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The Barrons Article on Inslaw
Newsgroups: alt.conspiracy Subject: Repost - Barrons
Article on Inslaw Message-ID: <1992Aug22.093924.11815@usenet.ins.cwru.edu
Date: 22 Aug 92 09:39:24 GMT Date: Thu, 10 Oct 1991 17:40:40 CDT
Reply-To: dave 'who can do? ratmandu!' ratcliffe Sender: Activists Mailing
List From: dave 'who can do? ratmandu!' ratcliffe
Subject: the INSLAW Case: part I of "BARRON'S" 1988 2-part piece
Subject: the INSLAW Case: part I of "BARRON'S" 1988 2-part piece
Keywords: U.S. Deptartment of Justice != "with liberty and justice
for all" Lines: 510 although these 2 articles are dated by more than
3 1/2 succeeding years-worth of newer revelations and mounting evidence
of cynical corruption at the highest levels of the executive branch, as
well as linkages into the judicial branch of the u.s. government, they
still provide very useful and well-researched background material. In
his decision, [federal bankruptcy judge George] Bason compares the Justice
Department to someone who decides to test drive an automobile: "So
the customer drives off with the car and this is the last the dealer ever
sees of him. I think that is approximately what the Department of Justice
has done in this case." First of a 2-part piece which began in the
March 21, 1988 issue of "BARRON'S NATIONAL BUSINESS AND FINANCIAL
WEEKLY" -------------------
---------------------------------------------------------- Beneath Contempt
Did the Justice Dept. Deliberately Bankrupt INSLAW? By MAGGIE MAHAR "A
VERY strange thing happened at the Department of Justice . . ." What
that very strange thing was was described in clear and exhaustive detail
in Judge George Bason's blistering ruling before a packed Washington,
D.C., courtroom last September. In a quiet voice, Bason, a 56-year-old
federal bankruptcy judge with a reputation for being meticulous in his
judicial approach, told the astonishing story of INSLAW vs. the United
States of America. In his ruling on the case, Bason explained how "through
trickery, deceit and fraud," the U.S. Department of Justice "took,
converted, stole" software belonging to INSLAW, a Washington-based
computer software firm. In 1982, INSLAW signed a $10 million contract
to install its case-tracking software, PROMIS (Prosecutor's Management
Information System) in the Justice Department's offices. But instead of
honoring the contract, Bason asserts, Justice officials proceeded to purposefully
drive the small software company into bankruptcy, and then tried to push
it into liquidation, engaging in an "outrageous, deceitful, fraudulent
game of cat and mouse, demonstrating contempt for both the law and any
principle of fair dealing." Ultimately, the series of "willful,
wanton and deceitful acts" led to a cover up. Bason called statements
by top Justice Department officials "ludicrous . . . incredible .
. . and totally unbelievable." Some of the evidence against the department
came from one of its own. During the course of the litigation, Anthony
Pasciuto, deputy director of the department's Executive Office for United
States Trustees, met secretly with INSLAW'S president, William Hamilton.
At that breakfast meeting at the Mayflower hotel, Anthony Pasciuto told
Hamilton and his wife, Nancy, how the Justice Department had pressured
Trustee officers to liquidate their company. Later, a superior confirmed
Pasciuto's story. But at the trial, a horrified Pasciuto listened while
his superior changed his testimony. Close to tears, he, too, recanted.
Judge Bason believed Pasciuto's original testimony however. On Feb. 2,
1988, he ordered Justice to pay INSLAW about $6.8 million in licensing
fees and roughly another $1 million in legal fees. Bason wasn't sure whether
he could assess a department of the U.S. government with punitive damages.
If so, damages could run as high as $25 million. Bason struggled with
that legal question and finally postponed the decision to a later date.
Now, no one knows how Judge Bason would have ruled on the question of
damages. In November, Judge Bason rejected a Department of Justice motion
to liquidate INSLAW. A scant one month later, the Harvard Law School graduate
and former law professor discovered that he was not being reappointed.
The decision to replace him followed from a recommendation made by a four-man
merit selection panel appointed by the chief circuit judge, Patricia Wald,
a former Justice Department employee. The panel was headed up by District
Judge Norma Johnson, another former Justice Department lawyer. Judge Bason
stepped down in February. He was replaced by S. Martin Teel Jr., 42, one
of the Justice Department lawyers who had unsuccessfully argued the INSLAW
case before Bason. Even jaded, case-hardened Washington attorneys called
the action "shocking" and "eerie." INSLAW'S case will
be assigned to another judge for disposition of damages. Meanwhile, the
Justice Department is appealing Judge Bason's initial $8 million award
to U.S. District Court. And, last week, the Internal Revenue Service descended
on the Hamiltons, demanding that the bankrupt company pay $600,000 in
back taxes-- immediately. "I restrained the IRS from going after
the Hamiltons personally--just a few days before I left the bench,"
Bason recalls. "But that restraining order lasts only 10 days. I
don't know what's happening now." "It seemed as if the controversy
was winding down," observes INSLAW'S former attorney, Leigh Ratiner.
"It would follow a natural course in the press, and then fade from
view." Inslaw would become another shocking event that slinks off
into obscurity: Someone occasionally might dimly remember and idly ask,
"What ever did happen to Bill Hamilton and those INSLAW people? A
real shame . . . I heard the judge was back teaching law somewhere. .
. ." But at the end of last week Anthony Pasciuto instructed his
lawyer to write a letter to Deputy Attorney General Arnold Burns. Pasciuto
has decided to tell the full story that he began telling at the Mayflower
last spring. And, in an interview with "Barron's" at the end
of the week, Pasciuto explained how the Justice Department black-listed
INSLAW. It was a tale that involved two U.S. trustees, a federal judge
who told two versions of the same story, and a Justice Department that
routinely refused to pay certain suppliers: "If you're on the bad
list, you go in this drawer," another Justice Department employee
explained to Pasciuto. Pasciuto knows what happened--but not why. In the
trial, INSLAW claimed that C. Madison "Brick" Brewer, the Justice
Department employee responsible for administering the department's $10
million contract with INSLAW, held a grudge against the company: INSLAW's
Hamilton had fired Brewer in 1976. But since the trial, Hamilton has become
convinced that Brewer alone could not have been that powerful. Bason's
removal and Pasciuto's account suggest that what motivated the remarkable
behavior of the Justice Department was something of greater moment than
a middle-level employee's petty grievance. Indeed, three people have lost
their jobs as a result of the INSLAW scandal--but not paradoxically, those
responsible for the scandals. The trio of victims includes Judge Bason
and Pasciuto-- who received notice that he would be fired after he testifed,
and just two days after Judge Bason was informed that he would not be
reappointed. The third casualty of the Inslaw affair was Leigh Ratiner
a former partner at Dickstein Shapiro and Morin, the firm that represented
Edwin Meese during his confirmation hearings for Attorney General. Why
Bason and Pasciuto got the axe can easily be inferred. Ratiner's forced
departure is a little more complicated. In January 1986, Elliot Richardson
asked Ratiner to take on INSLAW'S defense. Ratiner agreed, and named D.
Lowell Jensen, then the Deputy Attorney General, and a long-time Meese
friend, in a complaint. Not long after, Meese discussed the case with
another Dickstein, Shapiro partner, Leonard Garment, the attorney who,
along with E. Robert Wallach, represented Meese in his confirmation hearings.
Meese acknowledged the conversation in a pretrial interrogation. Shortly
thereafter, his partners at Dickstein, Shapiro asked Ratiner to resign.
The Senate's Permanent Subcommittee on Investigations is now looking into
INSLAW--a sign that the lawmakers, too, think that the whole story of
the "something strange" that happened in the Justice Department
has yet to be told. The Hamilton's attorneys aren't sure why a department
of the U.S. government wanted to liquidate their company. Anthony Pasciuto
doesn't know. Judge Bason is still trying to piece together who had it
in for him and why. But Bason, Hamilton and the attorneys involved in
the case are beginning to define the pieces of the puzzle with some pointed
questions. Why did the Justice Department hire Brick Brewer, a former
INSLAW employee, to supervise a contract with his former employer? "The
person is going to be biased in favor of the former employer- -or he is
going to be biased against the former employer," Bason pointed out
in his decision. The judge also noted that D. Lowell Jensen, the former
deputy Attorney General named by Ratiner in his complaint, was questioned
on this issue. Jensen, now a federal judge in California, "recognized
the general principle that it is a bad idea" to hire a former employee,
disgruntled or otherwise, for such a task, Bason observes. But, Bason
wrote, he was amazed to find "no hint in Jensen's testimony that
he recognized there was any possible applicability of that general principle
to the case of Mr. Brewer and Inslaw." Hamilton discloses that Mr.
