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

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

House Report 102-857

THE INSLAW AFFAIR

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

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

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

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1992

COMMITTEE ON THE JUDICIARY

JACK BROOKS, Texas, Chairman

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

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

LETTER OF TRANSMITTAL

HOUSE OF REPRESENTATIVES
Washington, DC, September 10, 1992

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

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

JACK BROOKS, Chairman

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

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

***

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

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

***

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

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

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

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