BILLINGS -- An obscure California company run by an ex-convict with a history of fraud has dropped its effort to take over the beleaguered Hardin jail, days after state officials launched an investigation.
The project has been dogged by a series of damaging revelations about the company, American Police Force, ever since officials in Hardin announced with great fanfare last month that they had secured a $2.6 million deal to fill the jail.
An Associated Press investigation of American Police Force, including the criminal background of its founder, cast serious doubts about the legitimacy of the company, and its jail management proposal quickly spiraled toward its death.
American Police Force had faced a Monday deadline from the Montana attorney general's office to reveal its financial backers. A spokesman for Attorney General Steve Bullock said the demand for information was still pending.
Becky Shay, spokeswoman for the company, said Friday the deal with Hardin had "gone sour" after media revelations about the founder, Michael Hilton. But she insisted the company's intentions had been honest.
"Two Rivers deserves a considerably less-controversial partner," she said of Hardin's economic development agency, which owns the 464-bed jail. "There was never any fraudulent intention."
The jail has been vacant since its completion two years ago. After looking for prisoners from Vermont to Alaska, officials were so desperate to fill it with inmates that they floated the idea that it could hold terrorists from Guantanamo Bay.
A short time later, American Police Force contacted Hardin about taking over the jail. The company made sensational claims on its Web site about its role in the wars in Iraq and Afghanistan, and how it could mobilize special operations forces anywhere in the world on 72 hours' notice.
Officials in Hardin were so impressed with the company's credentials that they rushed into a contract in September without thoroughly investigating Hilton's background.
The AP's inquiry found that Hilton has gone by at least 17 aliases and has a history of fraud and theft dating back to at least 1988. He spent three years in prison in California and has $1.1 million in outstanding civil judgments against him.
Hilton later acknowledged offering a job to the wife of the executive director of Two Rivers Authority. That official, Greg Smith, resigned Monday. His wife, Kerri Smith, is a finalist in Hardin's upcoming mayoral election. They have not returned requests for comment.
The September contract for the $27 million jail was never ratified.
It was signed by Hilton, Smith and Al Peterson, a board member of the quasi-public authority and Hardin's school superintendent.
Peterson said Friday he does not regret the decision.
"I can't say it was a mistake," he said. "We make the best decision we can based on the information we have on hand. I don't think we did anything we couldn't or wouldn't do in the future."
Peterson acknowledged Hilton paid for several meals when city representatives -- including Greg and Kerri Smith -- traveled to California to negotiate the deal last month. But in a letter released Friday, Peterson and authority president Gary Arneson stated no other compensation was received.
Montana Gov. Brian Schweitzer upbraided Hardin officials for first striking a deal with what he called "con men" and then defending American Police Force after Hilton's history emerged.
"They became part of the conspiracy. They became apologists," he said of Peterson and others involved in the deal.
Schweitzer added that Hardin residents "need some people to represent them that have some business skills, that are honest and have integrity."
It is unknown who invested money in American Police Force or how much Hilton personally put into the effort. He previously described his investors as "friends and family" and companies with which he was associated.
He had said he planned to sink $17 million into a law enforcement and military training center next to the jail.
Hilton had also talked of his company taking over local law enforcement services in Hardin for $250,000 a year. That idea never got very far, even though he brought three Mercedes SUVs marked with made-up "Hardin Police Department" logos to his first public appearance in town.
He said he would donate the vehicles to the city but never did.
Those involved in Hilton's past schemes had doubts all along. They included Richard Earnhart, a California contractor who invested more than $100,000 in an assisted living center that was promoted by Hilton in the late 1990s but never built.
As part of that scheme, Earnhart said he and several others involved were also given a Mercedes by Hilton. He said his vehicle was repossessed days after he got it.
A judge last week ordered Hilton to appear in California Superior Court in Los Angeles on Oct. 27, over a $340,000 outstanding judgment he owes in Earnhart's case.
"He had me under his spell," Earnhart said of Hilton in a recent interview. "That prison (the Hardin jail) -- he should be in it."
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