STATE OF SIEGE

By Richard Lacayo

ON THE COLD, FLAT STRETCHES of Garfield County, Montana, the self-proclaimed Justus Township is a bump on the taut horizon. fbi agents wearing flak vests and side arms who kept watch on the place last week saw a farmstead sprawl of family houses, cabins, trailers and some outbuildings in the midst of 960 acres of open land. All of it once belonged to Ralph Clark and his brother Emmett, busted wheat farmers turned fringe ideologues. Visitors say that these days Ralph Clark sometimes wears a lawman's five-pointed star, to signify that he's the law. For him and the 10 or so other Freemen holed up inside, some of them for more than a year, the compound is sovereign territory, with its own courts, laws and officials. It's also their light armory, ministry of information, and--the most important thing--national bank.

Over the past year, the self-styled Freemen churned out more than $1.8 million in phony money orders and other financial instruments, according to federal indictments. They used those to defraud banks, credit-card companies and mail-order businesses. A favorite tactic was to use liens filed against the property of government officials and others, then issue worthless money orders or checks using that property as collateral. Some unwary businesses, car dealerships, even the irs, have accepted them. Meanwhile, the Freemen have allegedly harassed local officials and brazenly taught weekend seminars in fraud and larceny to hundreds of out-of-state visitors. The attendees then spread out to practice what the Freemen preached: that bank debts and other obligations are invalid because the banking system and the U.S. government are themselves illegal.

With the arrest last week of two of the group's leaders and an escalating fbi presence around the Clark farm, Justus Township is no longer merely the headquarters for the Freemen's crooked amalgam of extremism and thievery. It's also the first major testing ground for federal law enforcement in the nervous aftermath of two disasters--the deadly shootout with white separatist Randy Weaver at Ruby Ridge, Idaho, and the Branch Davidian inferno near Waco, Texas, in which more than 75 people were killed. In its handling of such standoffs, the Justice Department is at pains to re-establish the line between force and recklessness. The word this time is play it cool and play it down. Attorney General Janet Reno, who took heat for approving the final assault at Waco, summed up the order of the day for Montana: "No armed confrontation, no siege and no armed perimeter."

The irony is that for months local officials have been begging for the cavalry to arrive. The Freemen have spent much of the past year in a campaign of intimidation, confident they could outgun local law enforcement, which in those parts means Sheriff Charles Phipps and his deputy. Since April 1, 1994, when the Clarks first retreated to their farms, later to be joined by fugitives from other areas, the Freemen have posted $1 million bounties on the heads of Phipps, county attorney Nick Murnion and local bankers, threatened to kidnap and hang local judges, and put phony liens on the property of anyone who got in their way. Prosecutors say they used one bogus money order in a failed attempt to buy $1.4 million in arms and ammunition.

Justice Department spokesmen insist they weren't flinching in Montana, just waiting for a grand jury in Billings to hand up federal indictments giving them legal authority to move against the fugitives, who otherwise faced only state-level charges. Whatever the reason for the long stalemate, it gave way last Monday when federal agents arrested two Freemen leaders, LeRoy Schweitzer, 57, and Daniel Petersen, 53. An undercover agent posing as a seminar attendee was said to have pulled a pistol after feigning car trouble near the Clark ranch.

The arrests came a day after a meeting at the Freemen's compound at which Schweitzer outlined a plan to kidnap local officials. It was captured on a videotape broadcast last week by abc's Prime Time Live. "We're going to have a standing order," said Schweitzer. "Anyone obstructing justice, the order is shoot to kill." The first attempt to arraign the two men at the Billings federal courthouse ended in chaos when they shouted demands for a "change of venue" to their own Justus Township court. Two days later, U.S. Magistrate Richard Anderson tried again, but had to enter not-guilty pleas on their behalf when the pair refused to cooperate. At a third hearing, where Anderson denied them bail, Petersen growled about a final confrontation at Justus Township: "This will be worse than Waco."

Not if the Federal Government, as well as the locals, can help it. Officials say that at least 10 Freemen, plus an unknown number of wives and children, remain at Justus Township. Those include Ralph Clark, 65, and his brother Emmett, 67, and Emmett's son Edwin, 45. On Saturday, Emmett's son Richard, 47, who had also been wanted by authoriteis but had not been involved in the standoff, turned himself in.

