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PLN quoted in article on Hardin, MT private prison scam

Newsweek, Jan. 1, 2009.
PLN quoted in article on Hardin, MT private prison scam - Newsweek 2009

Development Scheme

The Montana town of Hardin wanted a private prison. Or Gitmo detainees. Anything, really, to resuscitate its economy.

By Suzanne Smalley | Newsweek Web Exclusive

Oct 14, 2009

Hardin, Mont., population 3,500, is just 15 miles northwest of the Little Bighorn Battlefield Memorial, a national monument honoring the hundreds of U.S. soldiers and Cheyenne and Lakota Indians who died in 1876 fighting over this now largely forgotten land. With unemployment above 10 percent and the county's poverty rate at twice the national average, Hardin's town leaders have long been desperate to create jobs and fuel economic development. As with many hard-luck towns in the dusty Northern Plains, these days, the only thing anyone passes through Hardin for is a glimpse of the distant past.

So when a group of private investors, represented by out-of-state brokerage firms, agreed to finance a private prison in Hardin in 2006, it seemed like a no-brainer to the town's economic-development arm, the Two Rivers Authority. A private prison developer had approached state officials in 2004, seeking work in the state, and was later referred to Hardin by the state's Commerce Department, according to Paul Green, who headed the Two Rivers Authority at the time. Around the time Hardin began talks with the prison developer, the state was projecting dramatic growth in its prison population, a fact Hardin economic-development officials say they weighed when they decided to move forward with the deal. Bob Anez, a spokesman for the state's Department of Corrections, acknowledged that in 2005, gripped by the methamphetamine epidemic, the state projected as much as an 8 percent growth in male prisoners and a 27 percent growth in female prisoners. But Anez said that such projections, a budgeting tool, are not reliable, since the state aims to keep costs as low as possible and is always looking for cheaper alternatives to incarceration. Anez said the state, which also elected a new governor in 2005, never promised Hardin prisoners.

A few years later, deep into a recession that is causing states to dramatically cut prison budgets—including Montana, where the new administration has made reducing the prison population and prison-related costs a top goal—the 464-bed Hardin jail sits empty, and the town is worried that its creditors will soon foreclose on the property because they have not been paid back. The underwriters representing investors in the deal declined to comment for this story, but four Two Rivers officials separately told NEWSWEEK that Hardin will not likely have to pay anything back if the property is foreclosed on, though the town's municipal-bond rating will be destroyed and it will lose control over what becomes of the facility. Last spring, Hardin, desperate to fill its prison and bring in jobs, was one of four towns across the country to volunteer to house Guantánamo detainees. The town made worldwide headlines (including on Al Jazeera English, which described Hardin's streets of "empty storefronts, shabby houses, [and] intoxicated men") after essentially begging to house the alleged terrorists. The townspeople, eager for work, were sanguine about the idea, but the state's congressional delegation wouldn't have it.

Shortly after becoming famous for offering to host accused terrorists, Hardin thought it had finally found salvation when the economic-development board was approached by a mysterious security company that billed itself as "America's Private Police Force (APPF)." A Two Rivers board member recently told the Associated Press that under the recently signed contract with Hardin, APPF promised to pay off the cost of the prison and give the town an additional $5 a day per inmate, money that would go straight into town coffers. However, after a series of revelations about APPF's public face, Michael Hilton, and his allegedly fraudulent past, the deal between Hardin and the company fell through late last week. APPF did not ask beleaguered Hardin officials for any money. The contract APPF signed with Hardin was never approved by the investors who paid to build the prison, but that hadn't stopped APPF from moving into the empty jail and promising town officials $30 million in sweeteners, including an APPF-run police force (the town is too poor to pay for its own), a new military and law-enforcement training center, an animal shelter, a homeless shelter, and a free health-care clinic.

The fact that the Two Rivers Authority and its board—made up of town leaders, including the superintendent of schools, the owner of the local State Farm insurance office, and a town dentist, among others—went for APPF's pitch is a testament to their anguish in the face of Hardin's struggles. APPF first caused a stir in Hardin when company officials arrived last month, including a man wearing a black military-style uniform who introduced himself only as "Captain Michael." The public face of APPF, Hilton (a.k.a. Captain Michael) had long told Hardin officials he was backed by a highly regarded private-security company. The name of that company has not yet been publicly revealed. Upon arriving, APPF immediately outfitted the city with a fleet of Mercedes SUVs decorated with City of Hardin Police emblems. Officials in Hardin were thrilled.

