Inslaw's allegations against the Justice Department led to a number of investigations, including internal Department probes and Congressional investigations by the Senate's Permanent Subcommittee on Investigations (PSI) and the House Judiciary Committee. The DOJ eventually appointed a special counsel to investigate. After the special counsel issued his report, Inslaw responded with a lengthy rebuttal. The DOJ then re-examined the special counsel's findings, resulting in the release of a final Department review. During these federal investigations, Inslaw began making allegations of a broad, complex conspiracy to steal PROMIS, involving many more people and many more claims than the bankruptcy proceedings had covered. These later allegations are described below under the investigations which examined them.
After Judge Bason's June 1987 bench ruling found several DOJ officials' testimony "unbelievable", DOJ's Office of Professional Responsibility (OPR) opened an investigation of DOJ staff who testified at the hearing, including C. Madison Brewer, Peter Videnieks, and EOUST director Thomas Stanton. It also opened a separate investigation of EOUST deputy director Anthony Pasciuto. OPR recommended Pasciuto be terminated, based on his hearing testimony that he had made false statements to the Hamiltons, but in its final report it found no evidence that the other officials investigated had applied pressure to convert Inslaw's bankruptcy or lied during the independent handling hearing. After Judge Bason issued his written ruling in January 1988, Inslaw's attorneys also complained to the DOJ's Public Integrity Section that Judge Blackshear and U.S. Trustee Edward White had committed perjury. Public Integrity opened an investigation that ultimately found perjury cases could not be proven, and recommended declining prosecution.
The first Congressional investigation into the Inslaw case came from the Senate's Permanent Subcommittee on Investigations (PSI). PSI's report was issued in September 1989, after a year and a half of investigation. During the investigation, Inslaw made a number of new allegations, which take up most of the PSI report.
Inslaw's new allegations described the Justice Department dispute with Inslaw as part of a broad conspiracy to drive Inslaw into bankruptcy so that Earl Brian, the founder of a venture capital firm called Biotech (later Infotechnology), could acquire Inslaw's assets, including its software PROMIS. Inslaw owner William Hamilton told PSI investigators that Brian had first attempted to acquire Inslaw through a computer services corporation he controlled, called Hadron. Hamilton said that he rejected an offer from Hadron to acquire Inslaw, and that Brian then attempted to drive Inslaw into bankruptcy through his influence with Attorney General Edwin Meese.
Both Meese and Brian had served in the cabinet of Ronald Reagan when he was governor of California, and Meese's wife had later bought stock in Brian's company, so that Meese was willing to do this, Hamilton claimed. The contract dispute with DOJ was contrived by Brian and Meese with the help of Associate Attorney General Jensen, and PROMIS project manager Brewer.
Hamilton also complained that a DOJ automation program, 'Project Eagle', was part of a scheme to benefit Brian after he acquired PROMIS, and that an AT&T subsidiary, AT&T Information Systems, had engaged with the DOJ in a conspiracy to interfere with Inslaw's efforts to reorganize. He also told PSI investigators that the DOJ had undermined Bankruptcy Court Judge Bason's reappointment, and had attempted to undermine Inslaw's lead counsel in the bankruptcy suit.
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Report findings
Senate investigators found no proof for any of these claims. Their report noted that the bankruptcy court ruling had not concluded that Jensen had engaged in a conspiracy against Inslaw and that their own investigation had found no proof that Jensen and Meese had conspired to ruin Inslaw or steal its product, or that Brian or Hadron were involved in a conspiracy to undermine Inslaw and acquire its assets.
The report did re-examine the bankruptcy finding that the DOJ had pressured the United States Trustee to recommend converting Inslaw's bankruptcy from Chapter 11 to Chapter 7, and found that EOUST director Thomas Stanton had improperly tried to get special handling for Inslaw's bankruptcy. He did this, the report stated, in order to gain support for the EOUST from the DOJ.
The report concluded that the Subcommittee found no proof for a broad conspiracy against Inslaw within the DOJ, or a conspiracy between DOJ officials and outside parties to force Inslaw into bankruptcy for personal benefit. However, it criticized DOJ for hiring a former Inslaw employee (Brewer) to oversee Inslaw's contract with EOUSA, and for failing to follow standard procedures in handling Inslaw's complaints. It also criticized the DOJ for a lack of cooperation with the Subcommittee, which delayed the investigation and undercut the Subcommittee's ability to interview Department employees.
