorney.
These communications between DOJ and the Merit Selection Panel
were kept secret during two separate Congressional investigations
into the question of whether DOJ had influenced the decision on
Judge Bason's reappointment.
At the same time that Roger Whelan was disparaging Judge Bason
to the Merit Selection Panel, Whelan was counsel of record for
AT&T in the INSLAW bankruptcy. Whelan's client, AT&T,
had evidently been working in collusion with DOJ throughout the
INSLAW bankruptcy in an effort to obstruct INSLAW's successful
reorganization.
While Whelan was disparaging Judge Bason to the Merit Selection
Panel, Thomas C. Papson, also then an attorney of record for AT&T
in an unrelated U.S. Government contract proceeding, was a member
of the Panel. The Chair of the Panel, Judge Norman Johnson, who
failed to disclose to two Congressional investigations ex parte
communications with a DOJ attorney disparaging Judge Bason's ruling
in the INSLAW case, is a long-time friend of Stuart Schiffer,
currently the Acting Assistant Attorney General for the Civil
Division and the DOJ official who spearheaded the effort to remove
Judge Bason from the INSLAW case.
In light of the foregoing, the following statement in the Bua
Report would appear to be open to question in any serious, independent
investigation:
The Panel also heard from bankruptcy practitioners, including
a former bankruptcy judge, who opposed Bason's reappointment
for reasons wholly unrelated to INSLAW.
Exhibit B
A Synopsis of Specific Claims About U.S. Department of Justice
(DOJ) Malfeasance Against INSLAW Made by Credible Individuals
Who Are Fearful of Reprisal
The characterization of each witness is intended to be sufficient
to enable the reader to assess the witness's credibility but not
detailed enough to permit actual identification of the witness.
WITNESS #1. This individual is a computer systems specialist
who worked at the World Bank Headquarters in Washington,
DC for a number of years in the 1980's and who has been reluctant
to come forward publicly because of fear of reprisal.
This individual claims to have first hand technical knowledge,
supplemented by contemporaneous, handwritten notes, of the implementation
at the World Bank Headquarters in 1983 of INSLAW's PROMIS computer
software product, on a VAX mid-range computer from Digital Equipment
Corporation. According to this individual, the World Bank acquired
a VAX mid-range computer in its computer data processing center
in 1983 and, thereafter, in June 1983, acquired from a source
unknown to this individual, INSLAW's PROMIS software for implementation
on the VAX computer. According to this individual, the World
Bank's implementation of PROMIS was not in support of the traditional
PROMIS application domain of legal office case management. Instead,
the World Bank implemented PROMIS to track its own "international
message flow," as well as the international message flow
of its sister institution, the International Monetary Fund (IMF).
WITNESS #2. This individual is a current mid-level U.S. Government
employee with extensive experience in intelligence/national
security activities, who is fearful of reprisal.
This individual claims to have knowledge, obtained contemporaneously
with the actual event in June 1983, of a meeting at the World
Bank Headquarters in June 1983 concerning DOJ'S conveyance to
the World Bank of the "proprietary VAX" version of INSLAW's
PROMIS software. According to this individual (who also claims
to have contemporaneous handwritten notes), the DOJ was represented
at the meeting by D. Lowell Jensen, then Assistant Attorney General
for the Criminal Division. Among others who this individual
claims attended the meeting was Stanley Sporkin, then General
Counsel of the Central Intelligence Agency (CIA). According
to this individual, the initiative to implement PROMIS at the
World Bank came from the Bank Operations Division of the CIA.
Upon information and belief, the objective of the PROMIS implementation
at the World Bank was to provide an early warning system to the
U.S. intelligence community of signs of planned defaults on international
loans. During the first few years of the Reagan Administration,
a number of the so-called less developed countries actively considered
defaulting on their international debts.
