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INSLAW's ANALYSIS and REBUTTAL
of the
BUA REPORT
Memorandum in Response to the
March 1993 Report of Special Counsel Nicholas J. Bua
to the Attorney General of the United States
Responding to the Allegations of INSLAW, Inc.
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 the 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. (Emphasis added.) (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) (Emphasis added.)
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 data base adjustment
subsystem as an enhancement which had been developed by INSLAW
using private funds. (Hamilton, T. 125; PX 14) The data base
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)"1
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 contract2 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)3
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. (Emphasis added.) (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.4
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:
a. The prospect of INSLAW's bankruptcy;
b. The possible need for in-house EOUSA personnel to
take over the PROMIS Project;
c. Substantial questions of fraud being raised by
INSLAW's accounting practices;
d. The need for close auditing review of INSLAW's
costs, particularly overhead and computer center
costs; and
e. The prospect of terminating the PROMIS Contract.
(PX 49; Hamilton, T. 156-156)
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.5 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"6 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)7 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_.
(Emphasis added.) (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:
1. To create, generate and implement software to be
used on computers ("the computer-based software")
at 20 designated larger U.S. Attorney's Offices
(with an option, admittedly never exercised, to
expand this use, to up to thirty offices)
2. To create, generate and implement a different kind
of software to be used on specified word
processing equipment ("the word processing based
software") at some 74 smaller U.S. Attorneys'
Offices. (PX 17)
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 developed to
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. "8 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
STATE 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.9 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.10 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."11
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 1983.12 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.13
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 l991, 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 soon
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
distribution 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 198714 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 Burns15 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.16
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 acknowledgment 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."17 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. (Emphasis added.)
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.18
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 eye witness 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
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.19 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 in 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
Tacoma, 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.20 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, 1983.21
(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
absolutely22" 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 1993.23 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
Dominick 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.
(c) 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, Dominick 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 Dominick 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 affidavit24, 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.
(c) 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.25 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.26 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,27
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 bankruptcy."
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.28
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 allowable
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.29 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 timesharing 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 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.30 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.31 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.32 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 Norma 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.
_______________________________
1 The Bua Report criticized the Investigative Report of the
House Committee on the Judiciary for creating the impression that
Judge Bryant reviewed the evidence de novo. It is the Bua Report
that should be criticized. While Judge Bryant did not find that
he was required to review the evidence de novo, effectively, he
did so anyway. In so doing, he stated:
It is not necessary to duplicate the bankruptcy court's
exhaustive findings of fact here. 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.
(Emphasis added.)
Judge Bryant went on to say:
In accordance with the principles set out in Anderson v
Bessimer City, 470 U.S. 564, 571-75 (1985), the court has
examined the bankruptcy judge's findings of fact in the light of
the entire record, and finds that 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 the
judge's opportunity to assess credibility. _The cold record
adequately supports his findings under any standard of review_.
Accordingly the findings will not be disturbed. (Emphasis added.)
(D. Ct. Mem. Op., p. 37)
2 Notwithstanding, Brewer conceded on November 24, 1982,
that there was no factual support for any allegation that INSLAW
did not perform its best efforts on the BJS contract. (PX 45)
3 Brewer misconstrued the BJS contract as a commitment to
produce specified enhancements at a fixed price instead of a
"best efforts" commitment for development of an unspecified
number of enhancements within a cost-plus contract. (Hamilton,
257-258; Deroy, T. 2460-2462)
4 Moreover, the suggestion of the authors of the Bua Report
that "we have not found that INSLAW has demonstrated any
proprietary rights in the software" is outrageous given the
extensive record that obviously was ignored totally by them. It
is noteworthy that Judge Bason devoted over 31 pages and 74
separate findings of fact establishing the unquestionable
conclusion that INSLAW created an enhanced version of PROMIS,
that was proprietary to it, using private funds. To suggest
otherwise in light of this record, and especially given the
obvious fact that the authors of the Bua Report did absolutely
nothing to review the findings of the bankruptcy court, as fully
adopted by the federal district court, is unconscionable.
5 According to the Bua Report, Videnieks asserted at trial
that he was told by INSLAW's comptroller that INSLAW had missed
at least one payroll. This was not true. Had the authors of the
Bua Report inquired of INSLAW, they would have found that INSLAW
never missed a payroll during the three years of the contract,
notwithstanding the fact that DOJ held back almost $2 million in
payments under the contract. Not surprisingly, as in virtually
every other instance in which DOJ's testimony supported the
conclusions that the authors of the Bua Report intended to reach,
they made no effort to verify the accuracy of that information
with INSLAW.
6 These words, that served as the theme for INSLAW's
prosecution of its civil claims, are taken from the
contemporaneous handwritten notes of DOJ Contracting Officer
Peter Videnieks for March 28, 1983:
Letter was Brick's idea - and I thought/think its the best
way -- Why do you need signature _if you got the goods?_"
(Emphasis added.)
7 At trial, Brewer denied this fact three times. (Brewer, T.
1692, 1694, 1702) This was the only circumstance in which
Videnieks could recall not following a Brwer guidance which would
have resulted in a destriment to INSLAW. (Videnieks, T. 1859-
1860, 1861) Even with this single exception, Videnieks
acknowledged that the only reason he ignored Brewer's guidance is
that DOJ's Administrative Counsel Snider applied pressure on
Videnieks to proceed on the basis of a bilateral contract
modification. (Videnieks, T. 1861-1862)
8 "Our computer" refers to a PRIME mid-range computer
belonging to DOJ's Executive Office for U.S. Attorneys that was
housed temporarily in INSLAW's Computer Center in Lanham,
Maryland. INSLAW used that computer temporarily to support the
PROMIS operation in the U.S. Attorney's Office for the District
of Maryland via telecommunications, while a computer center was
being built in the Baltimore U.S. Attorney's Office. This
activity is separate from INSLAW's use of its own VAX mid-range
computer at the same Lanham, Maryland computer center for
temporary computer time sharing of PROMIS in the 10 largest U.S.
