PROMIS Software Scandal

The INSLAW Affair centers on INSLAW, a Washington, D.C. software company owned by Bill Hamilton and Nancy Hamilton, and their claim that the Department of Justice deliberately stole their PROMIS (Prosecutor's Management Information System) software, drove the company into bankruptcy, and distributed the software to domestic and foreign intelligence agencies, some versions allegedly fitted with a hidden surveillance backdoor capable of tracking money flows through international banking systems including CHIPS and SWIFT.⁴

The 1982 Contract and the Proprietary Rights Dispute

In March 1982, INSLAW signed a three-year, $10 million contract with the Executive Office for United States Attorneys (EOUSA) to install PROMIS in 20 large U.S. Attorneys' offices and word-processor systems in 74 smaller ones.² The contract specified installation of a public-domain version of PROMIS, but INSLAW argued the delivered software incorporated proprietary enhancements developed at private expense after May 1981. These enhancements, and who owned them, became the central dispute.

C. Madison Brewer, appointed as the EOUSA's PROMIS project manager, quickly became the focal point of INSLAW's complaints. Brewer had previously served as general counsel for INSLAW's predecessor organization, the non-profit Institute for Law and Social Research. Bankruptcy Judge Bason later found that Brewer had developed "an intense and abiding hatred" for INSLAW president Bill Hamilton and used his position "to vent his spleen," taking administrative actions designed to harm the company.¹ At an April 19, 1982 meeting, Brewer called a Hamilton memorandum "scurrilous" and persistently opposed escrow arrangements that would have preserved INSLAW's proprietary rights pending a contractual resolution.²

In April 1983, contracting officer Peter Videnieks negotiated Modification 12 with INSLAW, which restricted DOJ from distributing PROMIS "beyond the Executive Office for United States Attorneys and the 94 United States Attorneys' Offices covered by the contract, pending resolution" of the proprietary rights dispute.² Videnieks simultaneously demanded that INSLAW formally document all claimed proprietary enhancements; INSLAW's April 1983 submissions were rejected as inadequate, the dispute was never resolved, and INSLAW filed for Chapter 11 bankruptcy protection in February 1985 under pressure of withheld payments and escalating litigation.²

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 Edward 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," awarding approximately $6.8 million in damages.¹

The D.C. Circuit Court affirmed Bason's ruling in November 1989, with Judge William Bryant finding "convincing, perhaps compelling support" for the bankruptcy court's conclusions.¹ The Court of Appeals reversed all lower court rulings in May 1991 on jurisdictional grounds, vacating Bason's findings. The Supreme Court declined to hear INSLAW's appeal.

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

Congressional Investigations

The Senate Permanent Subcommittee on Investigations (PSI) examined the INSLAW matter in 1989 and found "no proof" that Lowell Jensen and Edwin Meese had conspired to ruin INSLAW or steal its product, and "no proof of any connection between Earl Brian or Hadron and the Department with regard to the INSLAW contract." The Senate report did find, however, that DOJ official Thomas Stanton had "improperly tried to get special handling for Inslaw's bankruptcy" and criticized the Department for placing Brewer, a former INSLAW employee, in charge of the implementation contract.³

The House Judiciary Committee, chaired by Representative Jack Brooks, conducted a three-year investigation from 1989 to 1992. Its September 10, 1992 report (House Report 102-857) reached substantially more damaging conclusions. The committee found "strong evidence...that the Department of Justice 'acted willfully and fraudulently,' and 'took, converted and stole,' Inslaw's Enhanced PROMIS by 'trickery fraud and deceit.'"¹ The report cited an admission from Deputy Attorney General Arnold Burns, who told DOJ Office of Professional Responsibility investigators in 1986 that INSLAW's proprietary rights claim was "legitimate" and that the government "would probably lose the case in court on this issue" — yet DOJ continued litigating against INSLAW.¹

The House Committee specifically examined the roles of Lowell Jensen and Edwin Meese in the affair. Jensen had developed DALITE (District Attorney's Automated Legal Information System), a competing case management software, while serving as Alameda County District Attorney; he was a member of the contract oversight committee at INSLAW's inception and later became Associate Attorney General and then Deputy Attorney General under Meese. The Committee found it "incredible that the Department, having made this determination [that INSLAW's proprietary rights claim was legitimate], would continue to pursue its litigation."¹ Meese had served alongside Earl Brian in Governor Reagan's California cabinet; Meese's wife purchased stock in a Brian-controlled company; Meese reportedly recused himself from PROMIS matters upon becoming Attorney General in February 1985, leaving Jensen to handle the issue.⁴

The House Committee's Democratic majority called on Attorney General Richard Thornburgh to compensate INSLAW immediately; the Republican minority dissented. The full report, House Report 102-857, was submitted September 10, 1992.

