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The INSLAW Case: Software to Die For


Date: Tue, 8 Oct 1991 15:15:57 CDT From: dave ratcliffe  < >

from the September 24, 1991 issue of the "Village Voice:"

Moving Target column


by James Ridgeway

WASHINGTON--"It is far worse than Watergate," says Elliot Richardson, the former attorney general who stood up to President Richard Nixon during that Republican scandal. "For Christ's sake, this October Surprise business we are talking about is [built from] truly horrible things ... I don't know whether it's true or not. [But] there are a number of elements in the situation that are hard to account for."

Convinced that freelance journalist Danny Casolaro, who claimed to have uncovered a sprawling conspiracy linking the October Surprise and the Iran-contra scandal to a contract dispute between the Justice Department and a software company named Inslaw, was murdered in a West Virginia hotel last month, Richardson has asked the Justice Department to open a federal investigation into his death. But even though Richardson, who is Inslaw's attorney, has made both informal and direct personal pleas to acting attorney general William P. Barr for a full investigation, he has so far received no reply.

And that's not the first time that Richardson has been ignored by the Justice Department. Richardson wrote former attorney general Dick Thornberg in 1989 seeking an independent counsel in the Inslaw case; Thornberg never replied.

"I have never understood why ... I mean, I was attorney general when Thornberg was a U.S. attorney. I appointed him chairman of a committee of U.S. attorneys, newly formed for the first time. I am a responsible former public official. I am not a wild-eyed nut."

So why didn't Thornberg respond to Richardson's letter?

"You tell me. I would have responded to a responsible lawyer whether I ever met him or not." When asked if he thought the lack of a reply was insulting, Richardson said, "Certainly. Let's say it's not easily explained, OK?

"The key thing about the death of Casolaro," Richardson continues, is that "although others were seeking to delineate ... the `octopus' [Casolaro's term for the wide-ranging conspiracy], he was the only one who told people who have no reason to misrepresent what he said that he had hard evidence, and was on the point of getting conclusive evidence. No one else made that claim.... He told four people, one at a time. The idea that he committed suicide with a razor blade under these circumstances seems highly implausible."

The investigation of Casolaro's death is still in the hands of the West Virginia authorities, who ruled it a likely suicide August 14. But it is already apparent that there is more than meets the eye to both the freelancer's "suicide" and the Inslaw case--and that sealing a 10-year-old cover-up isn't necessarily the only conceivable motive.

"This is a case in which any one of a number of potential defendants would have every reason to commit murder," says Richardson, "and in which the litigants have every reason to fear for their lives."

THE ORIGINS of the dispute over Inslaw, at least, are clearly understood. A former analyst with the National Security Agency and onetime contract employee of the CIA (where he prepared analyses of the foreign press), Bill Hamilton founded Inslaw in the early 1970s with his wife, Nancy. Inslaw was initially begun with grants from the Justice Department's Law Enforcement Assistance Administration; when Congress killed LEAA in 1980, the Hamiltons transformed Inslaw into a for-profit firm and continued to do business with Justice on a contract basis. Today, they are business partners with IBM.

By that time they had developed a software package called Promis that enabled law enforcement agencies to-keep up-to-the-minute tabs on cases as they wound their way through the courts. It was designed for district attorneys in large cities, and had been installed on a pilot basis in two large U.S. attorneys' offices. With Promis, a U.S. attorney could sit before a computer screen and quickly find where any particular case stood, locate defendants and witnesses, track every motion, and even follow an ongoing investigation from its history down to the detective's most recent report. As computers became smaller, increasing efficiency and speed, the Hamiltons modified Promis, adding new functions and making it speedier and more flexible.

In 1982, Inslaw signed a $10 million contract to install Promis in U.S. attorney offices across the country. At first Justice balked at paying fees for what it argued was public domain software that had been developed under LEAA grants, but on advice of its own counsel, the department ultimately agreed to pay for the proprietary, enhanced version of Promis--whenever it was used.