Jensen himself was already familiar with INSLAW. Hamilton ran into Jensen
in the early 1970s, when Hamilton was developing PROMIS, the case-tracking
system that he contracted to sell to the Justice Department. At that time,
Jensen, a long-time friend of Ed Meese, was district attorney in Alameda
Country in northern California, developing his own computerized case-tracking
system, DALITE. Jensen competed with Hamilton's PROMIS head-on-head. PROMIS
won. Hamilton and others familiar with the case ask: Could Jensen still
be feeling competitive? People who have "tracked" the INSLAW
case point to the coincidences of timing: INSLAW'S problems with the Justice
Department erupted soon after Jensen was promoted to Associate Attorney
General--the No. 3 person in the department--in 1983. Hamilton reveals
another curious coincidence: About 90 days before the Justice Department
contract began to fall apart, he received a phone call from Dominic Laiti,
chairman of Hadron Inc., a company in which Earl Brian, a long-time Meese
colleague, holds an interest (see "Brain's Meese Connection"
posting following this one, from Barron's Jan. 11, 1988 issue). Brian's
Infotechnology controls four of six seats on Hadron's board. Laiti told
Hamilton, according to Hamilton, that Hadron intended to become the dominant
supplier of computer software and services to law enforcers and courts
and related agencies, and that Hadron wanted to buy INSLAW. "We have
ways of making you sell," Hamilton quotes Laiti as saying. Laiti
insists: "I have no memory of this. It all sounds ridiculous to me."
The bizarre web of coincidences and connections includes AT&T. AT&T
had a contract with INSLAW and, during bankruptcy proceedings, declared
itself a major creditor. Then, Hamilton alleges, AT&T's attorney began
to behave less like someone representing a creditor interested in salvaging
the company than like an attorney for the Justice Department bent on liquidating
it. More coincidences: AT&T's outside counsel, Ken Rosen, was with
an obscure New Jersey firm, but formerly had been a member of Deputy Attorney
General Burns's New York law firm. Rosen's co-counsel, Shea & Gould,
is not AT&T's usual outside counsel, either, though it is the firm
used by Earl Brian. Bason questions the failure of high Justice Department
officials to take any action to investigate serious allegations of misconduct.
Both Hamilton and his attorney, Elliot Richardson, complained about Brewer's
handling of the contract, and requested an investigation. "There's
such a contrast between the total inaction on the part of Justice Department
regarding Mr. Brewer--and the hammer and tongs approach they're using
with Mr. Pasciuto," Bason observes. Last Thursday, Pasciuto's attorney,
Gary Simpson, delivered his letter to Deputy Attorney General Burns--and
met with the Senate committee. At the end of the week, that committee
met with Bason, as well. Senator Nunn's committee may find some answers--and
ask more questions--that will illuminate this bizarre story. For now,
Pasciuto does know what happened to him and his tale provides a window
on the strange thing that happened to INSLAW. In March of 1982, William
Hamilton could probably envision his face on the cover of Fortune. He
had just won the $10 million, three-year contract with the Justice Department
to install PROMIS in the department's 20 largest U.S. Attorney's offices,
and to develop a separate program for its 74 smaller offices. Hamilton,
who had contracts with private firms as well, now had a deal with the
nation's premier law firm: the Department of Justice. PROMIS was unique,
and those 94 U.S. Attorney's offices represented an entering wedge: Hamilton
could dream of capturing the federal judicial system's entire caseload.
In the fiscal year October 1, 1982, INSLAW's revenues went up about 35%
to $7.8 million, with more than half of those revenues coming from the
Justice Department contract. But then, that funny thing happened. The
Justice Department began postponing payments. In July 1983, Hamilton says,
the department suspended nearly $250,000 in payments, alleging that the
company was overcharging the government for time-sharing. In February
1985, the government terminated the contract with smaller offices that
had been generating revenues of $200,000-$300,000 a month. INSLAW's cash
flow shriveled. By Feb. 7, 1985, the government had withheld $1.77 million.
Inslaw twisted and turned, trying to negotiate with the Justice Department,
desperate to find out what went wrong. Finally, in financial shambles,
INSLAW filed for bankruptcy in late February. The Department of Justice
kept the INSLAW software--and kept on using it. In his decision, Bason
compares the Justice Department to someone who decides to test drive an
automobile: "So the customer drives off with the car and this is
the last the dealer ever sees of him. I think that is approximately what
the Department of Justice has done in this case." In last week's
letter to Deputy Attorney General Burns from Pasciuto's attorney, Gary
Simpson, Pasciuto suggests a pattern of harrassment that helped drive
INSLAW into Chapter 11. According to Pasciuto, in June of 1984, Robert
Hunneycutt, who worked in the Department of Justice's finance offices,
told him about his practice of dividing contractors' bills into three
piles. "One pile he would pay right away; the next pile when he got
around to it; and then he opened a drawer and pointed to some invoices
in the drawer and said: "These invoices may never get paid.'"
Hunneycutt then identified such invoices as belonging to companies on
the "bad list." "Mr. Pasciuto asked who was in that pile,"
the letter to Burns goes on, "and he said that INSLAW was an example
and that `People in the U.S Attorney's offices don't like INSLAW they
are in this pile. . . .'" When "Barron's" phoned Hunneycutt,
he returned the call, and left this message: "Mr. Hunneycutt knows
nothing." In a subsequent conversation, he denied the conversation
with Pasciuto. But Hamilton claims that the Justice Department was trying
to starve INSLAW. They didn't just push to bankrupt the software firm,
he insists, they wanted to liquidate it, converting it from Chapter 11
to Chapter 7, as soon as possible. Why? Hamilton speculates that Justice
may have wanted to push INSLAW into an auction where PROMIS could be purchased
cheaply by someone that the department viewed more favorably. Indeed,
the Justice Department did move for liquidation. And on St. Patrick's
Day 1987, Anthony Pasciuto met with the Hamiltons at the Mayflower and
gave them a fuller picture of what was happening to them. A mutual friend,
Mark Cunniff, executive director of the National Association of Criminal
Justice Planners, asked Pasciuto to go to that breakfast meeting at the
Mayflower. "I said, `Don't you know what you're asking me to do?'"
Pasciuto recalls. "He said, `I know.'" "I knew him for
19 years," Pasciuto explains. "I said, `Mark, I'm doing it for
you--and for these poor people.' I knew they had five kids," adds
Pasciuto, a graying 44-year-old All-American "nice guy" with
a strong Boston accent, and an open, slightly pockmarked face. Pasciuto
has been married for 21 years, in government service for 21 years, and
still wears his class ring--U. of Mass., 1965. So, at the Mayflower, Tony
Pasciuto remembers he tried to help Bill and Nancy Hamilton--and confirmed
their most paranoid fantasies: The Justice Department was out to get them.
At the meeting with the Hamiltons Pasciuto told them that his boss, Thomas
Stanton, director of the Justice Department's Executive Office for U.S.
Trustees, was pressuring the federal trustee overseeing the INSLAW case.
William White was being pressed to liquidate INSLAW. According to Pasciuto,
in 1985 White told him that he was resisting the pressure. As a result,
White informed Pasciuto, Stanton denied White's Alexandria office administrative
and budgetary support and, at the same time, tried to have an assistant
from the U.S. Trustee's office in New York take over the case and convert
it. The Hamiltons were told by Pasciuto that Cornelius Blackshear, the
U.S. trustee in New York at the time of INSLAW's Chapter 11 filing, knew
all about Stanton's plan. Pasciuto said that Judge Blackshear had repeated
this tale of pressure in the presence of United States Court of Appeals
Judge Lawrence Pierce in the judge's chambers in Foley Square in New York.
Pasciuto also told the Hamiltons that the Justice Department had blacklisted
INSLAW on the department's computer system procurements. On March 25,
1985, INSLAW's lawyers deposed Blackshear, and he confirmed the story
of pressure to liquidate INSLAW. The very next day, March 26, Blackshear
met with a Justice Department representative, and signed a sworn affidavit,
recanting, and saying that he had confused INSLAW with another case--United
Press International, which had also been involved in bankruptcy proceedings
in Judge Bason's court. "I know the difference between UPI and INSLAW,
I'm not that dumb," Pasciuto observes. He spells it out with a finger:
"U--P-- I." Cornelius Blackshear left his position as United
States Trustee and became a United States bankruptcy judge the following
fall. According to Pasciuto, Judge Blackshear discussed INSLAW in Judge
Pierce's chambers. But when questioned on the point, Judge Pierce told
"Barron's": "I have made it my business not to get into
the particulars of whatever Tony [Anthony Pasciuto] got himself into the
middle of. Apparently, he thought his employer was doing something that
was not kosher. I told him I didn't want to know about it--if he needed
to, he should hire an attorney." When "Barron's" offered
to recount the details Pasciuto allegedly discussed in his presence, the
judge grew agitated: "Don't tell me--I don't want to hear it. I don't
want to know about it." "I did ask him for help--six months
before it all happened. I didn't know what to do," Pasciuto recalls.
