Suit Claims Ex-Justice Official Helped Force Firm Into Bankruptcy

The former No. 2 official in the U.S. Justice Department has been accused in a $30-million lawsuit here of helping to force a computer company into bankruptcy court.

The target of the accusation, contained in a civil damage suit filed June 9, is D. Lowell Jensen, who was appointed to the U.S. District Court in San Francisco in July by President Reagan after serving for five years in the top echelon of the Justice Department.

Jensen is not named as an individual defendant but the suit contains specific accusations of bias and misconduct against him that allege he participated in decisions that “propelled” the computer company toward bankruptcy.

His accuser is William A. Hamilton, president of Washington-based INSLAW Inc., developer of a sophisticated computer system called PROMIS that is used to manage criminal and civil cases, and to collect $250 million that is owed to the government.

The feud that prompted the lawsuit has been festering for almost two years and is the subject of concern at the highest levels of the Justice Department. Atty. Gen. Edwin Meese III will soon be asked to help resolve the dispute out of court, informed sources said.

INSLAW filed for bankruptcy in 1985 after the Justice Department held up $1.2 million in payments to the company at the direction of C. Madison Brewer III, supervisor of the department’s use of PROMIS and other information systems. He, too, is charged in the suit with being biased in decisions involving PROMIS, which stands for Prosecution Management Information System.

Brewer had been fired in May, 1976, as INSLAW’s general counsel “for not being able to do the job,” Hamilton said in an interview. Six years later, Brewer joined the Justice Department. The suit alleges that he should have been disqualified from handling PROMIS contracts because of prejudice against INSLAW stemming from his dismissal there.

Jensen has been a critic of PROMIS ever since he tried to start a competing computer system in early 1974 while he was in the Alameda County prosecutor’s office, where he served 12 years as district attorney before his 1981 appointment by Reagan.

He tried unsuccessfully to persuade then-Los Angeles County Dist. Atty. Joseph Busch and his San Diego counterpart, Edwin Miller, to adopt Jensen’s competing system instead of PROMIS.

Jensen also was unsuccessful in his bid to have the California District Attorney’s Assn. adopt his computer system for use in the state’s 58 counties.

Brewer had direct responsibility for running PROMIS and, in his executive position, came in frequent contact with Jensen, the senior member of the PROMIS oversight committee.

At the time of the payment cutoff almost 75% of INSLAW’s annual $8 million in business was done with the Justice Department and its U.S. attorneys’ offices. INSLAW also now has a contract for computer-related work with the giant Aetna Insurance Co.

PROMIS has been operating for the last 15 years in the Los Angeles County district attorney’s office, the largest local prosecution agency in the world and 55 other local prosecutors’ offices, including San Diego.

Threat to ‘Give Away’ Secrets

According to the suit, Brewer has threatened to “give away” the system’s trade secrets to other criminal justice agencies. He has defended the proposed move on grounds that INSLAW has no right to charge license fees for its software.

Brewer and the Justice Department say, in court documents, that INSLAW, a private profit-making corporation since 1981, had developed PROMIS with government grants while INSLAW was still the nonprofit Institute for Law and Social Research.

Therefore, the government’s legal theory goes, INSLAW does not have the right to charge license fees, and that is the main reason payments were stopped.

Hamilton concedes the original PROMIS system was developed with funding from the now-defunct federal Law Enforcement Assistance Administration. But in court documents there is evidence that “more than a thousand discrete enhancements” to PROMIS have since been made by INSLAW with private financing.

‘Just Isn’t Fair’

“If they get away with this, they can take what they want from PROMIS for free and give it to others for free,” Hamilton said. “We are talking about millions of dollars. That just isn’t fair. We’ve earned both our outstanding technological reputation and the money they owe us.”

U.S. Bankruptcy Judge George Bason Jr., who is presiding over the proceedings, stated in a July 11 written opinion that a possible “personal vendetta” was being conducted against Hamilton.

Elaborating on this point, Judge Bason wrote: “The Court finds highly credible the testimony of (Hamilton). The Court believes the motivation of the Justice Department is extremely suspect . . . possibly because of a personal vendetta by a former employee (Brewer) of the debtor (Hamilton) who is now an employee of the Dept. of Justice.”

Hamilton supports his contention that Brewer should have been disqualified by pointing out in the suit that for a period in 1982 Brewer was barred from PROMIS dealings by another high-ranking Justice Department attorney.

But Brewer was later allowed to handle PROMIS matters, the INSLAW suit states, because “Jensen, having previously developed a negative attitude toward INSLAW’s product, failed to take action to insulate the administration of the program from Brewer’s bias.”

Source of Troubles

“I don’t think he (Jensen) has ever forgiven me nor INSLAW for his lack of success” with Jensen’s computer system, Hamilton said in an interview, “and I think the evidence is clear that our troubles with the Department of Justice stem from that and the bias Brewer has against us for firing him.”

Hamilton’s accusations of bias were put before Jensen by U.S. Sen. Paul Simon at Jensen’s confirmation hearing before the Senate Judiciary Committee in June. They were answered in writing on his behalf by Assistant Atty. Gen. John R. Bolton.

Bolton replied in a letter:

“Mr. Jensen . . . is fully satisfied with the propriety of his actions. . . . Mr. Jensen has neither been involved in nor attempted to influence the handling of (the PROMIS-related) proceedings.”

Contacted in San Francisco, Jensen said: “Given my current position on the bench, I am going to have to rely on Mr. Bolton’s reply to the Judiciary Committee. It speaks for itself as a defense.”

In response to a Times inquiry, Brewer replied: “I really would like to give you our side to this story because we have a good defense, but the department’s policy is that we don’t comment on litigation while it is in progress.”

That policy was reiterated by a dozen other Justice Department officials The Times questioned.

Richardson an Ally

One of INSLAW’s major allies in the battle with the Justice Department is the department’s former leader, Elliot Richardson, who served as U.S. attorney general under President Richard M. Nixon.

“Somebody over at justice (department) is just being pigheaded abut settling this dispute in a fair way,” Richardson said.

Then he added: “I suggest the Justice Department people go out and read the inscription on their own building, which reads, ‘The interests of the United States are served whenever justice is done to one of its citizens.’ They certainly aren’t doing justice to Hamilton. What they have done to him is horrendously unfair.”

Judge Bason heard oral arguments Sept. 26 on the Justice Department’s motion to dismiss INSLAW’s suit as groundless. He is expected to hand down his ruling this week.