A Victim Of 'The Octopus'?

Danny Casolaro couldn't have come up with a better plot. Casolaro, 44, was a Washington-based freelance reporter who was working on a bombshell book-a megexpose that, he said, involved the Iran-contra scandal, the October Surprise, the Bank of Credit and Commerce International and a pattern of allegedly shady dealings by the Reagan Justice Department. On Aug. 10 Casolaro was found dead in the bathtub of a motel room in Martinsburg, W.Va., an apparent suicide. By the time his family was notified two days later, Casolaro's body had already been embalmed-and there was no trace of his notes. Family members were incredulous: Danny, they said, wasn't the type to kill himself, and he had gone to Martinsburg to interview a pivotal source on the wide-ranging government conspiracy he called "the Octopus." Worse yet, his brother told reporters, Danny had recently said "don't believe it" if he somehow met with a mysterious accident.

All this might seem to be the stuff of a superheated imagination were it not for the fact that Washington is awash with conspiracy theories about the BCCI scandal and the so-called October Surprise. Casolaro's entry point for this maze of rumor and innuendo was the Inslaw case, which has been simmering since 1983. Inslaw was a Washington-based computer-software company that went bankrupt in 1985 after a bitter dispute with the U.S. Justice Department. Its owners, William and Nancy Hamilton, charge that department officials deliberately conspired to steal an Inslaw case-management computer program and drive the company into bankruptcy. Despite denials from the Justice Department, that claim has now been upheld by two different federal judges; the case, after a successful appeal by the government, is headed for a new trial. But the Hamiltons also say their dispute with the Reagan Justice Department has a more sinister dimension. Inslaw's feud with Justice, they claim, is directly linked to associates of former attorney general Edwin Meese III and to the October Surprise-the alleged attempt by Ronald Reagan's 1980 presidential campaign to delay the release of U.S. hostages in Iran in order to prevent Jimmy Carter's re-election.

Enter Joseph Daniel Casolaro. Casolaro, who had previously published fiction and done some freelance reporting for a Washington-area newsletter, began investigating the Inslaw case in 1990. He tried and failed to get a book contract, then borrowed heavily to finance his own research. His brother, Dr. Anthony Casolaro, said Danny believed he had uncovered evidence of a shadowy conspiracy linking Inslaw, the October Surprise, Iran-contra and BCCI. That was "the Octopus," which Dr. Casolaro said seemed to be a loose network of individuals, including some Americans, who did clandestine operations for profit. Friends said Casolaro had had a tough time with his research-but recently, his brother said, Danny was elated by a seeming breakthrough.

That led Casolaro to Martinsburg, where he expected to meet a source who had evidence of computer-hardware thefts from a major defense contracting firm. Then Casolaro was found in the bathtub with his wrists slashed. There was a suicide note, written in handwriting Casolaro's sister identified as Casolaro's own: "To those whom I love the most, please forgive me for the worst possible thing I could have done," the note read. "I'm sure God will let me in." State officials said Casolaro's death was "not inconsistent with suicide," and the FBI, after reviewing the autopsy, said it had no interest in investigating further. Protests from the family-and questions from reporters-forced state officials to dig deeper. Last week investigators suggested that his financial problems might have made Danny despondent: he had taken out a loan on his home in suburban Virginia and borrowed from a relative as well. The evidence, though inconclusive, pointed to suicide.

But the doubts persist. Last week former U.S. attorney general Elliot Richardson, who is representing Inslaw in its case against the government, called for the appointment of a special prosecutor to investigate the company's lawsuit against the Justice Department and, now, Casolaro's death. "It's hard to come up with any reason for [Casolaro's] death other than that he was deliberately murdered because he was so close to uncovering sinister elements in what he called 'the Octopus'," Richardson told The Boston Globe. In Washington, meanwhile, the House Judiciary Committee is headed for a showdown with the Justice Department on the Inslaw case. In late July, after Justice officials said several key files were missing, committee chairman Jack Brooks of Texas issued a subpoena for all departmental records on the dispute. At this point, no one really knows where the congressional investigation may lead.