"Judge Pierce and I go back to the time when I was an assistant dean
at the School of Criminal Justice in Albany--in 1972. He was a visiting
faculty member for one year. We became good friends. I considered him
a father figure. In his ruling, Judge Bason noted that Blackshear had
given "two different versions of the same event" and decided
that other evidence supported the first version. White also denied the
story of political pressure in court and Judge Bason asserted in his June
1987 ruling, "What I do believe is that Mr. White has a capacity
to forget . . . a capacity which probably all humans share to some degree
or another." Judge Bason went on to point out: "Mr. White has
just recently joined a large law firm that practices primarily in Virginia
and primarily in bankruptcy matters. Mr. White's future with the firm
that he so recently joined could well be dependent on income- producing
work that he does. . . . It seems to this court that Mr. White is not
in a position at this point in his career to jeopardize his relationship
with the U.S. Trustee's office in Alexandria, and for him to testify in
a way that would be strongly disliked and disfavored by the Executive
Office for U.S. Trustees could well have an adverse impact on the relationship
between the executive office and the Alexandria office and, in turn, a
relationship between Mr. White and the Alexandria office." But in
late spring of 1986, White was still a U.S. Trustee, and Pasciuto recalls
one more incident involving INSLAW. White called Pasciuto and asked for
an extra filing cabinet for his INSLAW files. "I said, `You've got
plenty of them over there,'" Pasciuto recalls. White responded, "I
know, but I need another one because I need to put all the INSLAW files
in one cabinet and lock it." White was discreet. So, on June 1, 1987,
when Anthony Pasciuto walked into that packed D.C. courtroom to take the
stand in the INSLAW case, he knew that White would not support his story.
He also knew that Judge Blackshear had changed his original story. As
Pasciuto's lawyer puts it in the letter to Burns: "Mr. Pasciuto was
now the only person with recollection of conversations with U.S. Trustees
in which Mr. Stanton was identified as having put pressure regarding the
INSLAW case. Other people's recollections were being erased by mechanisms
best known to them." Pasciuto's boss, Stanton, apparently put his
own pressure on Pasciuto. Beginning in 1985, according to the letter to
Burns, Pasciuto began reporting his concerns about substantial deficits
in the U.S. Trustee's office to Stanton. In 1986, Pasciuto spoke to the
Department of Justice's finance staff and by late 1986, he says he had
gone on record with the Office of Professional Responsibility about financial
indiscretions by Stanton. According to Pasciuto, Stanton in September
1986 called him a "traitor." Pasciuto began actively looking
for other employment, including a job as Assistant U.S. Trustee in Albany,
N.Y. But no transfers were available for Anthony Pasciuto--until he was
subpeonaed to testify in the INSLAW case. "Within an hour of receiving
that subpeona to testify, Mr. Pasciuto was given a copy of an appointment
paper for a job as the Assistant United States Trustee, Albany, New York,
signed by Mr. Stanton," Simpson, Pasciuto's attorney, reports in
last week's letter to Burns. After the trial was over, however, Pasciuto
was told that the procedure "was changed" and that the deputy
Attorney General would have to sign off on the form. That never happened.
But Pasciuto, who believed the signed appointment papers, sold his house
in Maryland for $200,000 and bought a house in Albany for $250,000. On
the day the movers came, he was told that the sale of the Maryland house
had fallen through. "We had to move, we had to carry two houses--and
we couldn't even move into the Albany house yet because the owners wouldn't
be moving out for a month," Tony Pasciuto recalls. "So, we stayed
with in-laws for a month." That was May 22, 1987. Nine days later
Tony Pasciuto walked into court. When he entered the court room on June
1, 1987, Pasciuto was not represented by counsel. According to Simpson,
his attorney: "The Justice Department attorney who was handling the
INSLAW case, Mr. Dean Cooper, did not prepare him well for his trial testimony.
The paralegal who was taking notes during the witness preparation says
that he has lost the notes of that meeting." When the questioning
began, Pasciuto must have realized that the Justice Department attorney
was not going to guide him gently through his story. One of Cooper's first
questions was "whether [Pasciuto] had been seeing a doctor about
a stressful condition." In his letter to Burns, Simpson explains:
"Mr. Cooper apparently knew that Mr. Pasciuto had been seeing a psychiatrist
in connection with personal problems that he had been experiencing and
Mr. Pasciuto . . . now knew that the United States Department of Justice
was prepared to stoop to the level of bringing his personal problems into
the INSLAW case to get him to be careful about what he said." Apparently,
the tactics worked. Pasciuto recanted, saying that the statements he made
to the Hamiltons at the Mayflower were made in an effort to hurt Stanton,
who was blocking his promotion. Judge Bason remembers the scene: "Mr.
Pasciuto seemed to be basically a very honest person who had been caught
up amongst a gang of very tough people--and he just didn't know what to
do. He was a career federal employee and he was petrified. He probably
had a vision of losing his job, his marriage, everything. Probably he
thought the only way he could save anything was to recant. I had to adjourn
at one point during his testimony--he was close to tears." But Pasciuto
didn't save his career. And now, in the letter to Burns, he has come forward
to make a full disclosure. Last week's letter to Burns contains a compelling,
painful vignette of a chance meeting between Pasciuto and Blackshear,
about a month after the trial, on July 11, 1987. If Hamilton felt floored
by Pasciuto's testimony, so Pasciuto must have felt betrayed by Blackshear's
change of heart. The meeting was awkward. As Simpson tells the story in
the letter to Arnold Burns, it was six in the evening, when Pasciuto and
his wife were leaving the home of a mutual friend, Harry Jones, now U.S.
Trustee for the Southern District of New York. Judge Blackshear came up
to Tony Pasciuto, put his arm around him, and said, "I am sorry,
it will be all right." Pasciuto replied: "No, it is not going
to be all right, they are going to fire me." Blackshear responded,
"They are not going to fire you. Don't they know how much you know?"
Pasciuto: "Yes, but they don't care." Blackshear: "But
you told the truth." Pasciuto: "Of what importance is the truth
if everyone else is lying?" Blackshear: "These people came up
from Washington and the U.S. Attorney's office; I got confused. I thought
that by changing my story I would hurt less people. I didn't know you
were subpoenaed until I saw your testimony, which was sent to me by Barbara
O'Connor." Pasciuto: "Do you remember what we talked with Judge
Pierce about?" "I wanted to see if he was going to continue
his crap," Pasciuto recalls. "But he dodged--literally backing
away from me--saying, again, `They sent someone from Washington and someone
from the U.S. Attorney's office. I felt the easiest thing to do was recant.
I felt less people would be hurt if I just bailed out.'" In Simpson's
version, Judge Blackshear had received two telephone calls from William
White the day he changed his story. White told him he had the wrong case.
Pasciuto, exclaimed, sarcastically: "What! They asked you about converting
*another* case [from Chapter 11 to Chapter 7]?" Blackshear, waving
his hand: "I don't want to get into it and who the hell cares?"
Today, after listening to Simpson's version, Blackshear states: "I
don't remember the specifics, word for word, but I do remember having
that conversation. And I don't have any problems with what Tony remembers."
Recalling the scene, Pasciuto says: "You know, even now--I'm not
angry. I can't help it. I'm not. Blackshear is basically a wonderful person.
It's sad--I'm sorry, I'm not angry. It really is sad. I feel devastated."