The Earl Brian Allegations and the October Surprise Connection

INSLAW's expanded conspiracy theory held that Brian, a California businessman and former Reagan administration associate, arranged with senior DOJ officials to obtain PROMIS in exchange for political favors connected to the 1980 October Surprise negotiations. Michael Riconosciuto, a computer scientist associated with the Wackenhut-Cabazon Indian Reservation joint venture in Indio, California, claimed in a March 21, 1991 affidavit that Brian made PROMIS available to him through Peter Videnieks, and that Riconosciuto subsequently modified the software for worldwide distribution to law enforcement and intelligence agencies, including specific adaptations for Canada's Royal Canadian Mounted Police (RCMP) and Canadian Security Intelligence Service (CSIS).⁴

Eight days after signing his affidavit, Riconosciuto was arrested on methamphetamine distribution charges, which he alleged were direct retaliation for his cooperation. He further claimed he and Brian had traveled to Iran in 1980 and paid $40 million to Iranian officials to delay the release of U.S. hostages until after Reagan's inauguration.⁴

The Bua Report characterized Riconosciuto as a "totally unreliable witness" whose PROMIS account was "a tale of total fiction woven against the background of accurate historical facts." The Special Counsel identified irreconcilable contradictions: Riconosciuto's affidavit stated his PROMIS modifications occurred from 1983 to 1984, while his trial testimony placed the work in late 1981 to early 1983 — a period when it was physically impossible for him to have received an enhanced version of PROMIS, as the software was not delivered under Modification 12 until April 20, 1983, more than a year after the implementation contract was even signed.² Brian and Videnieks both categorically denied ever meeting Riconosciuto or each other, or visiting the Cabazon reservation. The Bua Report found "overwhelming" evidence of no connection between Brian and anything related to INSLAW.²

Ari Ben-Menashe, a self-described former Israeli military intelligence officer, submitted affidavits to the House Judiciary Committee in 1991 alleging Brian had sold enhanced PROMIS to Israeli intelligence and Singapore's armed forces. Ben-Menashe subsequently told Bua investigators he had "no knowledge of the transfer of Inslaw's proprietary software by Earl Brian or DOJ," admitted his prior statements were inaccurate, and acknowledged he had delayed clarifying his position because he was writing a book and "wanted to make sure that his affidavit was filed in court and came to the attention of the public."² Multiple congressional investigations, including the October Surprise Task Force, found Ben-Menashe's testimony "totally lacking in credibility" and "demonstrably false from beginning to end."²

The Israeli Intelligence and Robert Maxwell Allegations

A distinct body of allegations, separate from the Brian conspiracy theory, held that Rafael Eitan, director of LAKAM (Israel's scientific intelligence bureau) and senior Mossad operative, acquired PROMIS through back-channel contacts and arranged for Israeli technicians to embed a surveillance backdoor before distributing the software internationally. Gordon Thomas's 1999 account in Gideon's Spies reported that Eitan assembled former LAKAM programmers who reconstructed PROMIS and inserted a "trapdoor" — a built-in chip enabling covert remote monitoring of databases queried by any user of the modified software.⁶

British media proprietor Robert Maxwell, who had maintained intelligence relationships with Mossad since his association with Yitzhak Shamir in the early 1960s, allegedly served as the primary commercial distributor for the modified software through his Israeli company Degem and a network of international holdings. According to accounts drawing on Israeli intelligence sources, Maxwell sold PROMIS-derived software to agencies in Britain, Australia, South Korea, Canada, Jordan, Poland, the Soviet Union, South Africa, and numerous other countries, with total sales alleged to exceed $500 million.⁵⁶ INSLAW alleged that Maxwell had contributed $600,000 from a joint U.S.-Israeli intelligence slush fund to have INSLAW's lead counsel dismissed, preventing the company from fully litigating its proprietary claims against the U.S. government.¹

The Bua Report found "no credible evidence" supporting any of these international distribution allegations and concluded that only public-domain versions of PROMIS had been distributed abroad.² The September 1994 DOJ review by Assistant Associate Attorney General John C. Dwyer reached identical conclusions.⁷

Danny Casolaro and The Octopus

Freelance journalist Danny Casolaro began investigating the INSLAW matter in 1990 after contact with Bill Hamilton and expanded the inquiry into a unified narrative he called "The Octopus," which he believed linked the PROMIS theft to the Iran-Contra Affair, the October Surprise, and the BCCI scandal through a single network of intelligence operatives, organized crime figures, and corrupt government officials. Casolaro's primary source was Michael Riconosciuto, whom he interviewed extensively before Riconosciuto's March 1991 arrest.⁴

On August 10, 1991, Casolaro was found dead in his bathtub at the Sheraton Hotel in Martinsburg, West Virginia, his wrists slashed twelve times. His research materials were missing from the hotel room. His death was ruled a suicide; a second autopsy in January 1992 confirmed the ruling but could not exclude foul play due to premature embalming of the body. Before traveling to Martinsburg, Casolaro had warned his brother that if anything happened to him there, "it would not be an accident."¹⁴

The House Judiciary Committee's 1992 report noted that Casolaro had "encountered dangerous individuals associated with organized crime and the world of covert intelligence operations" and called for further investigation into the circumstances of his death. The committee found no evidence that DOJ had influenced the local investigation.¹ FBI task force members privately "questioned the conclusion of suicide" and recommended further investigation, but documents remain partially withheld from public release.⁴

Court of Federal Claims and Final Resolution

In May 1995, the U.S. Senate referred INSLAW's claims to the Court of Federal Claims. Hearing Officer Judge Christine Miller ruled on July 31, 1997 that all versions of PROMIS were in the public domain and that the government had always been free to use the software as it wished. A three-judge Review Panel upheld this decision in August 1998 and notified the Senate accordingly. INSLAW received no compensation.¹

Bill Hamilton continued to maintain that PROMIS was fraudulently stolen and distributed internationally. The full scope of the international distribution allegations, particularly those concerning Rafael Eitan, Robert Maxwell, and the embedded backdoor, has never been conclusively resolved in any formal proceeding.