Despite this agreement, the Justice Department's contracting officer steadfastly refused to pay Inslaw for the use of Promis, and by 1985 it had withheld nearly $2 million from the Hamiltons. At that point Inslaw sought refuge in Chapter 11 bankruptcy and proceeded to sue Justice. In January 1988 the Bankruptcy Court awarded Inslaw $6.8 million in damages plus counsel fees. Justice appealed that ruling, but in November 1989 the federal district court for the District of Columbia upheld the Bankruptcy Court's findings. Nevertheless, last spring the U.S. Court of Appeals ruled that the case had been tried in the wrong courts for the past several years, and must be retried; Inslaw is appealing to the Supreme Court, and if that fails, the Hamiltons will file a new, expanded suit.


While on this level the Inslaw affair appears to be a fairly typical contract dispute, in fact the case has been marked from the beginning with extraordinary behind-the-scenes politicking to wrest control of Promis from Inslaw. First, the Justice Department refused to recognize Inslaw as the rightful owner of the software it had developed; then the chair of Hadron Inc., a software outfit controlled by a friend of then-attorney general Edwin Meese, tried to buy the program from Inslaw. When Hamilton refused, Hadron's chair told him, "We have ways of making you sell."

Next, a venture capital firm, citing high-level Reagan administration connections, tried to inveigle the Hamiltons into signing over their voting rights on Inslaw stock. When the Justice Department's refusal to pay fees forced the company into Chapter 11, Justice officials didn't let up. They tried to force Inslaw into a Chapter 7 liquidation, which would have finished off the company completely. And when that didn't work, Justice officials encouraged a Pennsylvania computer company to launch its own hostile takeover bid.

Why such a fuss over computer software? In its court filings Inslaw alleges it is a victim of a conspiracy by Meese and his friends, who stole Promis to make money. Chief among Meese's cronies in the affair was Earl Brian, currently chair of embattled Infotech, Inc., which has large holdings in the bankrupt Financial News Network and United Press International--not to mention Hadron, the company that tried to buy Promis from Inslaw.

A combat surgeon in Vietnam, Brian was appointed secretary of California's Department of Health and Welfare in 1970 by then- governor Ronald Reagan. When Reagan moved to the White House--with Meese as his counsel--Brian served as the unpaid chair of a task force on health care cost reduction; Brian also served along with Meese as a member of a "pro-competition" committee in the White House. Edwin Thomas, another longtime Meese associate who had worked for Meese at the University of San Diego Law School and a member of Reagan's California cabinet, joined them on the Reagan transition team in 1980. The relationships between these three Californians first created a stir when Meese went before the Senate to be confirmed as attorney general in 1984.

An investigation by an independent counsel revealed a suspicious series of events. Early in 1981, Thomas lent Mrs. Ursula Meese $15,000; at the time, Thomas was working directly for Meese as assistant counsel to the president. Before he made the loan, Thomas discussed Brian's Infotech (then operating under the name of Biotech Capital Corp.) with Mrs. Meese, and despite the fact that the Meeses were hard up for cash, she promptly took the money Thomas had loaned her and bought Biotech shares for her two children. Meese, who knew about the loan, did not report it on his financial disclosure forms.

Then, in July 1981, Brian loaned Thomas $100,000. In addition, Thomas made calls to the Small Business Administration on behalf of a loan application from a Biotech subsidiary; the SBA eventually granted the loan. No wrongdoing was ever adjudged in any of this.

In its court briefs, Inslaw cites the assertions of various Justice officials connecting Meese, Brian, and Hadron, Inc., with the harassment of the Hamiltons' company. One whistleblower even called a senator to warn that, once Meese was made attorney general, he would award a friend with a "massive sweetheart contract" to install Promis in every litigation office of the Justice Department. After Meese was named AG, the chief investigator of the Senate Judiciary Committee, Ronald LeGrand, called Hamilton to pass on a warning. He said that an unnamed senior official at Justice--whom LeGrand had known for years and trusted--had told LeGrand that the Inslaw case was "a lot dirtier for the Department of Justice than Watergate was, both in its breadth and its depth."