Tony Pasciuto now has a house in Albany, and soon will have no job either
in Washington or New York. Over the past nine months, he has spent $12,000
commuting from Albany to the job he still clung to in D.C. Legal fees
are draining his savings--the bills total $25,000 so far. "We're
lucky that my wife and I were always frugal and have the money saved,"
he says proudly. But Tony Pasciuto is frightened. "At work, ever
since I got the letter saying they were firing me, I've felt like I was
underhouse arrest," he relates. "People come by my office to
see if I'm there. If I leave, I have to sign out. Everyone is supposed
to, but normally very few people sign out. If I don't, they try to track
me down. If I go to the Men's Room, they come looking for me. "I'm
just a GS 15," adds Pasciuto, referring to his level in government
service. "Stanton, my boss, can't fire me. Stanton made the accusations,
but the deputy Attorney General, Arnold Burns, will fire me. How does
it feel to know that the deputy Attorney General of the United States
wants to destroy a GS 15? It's scary. It scares me to death." Subject:
the INSLAW Case: part II of "BARRON'S" 1988 2-part piece Keywords:
U.S. Deptartment of Justice != "with liberty and justice for all"
Lines: 877 That the U.S. Justice Department could engage in a vendetta
that would end the career of a federal judge, bankrupt a company, force
a partner out of his law firm, cause another federal judge to recant under
oath and reach down and wreck the career of a 21-year government-service
employee--that's the stuff of a spy novel, set, one would hope, in another
country. But resignations en masse from a Department of Justice inhabited
by "moles" suggest alarming facts, not diverting fiction. Conclusion
of a 2-part piece which appeared in the April 4, 1988 issue of "BARRON'S
NATIONAL BUSINESS AND FINANCIAL WEEKLY" This part was the cover story
with the following title emblazzoned above the seal of the United States
Department of Justice: Rogue Justice: Who and What Were Behind The Vendetta
Against INSLAW? ------------------------------------------------------------------------------
Rogue Justice What Really Sparked the Vendetta Against INSLAW By MAGGIE
MAHAR TWO weeks ago, "Barron's" told the story of INSLAW, a
small software company that landed a $10 million contract with the Justice
Department in 1982. Bill Hamilton, INSLAW'S 42-year-old founder was jubilant
when Justice bought the Prosecutor's Management Information System (PROMIS),
which he had spent his life--and his life's savings--building. But then
things took a mysterious and nasty turn. Justice began withholding payments.
Contract disputes multiplied. Threats accelerated. Bill Hamilton couldn't
understand what was happening or why. But he knew INSLAW's cash flow was
shriveling. By 1985, INSLAW was in financial shambles, and Bill Hamilton
ended up in federal bankruptcy court. And there, last fall, a federal
bankruptcy judge handed down an astonishing ruling. Judge George Bason
found that the Justice Department had purposefully propelled INSLAW into
bankruptcy in an effort to steal its PROMIS software through "trickery,
deceit and fraud." On Feb. 2, 1988, Bason ordered the Department
of Justice to pay INSLAW about $6.8 million in licensing fees and roughly
$1 million in legal costs. He postponed a decision on punitive damages--which
could run as high as $25 million. Trial testimony revealed an unexplained
series of "coincidences" surrounding the INSLAW case, including
the fact that Justice appointed C. Madison "Brick" Brewer to
oversee the INSLAW contract. Brick Brewer had worked for Hamilton--until
Hamilton fired him in May 1976. After listening to Brewer's testimony,
Judge Bason wrote that he could not understand why Justice picked a man
"consumed by hatred" to administer the contract with a former
employer. He also couldn't fathom why top department officials ignored
complaints from INSLAW attorneys when Brewer began withholding payments.
"A very strange thing happened at the Department of Justice . . .,"
observed Judge Bason, leaving open the question as to just why, at the
highest levels, the U.S. Department of Justice condoned a vendetta against
a small, private U.S. company. It was November of 1987 when Judge Bason
rejected a Justice Department motion to liquidate INSLAW. Not quite one
month later, Judge Bason learned that he would not be reappointed to the
bench. In the past four years, only four of 136 federal bankruptcy judges
seeking reappointment have been turned down. Bason was replaced by S.
Martin Teel, one of the Justice Department attorneys who unsuccessfully
argued the INSLAW case before him. Bason observes that the Justice Department
will now have a "third bite of the apple" on the question of
punitive damages. Judge Teel has recused himself from the case, and the
Justice Department is appealing. So INSLAW vs. the United States of America
hangs in limbo. The INSLAW case also left a Justice Department whistle-blower
waiting for the verdict on his 21-year career. When "Barron's"
began reporting the INSLAW story two weeks ago, we interviewed Tony Pasciuto.
Pasciuto revealed how a Justice Department colleague responsible for paying
contractors' bills said he divided them into three piles: "One pile
he would pay right away, the next pile when he got around to it, and then
he opened a drawer and pointed to some invoices in the drawer and said,
`These invoices may never get paid. If you're on the bad list you go in
this drawer.'" INSLAW was on the bad list. Pasciuto also repeated
what he had been told by Cornelius Blackshear, a federal judge and former
U.S. Trustee based in New York. Blackshear had confided that his Justice
Department superior in Washington was pressuring him to send someone down
to D.C. to help liquidate INSLAW. Apparently, Washington wanted to make
sure that the job was done. When INSLAW's lawyers deposed Blackshear,
he confirmed the story. During INSLAW's suit, Judge Blackshear recanted.
Meanwhile, about one hour after Pasciuto was subpoenaed to testify, his
superiors in the Justice Department offered him a long-awaited transfer
to Albany, N.Y. Feeling scared and "out there all alone," Tony
Pasciuto bought a house in Albany and changed his story. Close to tears,
he recanted on the stand. Judge Bason recalls the scene: "Mr. Pasciuto
seemed to be basically a very honest person who had been caught up amongst
a gang of very tough people--and he just didn't know what to do."
According to Pasciuto, after he testified, Judge Blackshear met him at
a party and said, "I'm sorry. . . . These people came up from Washington
and the U.S. Attorney's office. I got confused. I thought that by changing
my story I would hurt less people." When "Barron's" read
Pasciuto's version of the conversation to Judge Blackshear, a weary-sounding
Blackshear confirmed it: "I don't remember the specifics word for
word. But I do remember the conversation. And I don't have any problems
with what Tony remembers." Meanwhile, after Tony Pasciuto recanted
in court, the Justice Department told him, "Sorry, the procedure
was changed. No transfer to Albany." Then, B. Boykin Rose, one of
the Justice Department officials who resigned last week, wrote a letter
to Deputy Attorney General Arnold Burns--another member of the Justice
group who bailed out--recommending that Pasciuto be fired. When "Barron's"
last talked to Pasciuto, he was commuting from the new house in Albany
to a job in Washington, where he said, "I feel like I'm under house
arrest." And he was awaiting the end of his 21-year career in government
service. "My boss, Thomas Stanton, can't fire me," Pasciuto
explained. "The Deputy Attorney General, Arnold Burns, will fire
me. How does it feel to know that the Deputy Attorney General of the United
States wants to destroy a GS15? It's scary. It scares me to death."
Last week, Burns led the dissidents out of the department. Tony Pasciuto's
tale is chilling. And it raises two equally disquieting questions: Why
did the U.S. Department of Justice want to liquidate Bill Hamilton's software
company? And, how high did the coverup of the scheme to destroy INSLAW
go? WHEN six Department of Justice officials resigned last week, department
spokesmen insisted that they were NOT leaving because they feared Attorney
General Edwin Meese was about to be indicted. Nor had they beaten their
wives--should anyone ask. But, according to "Barron's" sources
inside Justice, their exodus represents the climax to a much larger, subterranean
game of musical chairs that has been going on in the Department of Justice
for the past 18 months. "I know of at least 50 or 60 career government
employees who have been reassigned or forced out," says one department
insider. Another charges the department with using FBI background checks
in order to manufacture reasons for forcing employees to leave. "They're
trying to find--or force--openings for political appointees that they
want to bury as what we call 'moles' in the department," explains
a longtime Justice Department hand. "They bury the moles so that
the next administration can't find them." The moles, he goes on,
are political appointees who are moved into GS (government service) jobs
normally held by career government employees. "It could take the
next administration two years to figure out who are the career employees
and who are the political appointees dropped into their slots," he
says. "In the meantime, the moles will be in place--and they'll have
the historical knowledge of how the organization works--everyone else
will be gone." But even while the moles are burrowing in, the rumor
among them is that sunlight is about to flood the shadowy reaches of the
department. For last week's resignations suggest that Special Prosecutor
James C. McKay is coming closer to addressing the question: "Was
there justice at Justice during the past four years?" The INSLAW
affair suggests a disquieting answer, for the virtually unpublicized case
serves as a window on how Justice did business during the Meese years.
In his blistering ruling, Judge Bason charged that the department committed
a series of "willful, wanton and deceitful acts . . . demonstrating
contempt for both the law and any principle of fair dealing." Originally,
Bill Hamilton, INSLAW's founder, thought that only one mid-level Justice
Department official was willfully and deceitfully out to get him: C. Madison
"Brick" Brewer, the former employee whom he had fired. When
Hamilton and his wife, Nancy, put their six children in the family station
wagon and drove to a federal court on June 9, 1986, to file a suit against
the United States government, they firmly believed that Brewer was their
nemesis. But as the trial progressed, their certainty gave way to doubts.
