BUTTE, Mont. - Officials say some red flags involving an ammunition company that wants to move to an industrial district near here have prompted them to request more information from the owner.

Owner Arthur Alphin of Kentucky-based A-Square also plans to relocate a rifle manufacturing plant to Glenrock, and Mayor Steve Cielinski said Alphin has been straightforward about the company's history from the beginning.

Both Glenrock and state officials did an investigation of their own and "the stories appear to fit," he said.

Cielinski said A-Square has not started manufacturing rifles in Glenrock, but it has moved equipment to a temporary location. Actual production is expected to begin mid-winter while most of the hiring will be done next spring, he added.

The town plans to seek a $2.3 million "business committed" grant from the Wyoming Business Council to help build a permanent A-Square facility, he said.

"With any type of economic development there's somewhat of a risk but everything that we've seen, it's worth the risk for us," Cielinski said. "And it's a business we would love to have here."

Alphin recently announced that he plans to move his ammunition business to the "Tax Increment Financing Industrial District" 10 miles west of Butte.

However, comments posted on a newspaper Web site and in an anonymous letter sent to the district's board raised concerns about A-Square's background and its request for $920,000 in TIFID funds for a new building, said Charlie O'Leary, the district's chairman.

The company's history includes 1996 raids on A-Square facilities and its owner's home in Kentucky by the Bureau of Alcohol, Tobacco and Firearms, U.S. Customs Service and the Internal Revenue Service. The raids were part of an investigation into alleged drug smuggling and running, money laundering and illegal exportation of weapons, The Montana Standard reported.

In addition, a former manager embezzled between $1 million and $3 million from A-Square, court records said.

O'Leary said the information raises questions about how much the district's board knew about A-Square and Alphin.

But Jim Smitham, director of the Butte Local Development Co., said Alphin was upfront about his past struggles "from the very start" and provided legal documents to support his innocence and that document the former employee's fraud.

Smitham said he also called Mayor Cielinski in Glenrock. He said Glenrock and the state sent a team to Kentucky to check out A-Square's operations.

"They came back with the conclusion they are an existing and operating business," Smitham said. "From our due diligence, everything looks good."

Most of the district board's research came from Economic Development Director Russ Connole, who verified through Trimble County in Kentucky that Alphin was defrauded by his former manager. He also checked with a District Court in southern Indiana and determined that Alphin had cleared his name through legal proceedings after the raids.

But Connole said his research did raise some red flags. When he called A-Square's telephone number provided by Alphin, a woman answered and said the company wasn't currently operating.

Alphin said his plants are producing, and the woman was still being trained and she didn't know much about the company.

The Kentucky secretary of state's Web site lists A-Square in bad standing and said it was dissolved in 1999 by the secretary of state for failing to file an annual report in time. Alphin said the information was outdated.

"We got that in good standing, and then I dissolved it," he said. "We are in good status. I'm not sure how they keep up on that Internet stuff."

Alphin said his only financial obligation is a $170,000 mortgage on a house in Bozeman.

Board members put A-Square on a fast track for approval because Alphin said he wanted to start construction before the ground freezes. But Connole urged the board not to be pressured by Alphin's timeline.

Board members decided to ask Alphin for business records from before the fraud and raids, contact information for the man running Alphin's Wyoming plant, old employee contact information and proof of Alphin's contracts or a letter from the businesses he supplies.

The board will discuss how to proceed during a meeting on Wednesday.