Up to this point, the Inslaw case still appears to be little more than a contract dispute with overtones of political corruption. But it doesn't stop there. As it turns out, there is considerable reason to suspect that while Promis may have been meant as a plum for one of Meese's cronies, it may also have played a role in an international espionage operation conducted by the CIA. And that's where the case really begins to get interesting.

ACCORDING TO THE HAMILTONS, a high government official, nearly speechless in his disgust, dropped by to tell them he had discovered that the theft of Promis had actually begun with the military. The British and U.S. navies needed a software program to conduct their zone defense against Soviet submarines in the North Atlantic, according to their informant. All Soviet subs leave from the same base near the Arctic circle, where they are easily detected, and have to run a gauntlet of listening devices in the deep waters between Iceland and Ireland before they break out into the open ocean. With the help of painstakingly accurate maps of the seafloor, the Russians have long been able to run through the intricate twists and turns of the deep marine trenches near Iceland at such speeds that they are usually able to lose their trackers. American and British subs needed a computer program that would allow them to follow every move of a Soviet sub and project its course and position; they tried everything available, but no software could follow all the variables quickly enough. Out of curiosity, they ran a test with Promis--and it worked. So they simply appropriated the program.

That, according to the Hamiltons' source, is how the theft got started. But there is actually much more evidence to support another theory of how and why the government started playing games with Promis.

Several different former intelligence agents have told the Hamiltons about various foreign countries that suddenly started using versions of Promis in the mid-1980s, ranging from Iraq to South Korea. These governments could use the program not only to track criminals but for complex covert operations and to identify "undesirables"--like revolutionaries. They suggest that the CIA obtained copies of the Promis software from the Justice Department and sold it to various police and intelligence agencies overseas; once installed, Promis actually became a high-tech bug, storing secrets of the unsuspecting host government, including intimate details of its internal police operations and intelligence service. American agencies could then penetrate and read the software.

"It was highly adaptable to tracking information of the kind that intelligence agencies like to track," Richardson says, "and the CIA adapted it to that purpose. Then, relying on Earl Brian, [they] started peddling it to foreign intelligence agencies."

The Hamiltons got the barest inkling of the intelligence implications for the first time last year. On November 5 their daughter Patty, who is a regional sales manager for Inslaw, got a call from the Department of Communications in the Canadian federal government. They told her that Promis was widely used in Canada--it had been installed in 900 different locations--and he wondered whether she would help fill out a questionnaire about using the software in both English and French.

This was all news to Patty, since Inslaw had never sold Promis to anyone in Canada. Playing dumb, the Hamiltons filled out the questionnaire. Then, on a business trip to Montreal in January, Patty dropped in on the Department of Communications for a chat. She asked the officials about the questionnaire and where Promis was being used. The Canadians checked their codes and told her it was on line with the Royal Canadian Mounted Police and with an agency they did not know.

Then Patty made an unannounced visit to the responsible official at Mountie HQ, who promptly denied all knowledge of Promis, and dismissed the Department of Communications as a bunch of "kooks." When Patty returned to Washington, Bill Hamilton tried to, find out where the Canadians had gotten Promis, but suddenly everything had changed: The Department of Communications begged forgiveness for their error, saying it wasn't the Mounties at all but the international development office that was using Promis. When Hamilton told them the software had never been sold to anybody in Canada, they backtracked, apologized once again, and said that, in fact, no one was using it.

That's when Michael J. Riconosciuto, a researcher and self- described arms expert, came forward. Riconosciuto had first called Inslaw out of the blue in the spring of 1990, and he has continued to do so from pay phones around the West. He claimed to have worked as research director for a joint venture between the Wackenhut Corporation, the big security outfit, and the Cabazon Indians, who have a reservation at Indio, California. The joint venture supposedly manufactured military material, such things as night- vision goggles, machine guns, fuel air explosives, and biological and chemical weapons for foreign governments, including those in the Middle East and Central America, and for covert operations of one sort or another. The contras were to be a prime market. The Cabazon tribe enjoyed quasi-sovereign status, allowing the arms manufacturers to operate outside stringent restrictions on the manufacture of armaments in the rest of the United States. As an added sweetener, the Indians could take advantage of minority set- aside contracts.