Why did Justice put Brewer in that critical and, under the circumstances,
highly improper position--and allow him to remain? Why did the Justice
Department refuse to settle? Why were the government's lawyers, seemingly
not satisfied with bankrupting INSLAW, pressing so hard to liquidate the
company? When the trial was finally over at the end of 1987, Bill and
Nancy Hamilton had won their case, but they still wanted to know why their
company was near ruin. So they followed the counsel of Elliot Richardson,
one of their attorneys: They sat down at their dining room table, made
a list of all the anomalies in the baffling case, and tried to puzzle
out the mystery. "These were all things we were aware of, yet until
you organize them and put them side by side, you don't see them,"
Hamilton observes. "But seeing the strange incidents and coincidences
all together, suddenly it popped out at me. There was a coverup--and it
wasn't just to protect Brick Brewer. For instance, someone had persuaded
Judge Blackshear to recant under oath within 48 hours of his original
deposition. Who would have that power? You don't do that to a federal
judge to protect Brick Brewer--it's too risky. That's when I became convinced
then that there was criminal liability at the highest levels of the department.
Then, I started to look at the pieces. And, every time I picked up a rock
and turned it over, it seemed to fit." Now, looking back five years,
Bill Hamilton believes he understands the reasons for the oppressive behavior
of the Justice Department. And he thinks he had an early warning about
the department's methods. But he didn't take the warning phone call seriously.
As Bill Hamilton tells it, it was April of 1983, and he was sitting in
his office--right across the street from the "Washington Post"--when
he received the call from Dominic Laiti, chairman of Hadron Inc. "Laiti
identified himself, and said that Hadron intended to become the leading
vendor providing software for law enforcement nationwide," Hamilton
recalls. "He said they had purchased Simcon, a manufacturer of police-department
software--and Acumedics, a company that provides computer-based litigation
support services for courts. `Now,' Laiti told me, `we want to buy INSLAW.'"
"I told him he had just described our ambition," Hamilton relates.
"We intended to become the major vendor of these software services
ourselves--and we were not interested in being acquired." But Laiti
kept pushing, and, according to Hamilton, boasted, as he remembers, "We
have very good political contacts in the current administration--we can
get this kind of business." The words would reverberate in Hamilton's
memory later, but, at the time, he didn't heed the implicit threat. He
just repeated, "We're not interested in selling," whereupon,
he says, Laiti retorted, "We have ways of making you sell."
The story sounds fantastic. Laiti calls it "ludicrous." Is Hamilton
making it up? "I would think the whole tale was fantasy-- if I hadn't
been involved in investigating the Iran-Contra affair," confides
a Senate staffer now involved in an investigation of the Justice Department's
software contracts. And Judge Bason states that Hamilton was a levelheaded
witness with a scrupulously honest memory: "I was particularly impressed
in the last phase of the trial," Bason recalls. "Hamilton could
very easily have testified positively in a way that would have been favorable
to his case--to an extent of about $1 million. Instead, he testified,
`This is my best recollection--but I am not sure.' The contrast between
that and the government witness who was so obviously disingenuous!"
The call from Hadron was strange, so Hamilton remembered it, but in 1983
he shrugged it off. "I politely, but firmly, cut off the conversation.
I'd never had a conversation like that with someone in the software industry.
I thought Hadron must be new to software--maybe they were used to an industry
where this kind of talk was more prevalent." But now, Hamilton surmises
that his troubles may have begun with that phone call. Within 90 days
of Laiti's threat, he says, the Department of Justice mounted its attack.
And, Hamilton alleges, the attack ultimately became a vendetta, a vendetta
that could have been inspired by the convergence of three interests: Hadron,
the brazenly aggressive competitor controlled, from behind the scenes,
by a Meese crony from his salad days in California: Dr. Earl Brian. Brick
Brewer, the embittered former employee who, as project manager, was in
a strategic position to do INSLAW harm. D. Lowell Jensen, then the deputy
Attorney General, and a ghost from INSLAW's own California past. Jensen
had developed a software product to compete with INSLAW and lost--back
in the 1970s when Jensen was a D.A. in Alameda County. But Jensen did
have the good fortune to meet Ed Meese in the D.A.'s office. So years
later, Jensen became top-ranking member of the "Alameda County Mafia,"
which found a home in the Ed Meese Justice Department. When Bill Hamilton
sat down, in good faith, to negotiate a deal with the Justice Department,
the people on the other side of the table were not dispassionate government
officials. They were instead a hostile crew, inspired apparently by old
scores and private interest. Whether carefully organized or spontaneously
launched, the attack was successful--for a while, anyway. When the principals
and the department were suddenly in danger of exposure, Hamilton charges,
the cover-up spread out to embrace the Justice Department bureaucracy,
the IRS, and Jensen's successor--former Deputy Attorney General Arnold
Burns--one of the six who quit last week. "They circled their wagons,"
Judge Bason wrote. The defense became an offense, and an attorney, a Justice
Department whistle- blower, and the judge himself all lost their jobs.
Today, only two of the three have found work. Hamilton is luckier. IBM
has become INSLAW's savior--rescuing the company from the auction block,
and vindicating the worth of its product. Meanwhile, some Senate staffers
looking into the INSLAW case believe that it raises questions about Project
Eagle, a much larger scheme to computerize the Justice Department, the
$200 million contract is scheduled to be awarded before the end of the
year. The deeply troubling questions about INSLAW remain. If anything,
they are magnified by last week's departures from Justice: "Why?"
and, "How High?" "Start," Bill Hamilton says, "with
Hadron." For Hadron is indeed, as Laiti allegedly boasted, "well-connected
in the Administration." It is controlled by Dr. Earl Brian, the longtime
friend of Ed Meese who owns Financial News Network ("Barron's,"
Feb. 29[, 1988]). In fact, business dealings between the Meese family
and Brian's company imperiled Meese's 1984 nomination. And Hadron, Hamilton
charges, is one of the keys to the mystery of why INSLAW became the victim
of rogue justice. Hadron boasts a history replete with acquisitions, lots
of government business--and brushes with the SEC. The outfit emerged in
1979 from the ashes of Xonics, a notorious high-tech fiasco founded and
headed by a colorful wheeler-dealer named Bernard Katz. "Barron's"
described Xonics in 1976 as a company with a knack for "recognizing
income as fast as possible and deferring expense as long as it decently
could." In 1977, the SEC brought a lawsuit against Xonics, accusing
top management, including Katz, of fraud and manipulating the stock's
price, in part by using Xonics stock to acquire other firms. Besieged
by two shareholder suits, Xonics agreed to a permanent injunction in April
of that year. The company did not admit to any wrong-doing. But the nimble
survived. In 1979, Dominic Laiti gathered a group of former Xonics executives,
and bought Hadron. By 1983, the company was lauded in the press as "an
investment banker's dream." For the child had, it appeared, inherited
the parent's acquisitive streak, snapping up nine companies in just three
years. The offspring did run into a few SEC snags of its own, however.
In 1981, the SEC ruled that the limited partnerships Hadron had set up
to fund its R&D efforts were in truth a form of loan financing rather
than a source of revenue. By 1982, Hadron had lost $4.5 million and another
shareholder suit was pending. But by 1983, Dominic Laiti's group appeared
to be on a roll, acquiring their way into an exciting new industry: lasers.
Laiti was quoted as saying, "There's the potential for very, very
rapid growth." Unfortunately, the roll turned out to be a very, very
rapid roller-coaster. By February of 1984, Hadron was announcing sale
of its "money-losing laser-equipment division." In the third
quarter a year earlier, Hadron had earned a penny-a-share profit, but
by early 1984, it was sinking $1.2 million into the red. Hadron's ups
and downs continued: a loss of $231,000 for the 1986 fiscal year, a profit
of $852,000 a year later--despite a 13% decline in revenues. Since 1979,
the price of Hadron's stock has followed the same pattern, swinging wildly
from its high of 6 1/8 in December of 1980 to a low of 3/4 in March of
1985. In the past couple of years, the stock has been trading in a narrower
range between 3/4 and 1 11/16, and an investor complains that as far as
he knows, the company hasn't had a shareholders' meeting since 1983. "I'm
not so much perturbed that they don't meet--I wouldn't care if they never
met, if the the stock were up around $5 or $6," this sizable holder
laments. Still, Hadron has kept bouncing back--with a little help from
Uncle Sam: namely, contracts with the Pentagon, a fat settlement with
the Agency for International Development and, most recently, a gigantic
contract with, yes, the U.S. Department of Justice. Hadron's government
connection can be traced to Earl Brian, who was president of Xonics, Hadron's
parent, until October of 1977. Brian slipped away from the company discreetly,
just six months after Xonics rolled over and agreed to the SEC injunction.
Brian was never charged with any wrongdoing; four Xonics officers were
required to sign the consent decree, and he was not one of them. Ostensibly,
Dominic Laiti led the investor group that then rescued Hadron from the
ruins of Xonics, but somehow Brian managed to keep his hand on the levers.