But reporters started asking questions, made suspicious in part by the APPF's Web site, which opens to the sounds of Ravel's "Bolero" and features heavily armed commandoes in fatigues and masks. The site claims APPF has "played a very important role in U.S. military and civilian efforts to protect our homeland and combat terrorism" and boasts of the Navy SEALs and former CIA agents working for it, but when journalists followed up on a Washington address APPF listed as its corporate headquarters, they learned that APPF was not a tenant. Underneath a collage of finger and shoe prints, APPF's site also swears by its talents at locating witnesses, debtors, fugitives, and spouses "both domestically and internationally" thanks to "unique privacy laws and databases."

Hilton told the Two Rivers board he wanted their facility to house prisoners and to train his elite mercenaries, but he was largely unknown in the private-security field. Still, the board members did not give up hope, and the deal moved forward until last week, when news reports surfaced that Hilton has a history of fraud, which caused the board to back away from the deal. Hilton, it turns out, has many aliases, has served time on grand-theft charges, and owes more than $1 million after losing a series of civil suits. Two weeks ago, Montana Attorney General Steve Bullock began investigating APPF, demanding proof substantiating the company's many grandiose claims in an effort to sniff out potentially "unfair or deceptive" business practices. (Bullock has since suspended the investigation, saying that since Hilton had left the state and "no Montanans were taken advantage of or conned by this company," there was no point in continuing. Bullock also emphasized that Hilton never provided any documents Bullock requested to prove APPF's baroque claims were true.) Despite the circumstances surrounding APPF, the company's bid to run a private police force in Hardin generated considerable buzz in the blogosphere and on the talk-radio circuit, with one conservative talk-show host asserting that APPF was owned by the controversial security firm formerly known as Blackwater (recently renamed Xe), and conspiracy theorists posting Internet alerts about the possibility that APPF might be secretly backed by the Obama administration so it could quarantine citizens who refuse the swine-flu vaccine.

Meanwhile, at least one member of the Two Rivers Authority economic-development board admitted last week that he was still holding out hope for a miracle outcome, even in the face of Hilton's history of fraud. Timothy Murphy, a dentist in town, said constructing the prison was a last-ditch hope to bring good jobs to town. "We're still trying to negotiate a deal with APPF—it's our last chance," Murphy said. "The detention facility would create 200 jobs, and we know ancillary businesses come in. You might get a new motel. We'd like to see the town continue to grow and, without economic development, small towns like Hardin in the Midwest are disappearing."

Alex Friedmann, associate editor of the watchdog publication Prison Legal News, argues Hardin is just the latest desperate small town to look to a private prison for economic salvation. Private prisons run by big companies such as Wackenhut spread across the country during the economic boom years, when the fight on crime relied primarily on mass incarceration and harsh three-strikes laws. Now 26 states have cut back on corrections for the coming fiscal year, according to the Vera Institute for Justice, and prisoners are being released. That means that during a severe budget crunch, there is less of a market to pay private companies to house prisoners.

Friedmann, who uncovered Hilton's sordid business past, says that the attention on Hardin's recent woes has been disproportionately focused on the hucksterism of Hilton and the fears stirred by a private police force, which he points out is really not much different from the private prisons that have long profited from housing and, in some cases, abusing U.S. prisoners. "The scam [by Hilton] is somewhat farcical and that's getting the headlines, but the back story is important," Friedmann says. "These rural communities desperate for economic development have latched onto creating prisons. What they've found in Hardin's case is that the demand for facilities to house prisoners has not kept up with the supply, so they have no jobs and no revenues, and they've lost the opportunity to attract other industry."

In fact, Hardin may not be entirely out of luck. The town has recently explored building a controversial horse-slaughtering plant so that it can export horse meat to the Far East. Murphy, the economic-development board member who held out hope longer than most that Hilton would somehow come through, said last week that the town has nothing left to lose. "Hardin is not going to attract the IBMs and Patagonias like Bozeman," he said. "We're going to get jobs like we got an asphalt plant a few years ago. It was originally proposed for Columbus, Mont., and they didn't want it." When asked why he continued to believe in APPF despite all the evidence of Hilton's questionable past, Murphy replied simply, "We're trying to better our town."