WITNESS #3. This individual is a current mid-level DOJ career
employee who has been in a position to know a good deal about
the INSLAW Affair for the relevant period of the 1980's,
and who, INSLAW has been told by others, has first-hand knowledge
of DOJ's dissemination to the World Bank in 1983 of the PROMIS
software, and of the concealment or destruction by DOJ of
contemporaneous, written documentation of the conveyance.
This individual, during the course of a recent meeting with attorneys
for INSLAW, emphasized repeatedly that anyone who provides information
to INSLAW will get into significant trouble, and that there would
be swift retribution against anyone in DOJ who even talks about
the INSLAW matter. This individual claims that all of the people
at DOJ who are responsible for "getting" INSLAW have
been promoted and awarded bonuses. This individual expresses
sorrow and perhaps even shame for what DOJ has done to INSLAW,
but declines to acknowledge the validity of any particular claim
except through sworn testimony before an independent counsel.
This individual states that no one would cooperate with any
investigation unless it is truly independent of DOJ, and unless
assured of no retaliation. Finally, this individual says that
the exodus from DOJ of the Republican Party political appointees
will be of some help on the INSLAW matter but that it will not
of itself be enough because "too many career people have
either been part of destroying INSLAW or have 'winked' at it."
WITNESS #4. This individual is a former very high ranking DOJ
official who told an intermediary in May 1993 that his disclosure
of information about DOJ's misconduct against INSLAW would lead
to economic reprisals against him by the Republican Party.
According to the intermediary, this individual claims to have
the following specific knowledge regarding DOJ's malfeasance
against INSLAW:
It was orchestrated by Lowell Jensen who, in turn, relied principally
on the Criminal Division's Executive Officer Miles Matthews;
The Justice Command Center is linked to the INSLAW scandal;
DOJ procurement executive Elizabeth "Pat" Rudd played
a very important role in the INSLAW scandal; and
Other current or former DOJ officials who were personally involved
in the misconduct against INSLAW are as follows:
Harry Flickinger Anthony Moscotto Anthony Liotta Carol Dinkens
Thomas Stanton Charles Neal
WITNESS #5. This individual is a senior DOJ career official with
extensive knowledge of DOJ information systems.
This individual claims that John Otto, while serving as one of
the highest ranking FBI officials in the late 1980's, disclosed
directly to this individual in a private meeting at the FBI that
the FBI was about to implement the PROMIS software under the FOIMS
(Field Office Information Management System) name, and that the
adoption of the tried and proven PROMIS software was expected
to cure the poor reputation of FOIMS among FBI employees.
WITNESS #6. This individual is a mid-level DOJ career employee
who fears retaliation unless there is an independent counsel.
This individual claims to have witnessed an admission, contemporaneously
with the referenced activity, by Marilyn Jacobs, then DOJ secretary
to D. Lowell Jensen, to the effect that Jensen, Jacobs' immediate
supervisor, was the person behind all of INSLAW's problems at
DOJ.
WITNESS #7. This individual is a high level career official of
the U.S. Government, who currently holds a position of considerable
responsibility and who was unwilling to be identified by INSLAW
to Special Counsel Nicholas J. Bua.
This individual claims to have witnessed admissions by former
DOJ Security Officer Garnett Taylor concerning the deliberate
destruction of documentary evidence in the INSLAW case by DOJ
security officials, and concerning the alleged role of Anthony
Moscotto, currently Director of DOJ's Executive Office for U.S.
Attorneys (EOUSA), in an "affirmative decision" by
DOJ to remove Judge George F. Bason, Jr. as sole federal bankruptcy
judge for the District of Columbia.
WITNESS #8. This individual is currently a relatively senior
career employee of the United States Government who had been
employed during relevant years of the 1980's in DOJ's Justice
Management Division, and who is prepared to answer questions
truthfully if compelled to do so by subpoena from a duly constituted
government inquiry into the INSLAW Affair.