Today, Laiti--the man who allegedly phoned Bill Hamilton--is Hadron's
chairman, but Brian's business- development company controls four of the
six seats on Hadron's board. In March of 1981, Brian resigned from Hadron's
board in order, he said at the time, "to divest himself of Hadron
to facilitate future transactions" between his business-development
company, Infotechnology, and Hadron "under the Investment Company
Act of 1940." But by January 1984, Brian was back on Hadron's board,
and, according to the 1987 annual report, he's still there, though Hadron
is continuing to do deals with Infotech. In October 1987, Hadron sold
Atlantic Contract Services to Infotech at book value for a combination
of cash and Infotech common stock in a deal valued at roughly $300,000.
"Brian does an awful lot of buying and selling," the disgruntled
Hadron shareholder observes. "He's making money at it, but I'm not
sure his shareholders are making money. I know that, as a shareholder
of Hadron, I'm not making any money." Still, in the spring of 1987
Hadron moved into the black in large part because it received $1.6 million
from the Agency for International Development. The AID settlement came
after the U.S. government cancelled a Hadron subsidiary's business with
Syria. But the AID money wasn't the only lucky boon from Uncle Sam. The
government has long been a Hadron client: In the 1987 fiscal year, approximately
34% of the company's revenues came from the Department of Defense. And
most recently, a Hadron subsidiary, Acumedics, locked up a $40 million
contract with the Department of Justice. Hadron never did acquire INSLAW.
But there's more than one way to skin a Justice Department software contract.
Last October, Hadron's Acumedics division signed the $40 million deal
to provide automated litigation-support services for Justice's Land and
Natural Resources division. When the Acumedics contract was awarded, competitors
groused that the bidding process was unfair. Justice officials respond
that all bids went through a stringent review process. "There was
absolutely no pressure on me. It was one of the cleanest procurements
I've been involved in," recalls Steve Denny, the contracts officer
on the case. Justice Department officials also pointed out that the $40
million deal was essentially a continuation of a 1983 contract. Acumedics
began doing business with the Justice Department in 1970 as an 8(a) minority
business. In 1983, Acumedics was acquired by Hadron--and lost its 8(a)
status. But even without the favored status, Hadron somehow managed to
hold onto the business, and win a four-year competitive bid contract.
Shortly after the acquisition, Earl Brian reappeared on the Hadron board,
and, recalls a former Hadron executive, told the board, "If we needed
any help in marketing at Acumedics, he had been a member of Reagan's Cabinet,
he knew people--and would be willing to make phone calls." The Hadron
alumnus adds: "He was just being nice." According to Federal
Computer Week, a trade publication: "A competitor for the 1983 contract,
who declined to be named, said his company no longer bids on Justice Department
contracts. He explained that, after losing the 1983 contract to Acumedics,
`We took a look at their bid compared to ours, and it was about $1.5 million
over ours.'" Now, the size of Acumedics's newest deal with the government
has raised old questions about the man behind the Hadron subsidiary, Dr.
Earl Brian, and his connection to Ed Meese. A venture capitalist, and
former neurosurgeon, Dr. Brian practiced medicine in Vietnam, then returned
to the States, where he became health and welfare secretary in then-Gov.
Reagan's California cabinet. There, he served with Ed Meese, Reagan's
chief of staff until 1979. Today, Brian owns and oversees Infotechnology
(which controls Hadron), the Financial News Network, and, most recently,
he headed up an investment group that bought the right to run United Press
International. The Brian connection became an embarrassment during Ed
Meese's confirmation hearings when Meese acknowledged that his wife, Ursula,
borrowed $15,000 from a Meese adviser, Edwin Thomas, in order to buy stock
in Brian's company. Coincidentally, just six months later, Brian lent
$100,000 to Thomas, who by then needed money himself--and had become a
member of the White House staff. Neither Meese nor Thomas listed the loans
on their financial disclosure statements. Meese paid no interest, and
Thomas only partial interest. Following a six-month investigation, independent
counsel concluded that there was no basis for criminal charges against
Meese, and while "inferences might be drawn from Mr. Thomas's contact
with Dr. Brian . . . whether Mr. Thomas or Dr. Brian committed a violation
of law was not within our jurisdiction. Even if we were to make an assumption
that Mr. Thomas might have been acting on insider information, we have
been given no evidence by the SEC." Bill Hamilton learned of the
connection between Hadron, Brian and Meese only after the INSLAW trial
ended. But then remembering what Hadron's Chairman Dominic Laiti said
about being politically connected--not to mention "ways of making
you sell"--Hamilton thought he glimpsed an ominous pattern. Hamilton
believes the Justice Department mounted its attack 90 days after the Hadron
phone call, "with the apparent objective of forcing INSLAW either
to agree to be acquired, or into bankruptcy." Earl Brian, Hamilton
is convinced, would have been happy to pick up INSLAW cheaply--at a liquidation
sale. Moreover, Hamilton has reason to believe that the No. 2 man in Justice,
D. Lowell Jensen, wasn't at all disposed to save INSLAW from the auction
block. For, years earlier, Jensen had competed with INSLAW's product,
PROMIS, head-on. While holding public office in Alameda County, Calif.,
Jensen was promoting a rival software, DALITE, that he hoped would be
used statewide. Jensen lost. Jensen served as Alameda County district
attorney in the early 1970s and during that time he tried to persuade
other DA offices to adopt DALITE, the case-tracking software system that
he helped develop. To that end, Hamilton alleges, Jensen urged the California
District Attorneys Association to incorporate. By incorporating, the association
would be in a position to apply for grants, receiving and administering
funds needed to finance DALITE training statewide. But, Hamilton recalls,
the very month that the association finally incorporated, the Los Angeles
District Attorney's office, the state's largest, chose INSLAW's PROMIS
software--dashing Jensen's hopes for DALITE. Larry Donoghue, now deputy
district attorney for the County of Los Angeles, remembers the keen rivalry.
He was in charge of selecting software for the L.A. office at the time,
and he recalls visiting Alameda County while making on-site inspections:
"Jensen called me into his office and I went away feeling what I
regarded to be unusual and significant pressure to select the DALITE system.
But PROMIS was a more suitable system for a large office. After I made
the recommendation to L.A., I remember my conversation with Joseph Busch,
who was district attorney there at the time. I said, `Joe what's your
reason for hesitating?' He said, `Larry, there is resistance to my selecting
PROMIS.' The resistance couldn't have come from within the L.A. office,"
Donoghue adds, "no one there knew anything about software. By a process
of elimination, it must have come from Alameda County." When "Barron's"
attempted to reach Jensen for a reply, his office stated that, because
the INSLAW case is still pending, he could not comment. But during the
trial, Jensen conceded that he had been a critic of INSLAW's software.
Yet, he insisted, DALITE was not a commercial product available for sale
to the public, and he had no financial interest in it. Jensen didn't own
DALITE any more than Bill Hamilton owned PROMIS when he first invented
it. Like DALITE, INSLAW's PROMIS began as a government product. Bill Hamilton
developed it while working as a consultant for the U.S. District Attorney's
office in D.C. in 1970, and improved it while working for a not-for-profit
company funded by the Justice Department. PROMIS became commercial software
only after Hamilton left this last job in 1981, formed INSLAW, and raised
private funds to refine PROMIS. The software then became a proprietary,
and highly profitable, product. Presumably Jensen might have had the same
luck with DALITE--if PROMIS had not won the California race. Instead,
Jensen remained at his post in Alameda County for 12 years. And from 1959
until 1967, Ed Meese served with Jensen, as an Alameda deputy district
attorney. When Ronald Reagan became President, Ed Meese recommended that
his former colleague, Jensen, be appointed assistant Attorney General
in charge of the Criminal Division. In 1983, when Rudolph Giuliani resigned
as associate Attorney General--the No. 3 spot in the department--Jensen
ascended to that post. So in early 1984, when Edwin Meese became Attorney
General, his old Alameda County compatriot was already in place. And Jensen
was not alone. A network, nicknamed the Alameda County Mafia, already
was ensconced in Justice. No fewer than six former Alameda County law-enforcement
officials held positions ranging from deputy assistant attorney in the
tax division, to commissioner of naturalization and immigration. The former
Oakland deputy police chief had snagged a spot as director of the National
Institute of Justice. Under Meese, Jensen rose to No. 2, and developed
a reputation as a buffer between Ed Meese and his critics. The 58-year-old
Democrat was described as "soft-spoken" "apolitical"
and a "gentleman of the old standard" in a 1986 "New York
Times" tribute, which added, "Colleagues say that Mr. Jensen,
better than anyone else at the Justice Department, knows how to duck."