The House report
Following the PSI report, the House Judiciary Committee began another investigation into the dispute. By the time the report was released in September 1992, Inslaw's bankruptcy suit had been first upheld in the D.C. Circuit Court, then vacated by the D.C. Appeals court. The House report thus took a different approach to several of the legal issues that the Senate report had discussed. Like the Senate report, much of the House report dealt with new evidence and new allegations from Inslaw.
The report raised "serious concerns" that Justice Department officials had schemed "to destroy Inslaw and co-opt the rights to its PROMIS software" and had misappropriated the software. The report was the outgrowth of a three-year investigation led by Jack Brooks, the committee's chairman, who had launched in investigation in 1989. The report faulted the Justice Department for a lack of cooperation in the investigation and found that "There appears to be strong evidence, as indicated by the findings in two Federal Court proceedings as well as by the committee investigation, that the Department of Justice 'acted willfully and fraudulently,' and 'took, converted and stole,' Inslaw's Enhanced PROMIS by 'trickery fraud and deceit.'"
New allegations
Inslaw's new evidence consisted of statements and affidavits from witnesses supporting Inslaw's previous claims. The most important of these witnesses was Michael Riconosciuto, who swore in an affidavit for Inslaw that businessman Earl Brian had provided him with a copy of Inslaw's enhanced Promis, supporting Inslaw's earlier claims that Brian had been interested in acquiring and marketing the software. A new allegation was also introduced in Riconosciuto's affidavit: Riconosciuto swore that he added modifications to enhanced PROMIS "to support a plan for the implementation of PROMIS in law enforcement and intelligence agencies worldwide." According to Riconosciuto, "Earl W. Brian was spearheading the plan for this worldwide use of the PROMIS computer software."
Another important witness was Ari Ben-Menashe, who also provided affidavits for Inslaw that Brian had brought both public domain and enhanced versions of PROMIS to Israel, and eventually sold the enhanced version to the Israeli government. Committee investigators interviewed Ben-Menashe in May 1991, and he told them that Brian sold enhanced PROMIS to both Israeli intelligence and Singapore's armed forces, receiving several million dollars in payment. He also testified that Brian sold public domain versions to Iraq and Jordan.
Report findings
On the issue of Inslaw's rights in "enhanced PROMIS", the House report found that "There appears to be strong evidence" supporting Judge Bason's finding that DOJ "acted willfully and fraudulently" when it "took, converted and stole" INSLAW's Enhanced PROMIS by "trickery, fraud and deceit." Like Judge Bason, the report found that DOJ did not negotiate with Inslaw in good faith, citing a statement by Deputy Attorney General Arnold Burns as "one of the most damaging statements received by the committee." According to the report, Burns told OPR investigators that Department attorneys informed him in 1986 that INSLAW's claim of proprietary rights was legitimate and that DOJ would probably lose in court on this issue. House Investigator found it "incredible" that DOJ would pursue litigation after such a determination, and concluded "This clearly raises the specter that the Department actions taken against INSLAW in this matter represent an abuse of power of shameful proportions."
On the new allegations brought by Inslaw, although the Committee conducted extensive investigations, the report did not make any factual findings on the allegations, it did conclude that further investigation was warranted into the statements and claims of Inslaw's witnesses. The report also discussed the case of Danny Casolaro, a free-lance writer who became interested in the Inslaw case in 1990, and began his own investigation. According to statements from Casolaro's friends and family, the scope of his investigation eventually expanded to include a number of scandals of the time, including the Iran-Contra affair, the October Surprise theory claims, and the BCCI banking scandal. In August 1991, Casolaro was found dead in a hotel room where he was staying. The initial coroner's report ruled his death suicide, but Casolaro's family and friends were suspicious, and a lengthy second autopsy was conducted. This also ruled Casolaro's death a suicide. Noting that Casolaro had encountered "a number of dangerous individuals associated with organized crime and the world of covert intelligence operations" and that "suspicious circumstances surrounding his death have led some law enforcement professionals and others to believe that his death may not have been a suicide", the House committee reported that further investigation was warranted. The Democratic majority called upon Attorney General Dick Thornburgh to compensate Inslaw immediately for the harm that the government had "egregiously" inflicted on Inslaw. The Republican minority dissented and the committee divided along party lines 21–13.