This individual claims, based on a conversation with an intermediary,
that everyone from "the director level on up" within
DOJ's Justice Management Division knew that the INSLAW case
was caught up in a covert U.S. Government intelligence operation
and that this is why there were classified intelligence/national
security documents on INSLAW and the PROMIS software stored
in the security vault of DOJ's Office of Security and Emergency
Planning. This individual also claims to know about a connection
between the Justice Command Center and the malfeasance against
INSLAW, and about the award of promotions and bonuses to certain
DOJ career officials for their participation in the wrongdoing
against INSLAW.
WITNESS #9. This individual is a trusted friend of Mr. and Ms.
Hamilton who, in turn, has a close relationship with one or
more persons currently holding senior level positions in the
Central Intelligence Agency. This individual has been unwilling
to submit to interviews by anyone officially associated with
the U.S. Government, whether in Congress or in the DOJ. This
individual has served as a conduit of information that certain
senior level CIA officials wish to have conveyed to Mr. and Ms.
Hamilton.
This individual has conveyed the following information to Mr.
and Ms. Hamilton:
The CIA secretly obtained a copy of the proprietary version
of PROMIS from DOJ in order to determine whether PROMIS could
be used to solve a long-standing, unmet need in the U.S. intelligence
community for compatible data base management software.
The initial unauthorized use of PROMIS in the U.S. intelligence
community was for an intelligence application aboard nuclear
submarines. PROMIS is currently installed on every nuclear
submarine of the United States and Great Britain, and the application
domain for this use of PROMIS is extremely sensitive.
The CIA implemented PROMIS internally after integrating PROMIS
with another piece of computer software. The CIA uses its version
of PROMIS to keep track of the covert intelligence operations
of U.S. and foreign governments.
PROMIS is being used as an inventory tracking system for long
range missiles and nuclear warheads, in the United States as
well as in several other nations that possess nuclear weapons.
The U.S. Government appointed someone by the name of Lindsey
to package a reduced-functionality derivative of the CIA's
version of PROMIS for Earl W. Brian to sell to the intelligence
agencies of foreign governments.
One of Earl Brian's sales of PROMIS was to the military intelligence
agency of the Government of Egypt, through "what appears
to be a CIA holding company."
There is one use of PROMIS by the United States Government that
is considerably more sensitive than any that have been identified
to the Hamiltons by this individual, and so sensitive that
decisions on disclosure are restricted to the four statutory
members of the National Security Council, i.e., the President,
the Vice President, the Secretary of State and the Secretary
of Defense.
One of the places where the proprietary version of PROMIS is
being used without license from INSLAW is the Office of the
Attorney General of the United States.
As a condition of his nomination as Attorney General, William
Barr was required to give assurances to President Bush that
he would be able to maintain the cover-up in the INSLAW case.
In early 1993, elements of the CIA intercepted a person or
persons in the vicinity of the Hamilton's family residence who
were apparently planning to carry out some act of physical
violence. On at least one other occasion, elements within the
CIA have intercepted or nullified plans by others to kill Mr.
and Ms. Hamilton.
WITNESS #10. This individual is a computer programmer aboard
a U.S. nuclear submarine. The individual would evidently face
the loss of his security clearance and possibly criminal prosecution
by DOJ if he were to provide testimony in the INSLAW case.
Through an intermediary, a member of the Hamilton family was
told that this individual has first hand knowledge about the
fact that INSLAW's PROMIS software has been implemented aboard
the U.S. nuclear submarine on which he serves, and that this
individual is deeply sorry for what the U.S. Government has done
to INSLAW and to the Hamilton family.
WITNESS #11. This individual is a current career employee of
DOJ who lacks confidence in the ability of DOJ to fairly and
thoroughly investigate the misconduct against INSLAW.
This individual claims to have witnessed DOJ officials, Garnett
Taylor and James Walker, remove classified intelligence/national
security documents from DOJ's Civil Division for relocation
or destruction.
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