The Justice Department's diplomat had to duck when congressional investigators
looking into the Iran-Contra affair reportedly found a Justice Department
memo dated March 20, 1986, saying that Deputy Assistant Attorney General
D. Lowell Jensen was giving a "heads-up" to the National Security
Council, warning that Miami federal prosecutors were on Ollie North's
trail. Bill Hamilton believes Jensen displayed the same talent for diplomatic
bobbing and weaving throughout the INSLAW affair. When Hamilton pieced
together the anomalies, he realized Jensen's rise to power occurred in
the fateful spring of 1983, when he received the call from Hadron, and
all of his troubles began. "Jensen was promoted to associate Attorney
General in May or June of '83--and that's when all the contract disputes
came up," Hamilton points out. Jensen exhibited a strong interest
in the software contract and even served as chairman of the PROMIS oversight
committee. In December of 1983, INSLAW's counsel, Elliott Richardson,
and Hamilton met with the assistant Attorney General for administration,
Kevin Rooney. They expressed their concern that Brick Brewer, the project
manager on the INSLAW contract, was biased against the company because
Bill Hamilton had fired Brewer some years earlier. Rooney testified in
a deposition that, a week later, he told Jensen's oversight committee
that Richardson's proposal seemed reasonable. It appeared that the dispute
could be resolved. But Rooney left the committee meeting early. After
he was gone, Hamilton says, "Mr. Jensen and the other members of
the committee surprisingly approved a plan to terminate the word-processing
part of the INSLAW contract with the department's Executive Office for
U.S. Attorneys." In March of 1983, Hamilton alleges, Bill Tyson.
formerly director of that Executive Office, told Hamilton that a Presidential
appointee at Justice was biased against INSLAW. In March 1987, Tyson sent
a handwritten letter to Jensen, reassuring him that he had denied this
allegation under oath--and that he had not named Jensen as the appointee
in question. He also sent a note to Deputy Attorney General Arnold Burns.
In a deposition, Tyson was asked: "Did either Mr. Jensen or Mr. Burns
ask you to write the letter?" "No sir." "Did you not
realize that by writing a letter to Mr. Jensen of this type informing
him of your intended testimony that he would then be able to develop his
testimony to be consistent with yours?" "That was not my intention."
"But as an attorney, you realize that is a possibility, more than
a possibility?" "Well, that was not my intention. . . ."
In his ruling last September, Judge Bason characterized portions of Tyson's
testimony as "so ludicrous that there is no way I can believe anything
that the man has to say." A month before writing the notes, Tyson
was removed from his position in the Executive Office for U.S. Attorneys,
and he and his secretary were exiled to Justice's Immigration and Naturalization
Service--though in positions commensurate with their grade levels. By
protesting too much, Tyson could seem to further implicate Jensen. But,
the answer to "How High?" leads even higher. Ed Meese himself
may have been involved in a push to force Leigh Ratiner, INSLAW's litigating
attorney, off the case. Ratiner had been a partner at Dickstein, Shapiro,
& Morin for 10 years when Elliot Richardson recruited him to take
on INSLAW. Dickstein, Shapiro was the law firm of Chuck Colson, of Watergate
notoriety. Colson brought in its principal client, the Teamsters Union.
More recently, Dickstein, Shapiro became known in the loop as Leonard
Garment's firm. Garment, a former colleague says, has been described as
"the only attorney in Washington who will put a senator on hold to
take a call from a reporter." Garment was former White House counsel
to Richard Nixon, and represented Meese during his confirmation hearings.
Meese and Garment put their heads together again after Ratiner filed a
complaint in the INSLAW case that named Meese's longtime friend and deputy
Attorney General, Jensen. Ratiner, an aggressive attorney with a reputation
as very bright, ego-driven, and a loner within the Dickstein, Shapiro
firm, relished being viewed as a maverick. So he was displaying his usual
independence when he filed the complaint that named Jensen early in October
1986. On Oct. 12, the "L.A. Times" ran a story airing the INSLAW
case and the former rivalry between Hamilton and Jensen. On Oct. 23, Ratiner
was asked to leave the law firm. Between Oct. 12 and Oct. 23, Ed Meese
talked to Garment about the case. In a pre-trial interrogatory, Ed Meese
conceded that he had a "general recollection of a conversation with
Leonard Garment in which Mr. Garment mentioned that he had discussed INSLAW
with Arnold Burns." Arnold Burns, the deputy Attorney General who
resigned last week, replaced Jensen when Jensen left Washington to take
a federal judgeship in San Francisco in the spring of 1986. When "Barron's"
asked Leonard Garment about the conversation, he emulated D. Lowell Jensen.
He ducked. "I know there was a suggestion by Meese--or one of his
staff--saying he met and spoke to me about INSLAW. Oh, he said it in pre-trial
interrogatories? Then . . . it was a question of his recollection."
Garment was more emphatic regarding Ratiner's removal. "No one in
the Justice Department or the whole U.S. government or the whole USA suggested
to me that anything should be done with Ratiner. Nor do I remember mentioning
INSLAW to Meese," he continues. "Look--I met with Meese around
the date he mentioned, and I discussed with him a matter of foreign policy.
I was on my way to Israel. . . . Memory is so tricky, but I don't have
the slightest recollection. . . ." Finally, Garment collected his
recollections and summed up his position. "As Sam Goldwyn said, `Include
me out.'" Ratiner's exit settlement with Dickstein, Shapiro bars
him from discussing how and why he left. But Hamilton believes that Burns
and Meese expressed dismay at the fact that he had turned the spotlight
on Jensen. After Ratiner gave up the case, the firm continued to represent
INSLAW, but Hamilton feels their support waned. In January of 1987, Dickstein,
Shapiro urged him to settle with Justice for $1 million--of which about
half would go to pay Dickstein, Shapiro's fees. A few days later, Hamilton
switched attorneys. In September, Judge Bason awarded INSLAW $6.8 million-
-plus attorneys' fees. During the trial, Tony Pasciuto's boss, Thomas
Stanton testified to another reason why Meese might have been interested
in the INSLAW case: INSLAW could besmirch the U.S. Trustee program. The
U.S. Trustee's Office had been recently set up to administer bankruptcies
nationwide, and it was Meese's baby. Meese made the decision to take the
Trustee program national--even though his predecessor, William French
Smith, had planned to ditch the pilot Trustee program. Two of Pasciuto's
former colleagues in the Justice Department allege that the move to keep
the U.S. Trustee program was flagrantly political. "It was a way
of getting cronies into office. There would be 50 or 60 positions to be
filled," one asserts. Stanton, the director of the Trustee program,
seemed well-protected within Justice. This former Pasciuto colleague adds:
"It was always puzzling to me how he got away with what he got away
with. He'd do things that were blatantly wrong and no one would question
him--it's kind of scary." Another former employee confirms, "Irrespective
of the law, or anything, if Stanton wanted something, he had the ear of
the right people at the highest level--straight from Burns to Meese. If
he could not get what he needed, he went to Burns." Outside Justice,
bankruptcy attorneys like Patrick Kavanagh, a solo practitioner in Bakersfield,
Calif., worry that the Trustee program "concentrates so much power
in one government department. . . . It's supposed to act as a watchdog
over lawyers and trustees, but the problem is it's more. It has a considerable
amount of power to control the administration of cases." When a case
moves from bankruptcy to liquidation, the U.S. Trustee's Office names
the trustee, who converts the assets, oversees an auction, and retains
appraisers who will put a price tag on the leavings. The U.S. Trustee's
program also links Justice and the IRS. "The thing that's a little
frightening about it is that the U.S. Trustee department sees itself as
part of the tax-collecting function of government," observes Charles
Docter, the bankruptcy attorney representing INSLAW. "The Justice
Department represents the IRS, and the IRS is often the biggest creditor
in a liquidation. In the INSLAW case, tax collectors seem unusually determined
to see their debt paid immediately. "The IRS showed up in Bill Hamilton's
office the day after the trial ended in August. Ultimately, they would
demand that he personally pay the $600,000 that INSLAW owes," says
Docter. "Usually the IRS calls us before coming to see one of our
clients," he notes. "We talk to them on the phone and get it
straight." Hamilton doesn't have the $600,000 in his personal savings
account. But Docter responded to the pressure by writing a letter in which
INSLAW promised to pay the withholding portion of the taxes within 30
days. "Normally, the IRS would wait that long." he says. "Instead,
on the 28th day, they went out and filed to convert INSLAW from Chapter
11 to Chapter 7." Once again, they were trying to liquidate INSLAW.
Lately, Docter reports, an aggressive IRS has been pursuing withholding
taxes by going after the individual who owns a company, "but normally
they don't go for the jugular immediately and file for a motion to liquidate."
