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40 - EVENTS/INTELLIGENCE_SCANDALS/PROMIS Software Scandal.md
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@ -5,7 +5,7 @@ aliases:
- INSLAW Affair
- INSLAW Case
created: 2024-04-25
updated: 2026-05-17
updated: 2026-10-14
category: "Intelligence Scandal"
tags:
- Event
@ -32,11 +32,17 @@ In April 1983, contracting officer [[Peter Videnieks]] negotiated Modification 1
### Bankruptcy Court Proceedings
Bankruptcy Judge Bason presided over two landmark proceedings. In June 1987, he found that DOJ had "unlawfully, intentionally and willfully" attempted to convert INSLAW's Chapter 11 reorganization into a Chapter 7 liquidation "without justification and by improper means," based partly on testimony from DOJ official Anthony Pasciuto, who initially stated that DOJ director Thomas Stanton had pressured U.S. Trustee [[William White]] to force the company into liquidation.[^1] In September 1987, after a two-week liability trial, Bason ruled that DOJ had "taken, converted, stole, INSLAW's enhanced PROMIS by trickery, fraud, and deceit," with damages later computed at about 6.8 million dollars.[^1]
Bankruptcy Judge Bason presided over two landmark proceedings. In June 1987 he gave oral findings on INSLAW's request for independent handling, and his written findings of January 25, 1988 state that DOJ "unlawfully, intentionally and willfully" attempted to convert INSLAW's Chapter 11 reorganization into a Chapter 7 liquidation "without justification and by improper means."[^1][^10] The findings drew partly on testimony from DOJ official Anthony Pasciuto, who told the Hamiltons he understood that U.S. Trustee [[William White]] had received pressure from DOJ director Thomas Stanton to take action against INSLAW; Pasciuto told the Senate subcommittee staff he did not remember using the word "convert."[^11] In September 1987, after a two-week liability trial, Bason ruled that the Department of Justice "took, converted, stole, Inslaw's enhanced PROMIS by trickery, fraud, and deceit," with damages later computed at about 6.8 million dollars.[^1]
Senior District Judge [[William Bryant, Jr.|William Bryant]] affirmed Bason's ruling on November 22, 1989, after reviewing "all of the volumes of transcripts... the more than 1,200 pages of briefs and supporting appendices," finding "convincing, perhaps compelling support for the findings set forth by the bankruptcy court" and that "the cold record adequately supports his findings under any standard of review," while reducing the damages by 655,200 dollars.[^1][^8] The D.C. Circuit reversed on May 7, 1991, on jurisdictional grounds, holding that the automatic stay "does not reach the Department's use of property in its possession under a claim of right at the time of the bankruptcy filing, even if that use may ultimately prove to violate the bankrupt's rights," and declined to disturb the findings of fraud, which "if it occurred, is inexcusable"; rehearing was denied on July 12, 1991, and the Supreme Court declined to hear INSLAW's appeal.[^8]
Bason's non-reappointment in 1988, when his four-year term expired after he sought early renewal, generated additional allegations that DOJ had improperly influenced the selection committee that chose his successor. The Bua Report found no credible evidence supporting this charge.[^2]
Bason's non-reappointment in 1988, when his four-year term expired on February 8, 1988, generated additional allegations that DOJ had improperly influenced the selection committee that chose his successor. Bason had asked Chief Judge [[Patricia Wald]] for reappointment by letter in May 1987, and on January 12, 1988 he sent her a fourteen-page letter, with copies to every judge on the court of appeals.[^12] The Bua Report found no credible evidence supporting this charge.[^2]
The Senate Permanent Subcommittee on Investigations staff study of 1989 found "no proof that the Department of Justice attempted to influence the selection process so as to deny Judge Bason reappointment."[^13] The House Judiciary Committee's 1992 report stated that the committee "was unable to substantiate Judge Bason's charges."[^14] Bason's successor, [[S. Martin Teel Jr.]], had been an attorney in the Department's Tax Division, and the House committee described him as a Justice Department attorney heavily involved in the litigation of the INSLAW case.[^15] On February 1, 1988, seven days before his term expired according to the Special Counsel, Bason sued to enjoin Teel from being sworn in, and the suit was unsuccessful.[^16]
The merit selection panel was chaired by District Judge [[Norma Holloway Johnson]], with [[Jerome A. Barron]], [[Wesley Williams Jr.]] and [[Thomas C. Papson]]; the Court of Appeals voted on December 21, 1987 and Teel "won by a substantial majority."[^17] Teel was bankruptcy judge in the District of Columbia from February 8, 1988 until his retirement on March 22, 2020.[^18] In an October 29, 1987 memorandum Deputy Assistant Attorney General Stuart Schiffer wrote that February 1, 1988 was "the date on which he [Bason] will either be reappointed or replaced."[^19]
The Department of Justice's September 27, 1994 review of the Bua report, in Part VII, states: "We disagree with Judge Bason's credibility determinations." The review says it cannot explain why Judge Bason reached such very different conclusions and that Hamilton's testimony appears to be the only support for the vast majority of Judge Bason's findings.[^20]
### Congressional Investigations
@ -95,3 +101,14 @@ Bill Hamilton continued to maintain that PROMIS was fraudulently stolen and dist
[^7]: U.S. Department of Justice. *Review of the Allegations of INSLAW, Inc.* Assistant Associate Attorney General John C. Dwyer, September 1994.