Riconosciuto claims, in an affidavit given to Inslaw, to have made modifications on Promis software provided him by Earl Brian for both the Canadian Mounties and the Canadian Security and Intelligence Service. Brian, he says, was the man who had sold the software to the Canadians. Riconosciuto is currently in prison in Washington state awaiting trial on drug charges, and his statement would be of dubious value--except that many of the details do check out independently. For one thing, the San Francisco Chronicle ran a series of articles on the Cabazon Indians last week that seemed to bear out the claims about weapons manufacturing on the reservation.

BY THIS TIME the Hamiltons were pretty sure Promis had been pirated abroad, and they began to hear stories of Promis cropping up in all sorts of foreign countries. Ari Ben-Menashe, a former Israeli intelligence asset, provided an affidavit that says that in December 1982 Rafael Eitan, the Israeli government's counterterrorism adviser, told him he had obtained Promis from Earl Brian and Robert McFarlane, then Reagan's national security adviser. In 1987 Ben- Menashe said he was at a meeting in Israel where Brian said he owned Promis. Ben-Menashe said he had been assigned to stop a sale of chemical weapons by Chilean arms dealer Carlos Cardoen to Iraq. "Mr. Carlos Cardoen ... stated to me that he brokered a deal between Dr. Brian and a representative of Iraqi ... military intelligence for the use of Promis," he recalled.

Richard Babayan, an Iranian arms dealer, said in an affidavit that during 1987 he met a member of Iraqi intelligence who told him Iraq had acquired Promis from Brian on the recommendation of the Libyan government. He went on to say he was told by an official of the Korea Development Corporation, which he said was a front for the Korean CIA that Brian had sold Promis to the Koreans as well.

The Hamiltons also continue to get tips about Promis popping up all over the United States. Although it formally denies using the program, high Justice Department officials have told the Hamiltons that FBI officials had admitted the software in their field offices is a renamed version of Promis.

The possibility of Promis being employed as an espionage tool is given further credence by the curiously disinterested attitude of government in getting to the bottom of the Inslaw mess. Inslaw itself has been unable to obtain subpoena power from the courts except for a brief period last spring, but those subpoenas were frustrated when the Appeals court threw out the case just as the deadline for Justice to turn over the documents approached. Senator Sam Nunn's Senate Permanent Investigations subcommittee conducted an investigation, but received little cooperation from Justice.

Texas congressman Jack Brooks's judiciary committee has been looking into the affair for the last two years, but only issued subpoenas last July. Brooks is believed to have interviewed Meese and his friends. According to the Hamiltons, the files of the Justice Department's chief litigating attorney on the case have disappeared.

UNLIKE THE MURKY October Surprise scandal or the compromised congressional investigations into Iran-contra, the facts in the Inslaw case are clear. Emerging from a low-level bankruptcy court, they paint a virtually indisputable case of corporate theft, political corruption, and the very real possibility of international espionage. The issue goes straight to the White House and involves officials at the highest levels of the Justice Department in what appears to be a deliberate campaign of intimidation, theft, and corruption. By now, that ought to have led to a serious congressional investigation.

Unlike Iran-contra, no one in this case has pleaded national security as a defense, though that's likely before it's over. But in a sense, it is already too late for that. The facts are too well-delineated. If the opinions of two judges are correct, this case ought to result in criminal indictments of past and present Justice officials.

As Elliot Richardson says, "Why in the world would this one group of informers ever have come together and cooked up all this stuff? How did they keep it consistent from day to day among themselves as to who told what to whom? There is a hell of a load of stuff they've told to various people, including staffers, journalists, the Hamiltons, me. The picture they paint is relatively coherent and consistent ... and then you add the stonewalling by the Department of Justice. I have never understood why."

Coast to Coast am George Knopt and Cheri Seymour


The Octopus


Octopus III

CIABASE 1/96 data dump on "Casolaro"

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