Still on the bench, Judge Bason managed to stop the IRS push to liquidate
INSLAW. When the tax collectors filed to convert INSLAW to Chapter 7,
Docter recalls having a memorable conversation with an attorney from the
Justice Department's tax division. Docter chided the attorney from Justice,
saying: "Look, the judge has already found that you tried to steal
the software through `trickery and deceit.' Isn't it about time you stopped
this heavy-handed stuff? Doesn't anyone in the department have enough
guts to say, `We have to start handling this like lawyers?' The whole
thing is just completely sullying the Justice Department." Docter
states that the attorney from Justice replied: "I don't set policy
around here. The Attorney General does." And, Bill Hamilton remembers,
Ed Meese approved the Justice Department bonuses awarded after the trial
was over, in December of 1987. Three of the six who received bonuses were
involved in the INSLAW case: Stewart Schiffer, who directly supervised
the INSLAW litigation, received $20,000. Michael Shaheen, head of the
"Office of Professional Responsibility," $20,000. Shaheen wrote
a letter to Arnold Burns on Dec. 18 recommending that whistle-blower Pasciuto
be fired for exercising "atrocious judgment" in telling the
Hamiltons what he knew. Lawrence McWhorter, Brick Brewer's boss, $10,000.
McWhorter, Judge Bason noted, said, "`I don't recall' or `I don't
know' something like 147 times in his deposition." The court found
McWhorter's testimony to be "totally unbelievable." Arnold Burns,
deputy Attorney General until just last week, headed up the panel that
received recommendations for Justice bonuses. With no help from Uncle
Sam, Bill Hamilton earned his own bonus. IBM has plans to enter a $2.5
million deal with INSLAW that will bail the firm out of bankruptcy. "About
$1 million will be used for software development to integrate INSLAW's
products with IBM's own database software," Hamilton says, "and
$1.5 million will be used to finance INSLAW's reorganization." Details
are still being negotiated. "IBM's law firm has drawn up a contract.
We expect to have it signed in two or three weeks," Hamilton adds.
In a 1981 speech, Edwin Meese had lauded INSLAW's work on PROMIS as "one
of the greatest opportunities for success in the future." It seems
he was right: The IBM deal provides the clearest evidence of all of the
product's continuing value. Still, the IRS persists in demanding immediate
payment--even though the pending IBM contract, not to mention the $8 million
owed by Justice, suggest that INSLAW will be able to pay its tax bill.
Charlie Docter, INSLAW's attorney, comments on the IRS posture: "The
whole thing smacks of a police state. This case scares the hell out of
me. ' "Scary" is the word most often used by victims of the
INSLAW affair. They are angry, but they also can't quite believe it happened.
That the U.S. Justice Department could engage in a vendetta that would
end the career of a federal judge, bankrupt a company, force a partner
out of his law firm, cause another federal judge to recant under oath
and reach down and wreck the career of a 21-year government-service employee--that's
the stuff of a spy novel, set, one would hope, in another country. But
resignations en masse from a Department of Justice inhabited by "moles"
suggest alarming facts, not diverting fiction. Bill Hamilton's story is
not based on imagination. It's based on experience, and there's considerable
circumstantial evidence that he could have been the victim of a California
cabal encompassing onetime members of the Reagan gubernatorial cabinet,
and alumni of the Alameda County Mafia. Ed Meese belonged to both groups.
Why did INSLAW rate the attention of such a powerful group? INSLAW was,
one Senate staffer suggests, the leading edge of Justice's $200 million
"Project Eagle," a plan to computerize the department's tax
division, criminal division and the 94 U.S. Attorney's offices. INSLAW
predates the four-year-old Project Eagle, and might well offer an easy
entry to any company that wants to participate in that program. The Justice
Department has taken pains to say that INSLAW is not involved in Project
Eagle. But Senate staffers looking into both INSLAW and Project Eagle
aren't so sure. Project Eagle seems part of the same pattern of musical
chairs: John J. Lane, a respected deputy assistant Attorney General for
information technology, left last summer, and according to Government
Computer News, Justice has lost its four IRM (information resources management)
officials with the longest service in the past year. When Lane left, Justice
reorganized its computer operations and created a new position, naming
Stephen R. Colgate, who had been director of the Treasury Department's
Office of Finance, to head Project Eagle. Asked about his priorities,
Colgate was quoted in the trade publication as saying that, for the leadership
of the department, "Eagle is the No. 1 priority. Eagle is the technology
legacy that this Administration wants to leave behind." A member
of Sen. Christopher Dodd's staff who has been looking into the INSLAW
case for more than a year takes a more cynical view: "If you wanted
to wire [fix] something, this would be the project," he confides.
"It's been anticipated for a long time. And, it's a lot of money.
So, if you wanted to wire something . . . this would be the one."
These days, however, it's unlikely anyone at Justice wants wire anything.
Today, there's a new agenda: Everyone is either burrowing in, or getting
out. And, before leaving, there's an urgent desire to tidy up. Justice
had announced its intention to fire Tony Pasciuto two months ago. But
in the end, just a week before Deputy AG Arnold Burns resigned, he agreed
to meet with Pasciuto's attorney, Gary Simpson, to hear Pasciuto's side
of the case. Five or six officials from Justice were in the room; another
three or four--including one who had recommended firing Pasciuto-- waited
nervously in the hallway outside. "I was on a roll," confesses
Simpson, who is normally matter-of- fact. "It was something else.
I was accusing them of all sorts of things, and no one stopped me."
Justice ultimately proposed a painless solution: Pasciuto should walk
away, go work somewhere else, and they'd acknowledge he had been a good
employee. During the meeting, Simpson did most of the talking. "Burns
was really taking it on the chin," he recalls. "He jerked back
a couple of times, but he didn't say anything. More than once, he nodded
assent. When I stated that Blackshear had recanted, he nodded again. And,"
Simpson concludes, "Burns didn't look like he was hearing any of
it for the first time." Where Are They Now? LEIGH RATINER has left
the practice of law. The man who once negotiated the Law of the Sea treaty
for the U.S. government now runs his own business, LSR Enterprises, a
maker of filing systems for lawyers. JUDGE BASON, who was denied reappointment
as a federal bankruptcy judge, is still unemployed, and looking for work.
Judge Bason has no regrets, though he concedes he does not relish controversy.
Indeed Judge Bason tried to have himself taken off the INSLAW case when
it first came up. "I talked to the chief justice of the District
Court and said, `This has the potential of becoming a very hot potato.'
I wasn't sure I wanted to get involved in it." George Bason is not,
by temperament, a fighter. "My wife tells me I'm very stubborn,"
the 56-year-old former law professor confesses. "It takes me a long
time to make up my mind about things and I tend to reserve judgment until
I know as much as I can. But when I make up my mind, I'm very firm. To
a very aggressive person I may give the impression of being a pushover,
and when I prove not to be one, such people can be very angry." TONY
PASCIUTO is luckier. He has been offered a good job at a large financial
firm based in New York. If he takes it, he'll be making a lateral move
from Justice into the private sector. Meanwhile, his attorney, Gary Simpson,
awaits final word on Pasciuto's honorable discharge from the department.
The papers are scheduled to be signed today. ------------------------------------------------------------------------------
if you've made it to the end of these 2 articles, you understand that
there are a lot of questions Ms. Mahar leaves open-ended since, during
the spring of 1988 when she wrote this, many aspects of this situation
were still grinding on and had not achieved the clarity now more evident.
obviously, 3 and a half years later, and a great deal more known about
this story, there is much that Ms. Mahar was only able to intimate for
lack of more concrete evidence that has since become available. if any
of you are interested in following up on any of the points raised in these
2 articles, i'd like to suggest at least a couple of obvious starting
points. Maggie Mahar writes that Bason questions the failure of high Justice
Department officials to take any action to investigate serious allegations
of misconduct. and alludes to the Senate Permanent Subcommittee on Investigations,
chaired at that time by Sam Nunn: The Senate's Permanent Subcommittee
on Investigations is now looking into INSLAW--a sign that the lawmakers,
too, think that the whole story of the "something strange" that
happened in the Justice Department has yet to be told. . . . At the end
of the week, that committee met with Bason, as well. Senator Nunn's committee
may find some answers--and ask more questions--that will illuminate this
bizarre story. why not call up Senator Nunn's office and ask "what
happened?" "what did you find out? what did you conclude? is
there a report you can send me?" also Senator Dodd's office should
be called: A member of Sen. Christopher Dodd's staff . . . has been looking
into the INSLAW case for more than a year . . . to see if the member she
alludes to is still there or ever wrote up a report of their examinations.
-- daveus rattus yer friendly neighborhood ratman KOYAANISQATSI ko.yan.nis.qatsi
(from the Hopi Language) n. 1. crazy life. 2. life in turmoil. 3. life
out of balance. 4. life disintegrating. 5. a state of life that calls
for another way of living. -Steve Crocker