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

D. THE DEPARTMENT MISAPPROPRIATED INSLAW'S SOFTWARE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

According to Judge Bryant:

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

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

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

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

E. INSLAW DECLARES BANKRUPTCY AND PURSUES LITIGATION

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

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

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

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

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

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

* * * * * * *

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

* * * * * * *

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

* * * * * * *

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

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

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

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

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

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

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

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

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

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

and found

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

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

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

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

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

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

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

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

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

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

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

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

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

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

H. DEPARTMENT ASSERTS ERRONEOUS POSITION BEFORE DOTBCA

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

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

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

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

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

However, the DOTBCA judge responded:

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

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

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

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

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

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

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

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

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

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

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

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

I. DEPARTMENT ENCOURAGES CONTRACT MEDIATION WHILE IT HINDERS SETTLEMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

B. ENHANCED PROMIS MAY HAVE BEEN DISSEMINATED NATIONALLY AND INTERNATIONALLY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2. SWORN STATEMENT OF MICHAEL RICONOSCIUTO

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

6. Allegations of Promis Distribution to Agencies Within the Department

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

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

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

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

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

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

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

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

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

7. RONALD LEGRAND DENIES INSLAW'S ASSERTIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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