Attorneys' Offices. It is the latter time-sharing that DOJ
refused to compensate INSLAW for in accordance with a Negotiated
Agreement. The wrongful withholding of payments for the later
PROMIS computer time sharing service is the principal sham
contract dispute described in Section C.6 of this document.
9 In late 1990 and early 1991, the Government of Canada
contacted INSLAW by telephone and by letter seeking information
about the availability of a French-language version of PROMIS and
disclosing that the English language version of PROMIS was then
operating in several departments and agencies of Canada's federal
government. The Canadian officials also told INSLAW that one of
these agencies, the Royal Canadian Mounted Police (RCMP), was
using PROMIS to support 900 office locations throughout Canada.
After the U.S. and Canadian media began reporting on this
disclosure and on INSLAW's claim that it had neither sold PROMIS
to the Government of Canada nor authorized others to do so on its
behalf, the Government of Canada retracted its prior oral and
written disclosures to INSLAW, attributing them to an unfortunate
mistake by the Canadian officials involved. Eventually, Canada
settled on the explanation that its Department of Public Works
had purchased six copies of the PROMIS software product
manufactured by Strategic Software Planning Corporation of
Cambridge, Massachusetts. According to that company, its PROMIS
software product is for project management in the construction
industry. Canada has never disclosed whether its Department of
Public Works also uses the Intelligence Report System that the
CIA claims to have acquired with its copy of PROMIS from the same
vendor.
10 INSLAW President, William Hamilton, recited in a sworn
affidavit filed in camera in U.S. District Court for the District
of Columbia on October 17, 1990 in support of INSLAW's request to
re-open discovery against DOJ, the statements that Carl Jackson
made to Mr. and Mrs. Hamilton and Jackson's claim to have
confirmed those facts in 1990 with Phillip Cammera.
11 This account by Bua cannot possibly do justice to the
PBI's probable reaction to the appointment of Denning as the
independent expert. Denning is the leading proponent within U.S.
academia for a controversial joint initiative of the FBI and the
NSA called the Clipper Chip. According to press accounts, Denning
is one of the few people outside of the U.S. Government who has
received a security briefing on the Clipper Chip. The Clipper
Chip was developed by NSA and proposed by the NSA and the FBI for
incorporation into computer hardware manufactured in the United
States. It is designed to preserve the technical capability of
the FBI and the NSA to eavesdrop on the computer-to-computer
communications of U.S. businesses.
12 Denning states that a new version of FOIMS created in 1983
was written in the NATURAL programming language and used the
ADABAS database management system (DBMS). A DBMS can be
analogized to an engine in a car, and the case tracking
application code can be analogized to the car itself. FBI
information system officials directly informed INSLAW in 1983,
however, that the new 1983 version of FOIMS would use ADABAS as
the DBMS, but would have newly-written COBOL-language application
code. Because of these representations to INSLAW in 1983, INSLAW
provided oral and written briefings to the FBI that year on how
it could avoid the delay and costs associated with writing a new
COBOL-language application system by, alternatively, inserting
the ADABAS "engine" into the tried and proven and thoroughly
debugged PROMIS COBOL code. Prior to providing these briefings to
the FBI, INSLAW consulted with technical representatives of
Software A.G. of North America, the vendor of both ADABAS and the
NATURAL programming language.
13 The ratio of numbers of line of code between COBOL and
NATURAL is 10 to 20 times as many COBOL lines of code as NATURAL
lines of code for the same application, according to Maguire. If,
therefore, FOIMS contained 570,000 lines of code written in the
NATURAL programming language, a corresponding case tracking
system written in COBOL would consist of 5.5 to 11 million lines
of COBOL code. INSLAW's PROMIS software is widely regarded as
extremely rich in case tracking functionality and yet it has only
about 500,000 to 600,000 lines of COBOL, code, with the exact
number dependent upon each customer's application of the on-line
DESIGN subsystem and its automated COBOL code generator. An
application software system such as a case tracking system that
contains the equivalent of millions of lines of COBOL is
extremely unlikely. If the PROMIS software were translated into
the NATURAL programming language, for example, it would have
about 30-60,000 lines of NATURAL code instead of 500-600,000
lines of COBOL code.
14 In these 1991 affidavits, Ben Menashe distinguishes
between the copy of PROMIS that Rafi Eitan allegedly obtained
during the early 1980's on a visit to the United States, and the
copy of PROMIS that Brian was marketing in Tel Aviv in 1987.
According to Ben Menashe, Israel was authorized by the United
States to use the initial Rafi Eitan copy of PROMIS solely for
the signal intelligence penetration of other governments, whereas
the copy of PROMIS that Israel allegedly purchased from Earl
Brian in 1987 was for the internal database management of Israeli
intelligence files.
15 Burns had succeeded Jensen as Meese's Deputy Attorney
General in July 1986, when Jensen became a U.S. District Judge in
San Francisco.
16 Deputy Attorney General Bums had himself written to
Ratiner in late August 1986, signaling DOJ's readiness to settle
rapidly the disputes underlying the