Filename: Harry2.Art Type : Article Author : Harry Martin Date : 03/15/91 Desc : Federal Corruption Series Part II ----------------------------------------------------------------------- HOW THE JUSTICE DEPARTMENT USED THE BANKRUPTCY COURT By Harry V. Martin Second of a New Series (c) Copyright Napa Sentinel, 1991 March 15, 1991 Reprinted with permission of the Napa Sentinel The corruption of the bankruptcy system is endemic of a political patronage system with its roots going back to former U.S. Attorney Edwin Meese, according to many former employees of the Department of Justice. The INSLAW case--reported last week in the "Napa Sentinel"--is a microcosm of the entire system. As a result of the INSLAW cases, many heads in the Justice Department were lopped off. When Judge George Bason, a bankruptcy court judge, refused to liquidate INSLAW, ruling instead that the Department of Justice used deceit, trickery and fraud, he was only one of four who were not re-appointed to their jobs. A total of 132 were re-appointed. But to show the collusion of the Justice Department, when it removed Judge Bason from the bench after his ruling against them and for INSLAW, they had S. Martin Teel appointed to the bench to replace Bason. Who was Teel? He was a Department of Justice attorney who unsuccessfully argued the INSLAW case before Judge Bason. Tony Pasciuto admitted that he was ordered to pressure the bankruptcy judge to rule against INSLAW. After being subpoenaed by INSLAW's attorney, Pasciuto was offered a long-awaited transfer by the Justice Department from Washington, D.C. to Albany, New York. Pasciuto bought a home in Albany and then changed his testimony. After the testimony was completed, the Justice Department cancelled his transfer. Pasciuto had to commute from Albany to Washington. Former Attorney General Elliott Richardson made a list of the baffling questions of why the Justice Department wanted INSLAW declared insolvent and why it wouldn't pay a $6.8 million settlement to the small company. INSLAW received an offer to sell their company and they refused. The buyer informed the company that he had powerful political influence and "We have ways of making you sell." Within 90 days of that threat, the Justice Department commenced its attack on INSLAW. The company that made the attempt to buy INSLAW had financial connections to Meese and some of Meese's cronies. When the battle ended, INSLAW was broke, an attorney, a Justice Department whistleblower and a judge were out to work, but INSLAW was saved by a corporate giant--IBM--who rescued the company virtually from the auction block. The company that allegedly made the threat was Hadron. It has had brushes with the Security Exchange Commission, it has gone to the brink of being broke and one of its companies has been accused by the SEC of fraud and manipulation of stock prices, the company lost $4.3 million in one year. It soon sunk $12 million in the red. But once Meese became Attorney General, Hadron suddenly received lucrative Pentagon contracts, along with the Agency for International Development. The company was also awarded a $40 million contract from the Justice Department, despite protests against the bidding process. One member of Hadron's board was Dr. Earl Brian, who was in Reagan's California cabinet along with Meese. Meese was chief of staff in California. The Deputy Attorney General was D. Lowell Jensen, who had competed against INSLAW years earlier. The person in charge of making Justice Department payments for INSLAW's software--and who didn't--was an employee who had been fired from INSLAW. Jensen was also in trouble when the Senate was investigating the Iran-Contra scandal. Apparently the Senate committee discovered a memo written by Jensen to the National Security Council warning that the Miami federal prosecutors where on Ollie North's trail. The memo revealed that the Justice Department, who was supposed to prosecute the Iran-Contra affair, actually was tipping off the government in advance. One Justice Department official testified at the INSLAW hearing that INSLAW's software could be dangerous. Thomas Stanton testified "INSLAW could besmirch the U.S. Trustee program." The program is so sophisticated that it could trace all assets, track all trustees and judges. Another Justice Department employee stated that the U.S. Trustee program was flagrantly political. "It was a way of getting cronies into office. There would be 50 or 60 positions to be filled... it was Meese's baby." The official also stated, "It was always puzzling to me how he got away with what he got away with. He'd do things that were blatantly wrong and no one would question him--it's kind of scary." The Meese program would concentrate too much power in one government department. "It's supposed to act as a watchdog over lawyers and trustees, but the problem is it's more. It has a considerable amount of power to control the administration of cases. When a case moves from bankruptcy to liquidation, the U.S. Trustees office names the trustee, who converts the assets, oversees the auction, and retains appraisers who will put a price tag on the leavings. The U.S. Trustee's program also links Justice and the IRS. The thing that's a little frightening about it is that the U.S. Trustee department sees itself as a part of the tax-collecting function of government. The Justice Department represents the IRS, and the IRS is often the biggest creditor in liquidation," states a leading bankruptcy attorney.