CHICAGO -- A financially troubled rent-a-cell prison in Minnesota that finally reached capacity last month is now trying to discharge more than 150 Puerto Rican inmates and replace them with prisoners from Colorado.

The Prairie Correctional Facility in Appleton, Minn., charged Puerto Rico's Administration of Corrections with breach of contract and tried to return inmates to the island last week. But corrections officials in Puerto Rico contested the move in federal court, and won a temporary restraining order that bars the prison administrators from sending the inmates home for now.

Prison officials have refused to comment either on the basis for the breach of contract charge or why they want to return the prisoners to Puerto Rico. Puerto Rican officials first contracted to send inmates to the prison in 1993.

In the restraining order, U.S. District Judge Hector Laffitte also ordered Prairie Correctional officials to continue housing the prisoners "in compliance with all federal and state laws." The prison put all Puerto Rican prisoners on lockdown last week pending their return trip to the island.

The prison, which has missed at least three debt service payments on bonds issued for its construction, had long blamed its inability to attract prisoners for the payment defaults.

The tension between the Puerto Rican prisoners and prison officials has been mounting for some time. The Federal Bureau of Investigation is looking into reports from former prison guards that some colleagues beat and otherwise mistreated the Puerto Rican prisoners over the past year. The inmates staged a disturbance, which was quelled with tear gas, last week while waiting to learn their fate.

Laffitte scheduled a full hearing on the matter Oct. 31, but it is not clear when the conflict will be resolved.

A protracted court battle may jeopardize Prairie Correctional's plans to replace the Puerto Rican prisoners with about 200 inmates from Colorado, which would leave the prison at half-capacity again. Liz McDonough, a spokeswoman for Colorado's department of corrections, said the state hopes to send a group of about 100 inmates to the Prairie Correctional Facility within the next 30 days.

"We're formulating alternate plans in the event there's a problem in Minnesota," she said.

Appleton conceived the rent-a-cell prison project to create jobs in the area. In 1990 it formed the Appleton Prison Corp., which issued $26.9 million of unrated, tax-exempt revenue bonds to build the structure.

The corporation had no potential clients when it broke ground for the prison, and has struggled since completing it in 1992 to lure enough out-of-state prisoners to fill its 516 beds.

In the process, it defaulted on at least three scheduled debt service payments totaling more than $4 million. The trustee for the bonds, First Trust National Association, declined to say whether the corporation made its scheduled August 1994 payment.

Some bondholders remain optimistic the prison will succeed once the new Colorado prisoners are in place. Minneapolis-based IDS Financial Services Inc., which holds the biggest share of the prison bonds, says it's hopeful.

"The facility hasn't been full, and therefore it hasn't cash flowed, but we expect it to soon. We remained pretty optimistic on this project all along, because there are similar facilities in other states that are successful," said IDS spokesman Mike Kennedy.

A spokeswoman for First Trust refused to discuss future payment prospects, the size of the inmate population, or conditions at the prison.

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