Bua report
In October 1991 William P. Barr succeeded Dick Thornburgh as Attorney General. In November, Barr appointed retired federal judge Nicholas J. Bua as a Special Counsel to investigate the allegations in the Inslaw case. Bua was granted authority to appoint his own staff and investigators, to impanel a grand jury, and to issue subpoenas. In March 1993 he issued a 267-page report.
The report concluded that there was no credible evidence to support Inslaw's allegations that DOJ officials conspired to help Earl Brian acquire PROMIS software, and that the evidence was overwhelming that there was no connection between Brian and PROMIS. It found the evidence "woefully insufficient" to support the claim that DOJ obtained enhanced PROMIS through "fraud, trickery, and deceit," or that DOJ illegally distributed PROMIS inside or outside of DOJ. It found no credible evidence that DOJ had influenced the selection process that replaced Judge Bason. It found "insufficient evidence" to confirm the allegation that DOJ employees sought to influence the conversion of Inslaw's bankruptcy or commit perjury to conceal the attempt to do so. Finally, it concluded that the DOJ had not sought to influence the investigation of Danny Casolaro's death, and that the physical evidence strongly supported the autopsy finding of suicide.
Bua's report came to a number of conclusions that contradicted earlier proceedings and investigations. Judge Bason had found that DOJ's claim it was concerned about Inslaw's financial condition when it requested a copy of PROMIS was a false pretext. Bua rejected this finding as "just plain wrong." The House report had cited Deputy Attorney General Burns' statements as evidence that DOJ knew it did not have a valid defense to Inslaw's claims. Bua found this interpretation "entirely unwarranted."
Bua was particularly critical of several of Inslaw's witnesses. He found that Michael Riconosciuto had given inconsistent accounts in statements to the Hamiltons, his affidavit, and in testimony at his 1992 trial for manufacturing methamphetamine. Bua compared Riconosciuto's story about PROMIS to "a historical novel; a tale of total fiction woven against the background of accurate historical facts."
Bua found Ari Ben-Menashe's affidavits for Inslaw inconsistent with his later statements to Bua, in which Ben-Menashe said that he had "no knowledge of the transfer of Inslaw's proprietary software by Earl Brian or DOJ" and denied that he had ever said this elsewhere. Ben-Menashe said that others simply assumed that he was referring in his previous statements to Inslaw's PROMIS, but acknowledged that one reason he failed to clarify this was because he was going to publish a book and "he wanted to make sure that his affidavit was filed in court and came to the attention of the public."
Bua also noted that the House October Surprise Task Force had examined Ben-Menashe's October Surprise allegations and found them "totally lacking in credibility," "demonstrably false from beginning to end," "riddled with inconsistencies and factual misstatements," and "a total fabrication." He specifically observed that the Task Force found no evidence to substantiate Ben-Menashe's October Surprise allegations about Earl Brian.
DOJ review
Inslaw responded to the Bua report with a 130-page Rebuttal, and another set of new allegations in an Addendum. These allegations included the claim that the DOJ's Office of Special Investigations was "a front for the Justice Department's own covert intelligence service" and that "another undeclared mission of the Justice Department's covert agents was to insure that investigative journalist Danny Casolaro remained silent about the role of the Justice Department in the INSLAW scandal by murdering him in west Virginia in August 1991."
By this time, Janet Reno had succeeded Barr as Attorney General after Bill Clinton's election as president. Reno then asked for a review of Bua's report with recommendations on appropriate actions. In September 1994, the Department released a 187-page review (written by Assistant Associate Attorney General John C. Dwyer) which concluded that "there is no credible evidence that Department officials conspired to steal computer software developed by Inslaw, Inc. or that the company is entitled to additional government payments." The review also reaffirmed the earlier police findings that Casolaro's death was a suicide and rejected Inslaw's claim that OSI agents had murdered Casolaro as "fantasy," with "no corroborative evidence that is even marginally credible."
Court of Federal Claims trial and ruling
In May 1995, the United States Senate asked the U.S. Court of Federal Claims to determine if the United States owed Inslaw compensation for the government's use of PROMIS. On July 31, 1997, Judge Christine Miller, the hearing officer for the U.S. Court of Federal Claims ruled that all of the versions of PROMIS were in the public domain and that the government had therefore always been free to do whatever it wished with PROMIS. The following year, the appellate authority, a three-judge Review Panel of the same court, upheld Miller's ruling and in August 1998 informed the Senate of its findings.