[^8]: *United States v. INSLAW, Inc.,* 113 B.R. 802 (D.D.C. 1989); *In re INSLAW, Inc.,* 932 F.2d 1467 (D.C. Cir. 1991), rehearing denied July 12, 1991.
[^9]: "Software likely in hands of terrorist," *The Washington Times,* June 14, 2001, archived at https://web.archive.org/web/20190328003123/https://www.washingtontimes.com/news/2001/jun/14/20010614-023749-9383r/ ; Fox News, *Special Report with Brit Hume,* October 16, 2001, Carl Cameron segment, transcript as reproduced at Boing Boing, October 17, 2001, and in Ruppert, Michael C., "Bin Laden's Magic Carpet," *From The Wilderness,* October 26, 2001 (the spokesmen's statements appear only in the latter); "Firm says stolen software helped bin Laden plot 9/11," *The Washington Times,* January 6, 2003, archived at https://web.archive.org/web/20170329002654/http://www.washingtontimes.com:80/news/2003/jan/6/20030106-083824-4351r/ ; U.S. Department of Justice, Office of the Inspector General, *A Review of the FBI's Performance in Deterring, Detecting, and Investigating the Espionage Activities of Robert Philip Hanssen,* August 2003, unclassified summary.
[^10]: *In re INSLAW, Inc.*, 83 B.R. 89 (Bankr. D.D.C. Jan. 25, 1988), https://cite.case.law/br/83/89/; *United States v. INSLAW, Inc.*, 113 B.R. 802 (D.D.C. Nov. 22, 1989), https://cite.case.law/br/113/802/; *United States v. INSLAW, Inc. (In re INSLAW, Inc.)*, 932 F.2d 1467 (D.C. Cir. May 7, 1991), https://cite.case.law/f2d/932/1467/.
[^11]: U.S. Senate, Permanent Subcommittee on Investigations, *Staff Study of Allegations Pertaining to the Department of Justice's Handling of a Contract with INSLAW, Inc.*, S. Prt. 101-58 (1989), pp. 6-7 and n.23 (Pasciuto's account; Nancy Hamilton's notes reading "St call Wh & sd had to be convertd"). https://archive.org/details/StaffStudyOfAllegationsPertainingToTheDepartmentOfJusticesHandlingOfAContractWithInslaw
[^12]: U.S. Department of Justice, *Report of Special Counsel Nicholas J. Bua to the Attorney General Regarding the Allegations of Inslaw, Inc.* (March 1993), pp. 155, 175. https://archive.org/stream/InslawPROMISBuaReport/Inslaw%3APROMIS%20Bua%20Report_djvu.txt
[^13]: U.S. Senate, Permanent Subcommittee on Investigations, *Staff Study of Allegations Pertaining to the Department of Justice's Handling of a Contract with INSLAW, Inc.*, S. Prt. 101-58 (1989), p. 37. https://archive.org/details/StaffStudyOfAllegationsPertainingToTheDepartmentOfJusticesHandlingOfAContractWithInslaw
[^14]: U.S. House of Representatives, Committee on the Judiciary, *The INSLAW Affair: Investigative Report*, H. Rept. 102-857 (Sept. 10, 1992), p. 12 (section I.E). https://archive.org/stream/InslawAffairInvestigativeReport/TheInslawAffair_djvu.txt
[^15]: U.S. House of Representatives, Committee on the Judiciary, *The INSLAW Affair: Investigative Report*, H. Rept. 102-857 (Sept. 10, 1992), p. 12 (section I.E); U.S. Department of Justice, *Report of Special Counsel Nicholas J. Bua to the Attorney General Regarding the Allegations of Inslaw, Inc.* (March 1993), p. 171 (Teel "an attorney in the Tax Division of DOJ"). https://archive.org/stream/InslawPROMISBuaReport/Inslaw%3APROMIS%20Bua%20Report_djvu.txt
[^16]: Bua report (1993), p. 180.
[^17]: Bua report (1993), pp. 155-156, 172.
[^18]: Office of the Circuit Executive, D.C. Circuit, news release, Jan. 28, 2020. https://www.dcd.uscourts.gov/sites/dcd/files/BankruptcyJudgeMeritSelectionPanelNewsReleaseJanuary-28-2020.pdf
[^19]: H. Rept. 102-857 (1992), p. 108.
[^20]: U.S. Department of Justice, *Report on the Review of Special Counsel Nicholas J. Bua's Report on the Allegations of INSLAW, Inc.* (Sept. 27, 1994), Part VII, pp. 185-186.