SUBJECT: FEDERAL CORRUPTION FILE: UFO2768
PART 1
Filename: Harry1.Art
Type : Article
Author : Harry Martin
Date : 03/12/91
Desc : Federal Corruption Series Part I
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FEDERAL CORRUPTION
By Harry V. Martin
A NEW SERIES
(c) Copyright Napa Sentinel, 1991
March 12, 1991
Reprinted with permission of the Napa Sentinel
EDITOR'S NOTE: When discussing the widespread corruption in the
federal Bankruptcy Courts, it is difficult to focus on just the
Northern California jurisdiction. This new series will focus on the
extent of the corruption throughout the nation and its linkage to
various courts.
When the U.S. Government sent Anthony Souza to Northern California to
investigate what government officials called "the dirtiest system" in
the United States, it was aware that the entire bankruptcy system is
unraveling. Former LendVest Trustee Charles Duck was the main focal
point of Souza's investigation-even though a local bankruptcy judge
called him the most "honest man" he had ever known. Duck's ties to
bankruptcy judges throughout the Bay Area is providing a picture of
intense corruption going deep inside the law enforcement agencies. Even
Souza admits privately that his hands are tied.
There has been one known murder in Northern California that has
strong possible links to the bankruptcy system. There have been several
more in Texas. This series will focus on different incidents from
various parts of the country.
One of the most bizarre cases of corruption in the bankruptcy system
involves a small Washington-based computer software firm called INSLAW.
In 1982 the firm signed a three year contract for $10 million with the
U.S. Department of Justice. The software program INSLAW developed was a
case-management computer program called PROMIS. The software, which was
developed by Bill Hamilton, enabled the U.S. attorneys to keep track of
information on cases, witnesses and defendants, and to manage their
caseloads more effectively.
Though the U.S. Attorney's Office placed the PROMIS program into
operation in several of its offices, it refused to pay Hamilton.
Subsequently Hamilton was forced into the bankruptcy court. Former U.S.
Attorney General Elliot Richardson, representing Hamilton, advised him
to sue the Justice Department for stealing his software.
Anthony Pasciuto, who was the deputy director of the Executive Office
for U.S. Trustees, which oversees bankruptcy estates on behalf of the
court, had stated that the Justice Department was improperly applying
pressure on his office to convert INSLAW's Chapter 11 reorganization
into a Chapter 7 liquidation, which would mean that all company assets,
including the rights to PROMIS would be sold at auction.
U.S. Trustee Cornelius Blackshear corroborated Pasciuto's story. Two
days after he was visited by Justice Department officials, Blackshear
issued a sworn affidavit recanting his earlier testimony.
The Justice Department recommended that Pasciuto be fired. The memo
seeking his dismissal reads ". . . but for Mr. Pasciuto's highly
irresponsible actions, the Department would be in a much better
litigation posture than it presently finds itself."
Federal Bankruptcy Judge George F. Bason, Jr., ruled in 1987 that the
Justice Department had acted illegally in trying to put INSLAW out of
business. Bason sent Edwin Meese a letter recommending that he
designate an appropriate outside official to review the dispute because
of the prima facie evidence of perjury by Justice Department officials,
Meese did not respond.
Later that year after nearly three weeks of trial, Bason ruled in
favor of INSLAW in its suit against the Justice Department. "The
department (of Justice) took, converted, stole INSLAW's software by
trickery, fraud and deceit," the judge stated, adding, "the Justice
Department engaged in an outrageous, deceitful, fraudulent game of cat
and mouse, demonstrating contempt for both the law and any principle of
fair dealing." Judge Bason ordered the Justice Department to pay INSLAW
$6.8 million. Bason's verdict was upheld on appeal by U.S. District
Court Judge William B. Bryant. Three months after Bason's ruling, he
was denied re-appointment to the bankruptcy court.
Hamilton's trouble began when a friend of Meese attempted to buy out
INSLAW, but Hamilton turned him down. In a court document, the
potential buyer is quoted as saying, "We have ways of making you sell."
It was after that the trouble for INSLAW began.
The Senate Permanent Subcommittee on investigations, chaired by
Senator Sam Nunn, began an investigation into the INSLAW case. Once the
inquiry got under way, the Senate Judiciary Committee's chief
investigator, Ronald LeGrand, received a phone call from an unnamed
senior officer at the Justice Department--a person LeGrand had known
for years. The caller told LeGrand that the "INSLAW case was a lot
dirtier for the Department of Justice than Watergate had been, both in
its breadth and its depth."
The Nunn Committee completed its investigation and published its
report. It recognized that INSLAW has been a victim of the system and
stated that "the Justice Department had been uncooperative, refusing to
allow witnesses to testify without representatives of the litigation
division being present to advise them. The effect of their presence was
to intimidate those who might otherwise have cooperated with the
investigation." The report states, "The staff learned through various
channels of a number of Department employees who desired to speak to
the Subcommittee, but who chose not to out of fear for their jobs."
Congressman Jack Brooks of Texas has opened a new investigation into
the INSLAW case. Brooks is investigating allegations that Justice
Department officials--including Meese--conspired to force INSLAW into
bankruptcy in order to deliver the firm's software to a rival company.
The rival firm, according to court records and law enforcement
officials, was headed by Earl W. Brian, a former Cabinet officer under
then California Governor Ronald Reagan and a longtime friend of several
high-ranking Republican officials. Meese had accepted a $15,000
interest-free loan from Brian. Meese's wife was an investor in the
rival company. This is the same company that allegedly sought to buy
INSLAW from Hamilton and made the alleged threat.
What happened to PROMIS?
* The program is in use throughout the nation and has been used also
for military intelligence information. It has the ability to track
troop movements.
* An official of the Israeli government claims Brian sold the PROMIS
program to Iraqi military intelligence at a meeting in Santiago,
Chile. The software could have been used in the recent Persian Gulf
War to track U.S. and allied troop movements. Ari Ben-Menashe, a 12
year veteran of Israeli intelligence, made the statement in a sworn
affidavit to the court.
* The software is now operative with the CIA, the National Security
Agency, the Defense Intelligence Agency, and the U.S. Department of
Justice. Only the Justice Department is authorized by the court to
use the software.
* Brian now claims he acquired the property rights to the software and
consummated a sale to Israel, although he had allowed its use by the
Israeli intelligence forces for as many as five years before the
actual sale.
In essence, a small company in Washington developed a very sensitive
computer program which the Justice Department obtained. The courts
ruled in favor of the developer and the judge who made the ruling was
never re-appointed. The software was acquired by a friend of Meese and
the Justice Department has never paid for its use and has allowed other
agencies the right of its use.
The bankruptcy court was a tool--as it appears to be with other
jurisdictions--to support the economic gain of a few. Charles Duck was
not alone--as the record will prove.
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