The two adjoining ranches were theirs until the government foreclosed on them for nonpayment of loans and taxes. Around Garfield County nearly everybody seems to have friends or even family holed up there. But sympathy for the fugitives has been hard to find. The common view is that the Clarks and their cohort are sore losers in the perilous game of farming and ranching. "They just sit up there dreamin' up things to be a public nuisance," says rancher Tom Wilson. "We're all sick of it." But everywhere there's a strong desire for a bloodless settlement. "We think they were led astray," says former Garfield County commissioner Kenneth Coulter. "They were possibly gullible because of their financial situation."

Even with the evidence of local support, the FBI moved gingerly all week. The situation has escalated at a time dangerously close to the April 19 anniversary of the Waco debacle and last year's bombing in Oklahoma City, a red-letter date on the calendar of the extremist right. This time the FBI has been taking no chances. Trained negotiators have stayed in touch with the fugitives via a phone line that was kept operational when the regular lines to the house were cut off. The FBI's Hostage Rescue Team, an elite assault force involved in the Ruby Ridge shootings, has been on the scene but out of sight. To head up the bureau's command post in Billings, FBI Director Louis Freeh sent a top deputy, Robert ("Bear") Bryant, chief of the FBI's national security division. He sends regular field reports to Freeh, who in turn confers daily with Attorney General Reno. At the White House, Chief of Staff Leon Panetta has kept the President up to date.

Though the common-law-courts movement is loosely organized, with no strict hierarchy, the first arrests were big ones. Schweitzer became a leader of the Freemen after a tax dispute in the late 1970s. Using ideas common to the Posse Comitatus and other rightist fringe groups, they cobbled a doctrine out of bits and pieces of the Magna Carta, the Bible, the Constitution and other sources to argue that the Federal Government represents an illegal usurpation of the common-law power of localities. The ideas are now spread by groups under a variety of names--Freemen, We the People, People for Constitutional Courts, even the Civil Rights Task Force--sometimes with a strong dose of white separatism, anti-Semitism and the usual paranoia about a worldwide conspiracy of bankers. In January Lutheran pastor Helen Young met with Freemen leaders at the Clark farm. "It was hard for me to dialogue with them," she says. "It became a matter of them looking at the Scriptures through a certain lens that doesn't really proclaim God's love, but proclaims hate."

But at the Freemen-style seminars around the country, even listeners unmoved by the talk about Jews bringing blacks to America to destroy it could be hooked by the talk that their debts were a legal illusion. Some Garfield County ranchers and farmers discovered the Freemen idea in 1992, when they attended an invitation-only seminar in Great Falls, Montana. It was organized by Roy Schwasinger, founder of We the People, one of several organizations promoting Freemen-style ideologies and fraud schemes. Depending on his audience, Schwasinger told listeners that either the Federal Government or the U.S. banking system had lost a class-action suit for defrauding farmers and ranchers. To cash in on their share of the (nonexistent) settlement, he offered them a helpful kit of documents. Price: $300.

These days Schwasinger is serving a 16-year federal-prison sentence for filing fraudulent property liens on government officials. Federal prosecutors estimate that by the time of his conviction in 1994 he had sold close to 3,000 of the kits, for a take of almost $900,000. In Montana the talk of debt relief was irresistible to some hard-pressed farmers and ranchers, especially during downturns in the rural economy.

Though the FBI has been worried that the scene at Justus could become a magnet for armed fringe groups, representatives of the self-proclaimed militias around the Western states have also been denouncing the Freemen as ordinary criminals. "Those people are crooks," says Bob Wright, who leads a militia unit in New Mexico. "This is not a militia issue."

Paul Dinsmore, an area rancher who is also host of a right-wing Colorado radio talk show, visited the group a month ago and has been in touch with them since. "At this point they're just scared," he says. "They don't have much stored food. They know they are going to jail. They have visions of being shot, and they want their safety ensured." As for the fbi, there were no signs last week that they were fixing for a fight. Bulldozers were improving the roads in the vicinity of a farmhouse near the Clark place. If they have to settle in for a while, the feds plan to use it as spring headquarters. --Reported by Patrick Dawson/Jordan, Douglas Waller/Washington and Richard Woodbury/Denver

With reporting by PATRICK DAWSON/JORDAN, DOUGLAS WALLER/WASHINGTON AND RICHARD WOODBURY/DENVER