Agreement To Release Hostages Held by Inmates at Brazilian Prison Hits Snag As Standoff Reaches Third DayBy STAN LEHMAN

SOROCABA, Brazil (AP) _ An agreement under which rebellious prisoners would free the 638 hostages they were holding appeared to hit a snag Wednesday, heightening tensions in the three day hostage stand-off.

Prisoners agreed Tuesday night to release the 17 guards and 621 visitors at 9 a.m. (6 a.m. EST) the following morning but shortly after 11:00 a.m. (8 a.m. EST) negotiators accused prisoners of not keeping their word.

``Although things are absolutely calm, unfortunately the prisoners have not met their part of the bargin in keeping their promise of releasing all the hostages,'' said Joao Benedito de Azevedo Marques, head of negotiations for the Sao Paulo state prison agency.

Prisoners did, however, release one of the 17 guards who was taken ill and was said to suffer from a heart condition, Marques said. The guard was rushed out of the compound in an ambulance.

``As of this moment the full responsiblilty for whatever happens inside is the exclusive responsibility of inmates,'' said a visibly angry Marques shortly after leaving the prison compound.

Marques said he gave the prisoners an hour to release the hostages but declined to say what he would do if they failed to meet the deadline.

About 150 riot police entered the prison compound shortly after the scheduled release time, where police vans waited to carry out the transfer.

Another 100 or so riot troopers armed with machine guns and police dogs entered the facility shortly after Marques left.

An ambulance also entered the compound at the same time apparently to remove one of the

``They are going in to accompany prison workers who are going to make sure none of the prisoners are mixed in with the hostages when they're released,'' said Sao Paulo state policeman Rui Cesar.

Inmates' friends and relatives who have been keeping vigil outside the prison feared that once the hostages were freed, police would disregard the agreement and storm Sorocaba Prison, located 50 miles west of Brazil's largest city, Sao Paulo.

``I'm sure that as soon as the hostages are safely away, the riot troopers are going to come in and massacre everyone,'' Maria Cleuza Santos, whose son Marcelo is inside serving a six-year sentence for robbery.

The standoff began Sunday, apparently after several inmates dressed in wigs and women's clothing tried to sneak out during a busy visitors' day. Guards recognized the inmates and a shootout ensued that radio reports said killed an inmate and a women who had smuggled in five guns and a several hand grenades. Authorities would not confirm the reports.

The prisoners took 17 guards and all 699 visiting relatives, including more than 200 children, hostage. They later released 78 relatives. Monday passed with no negotiations, and inmates apparently beat a guard on the prison roof Tuesday.

Inside, inmates hung guards by their ankles and tortured them with knives, sticks and iron bars, according to Selma Giron, a prison official who said she heard the reports from people in the prison. Relatives being held hostage were not being mistreated, she said.

The standoff shocked even a country where prison overcrowding and years of waiting before trial has made rebellions common. About 900 inmates are housed in Sorocaba Prison, which was designed to hold 500.

Leaders of the uprising, the second at the prison this year, agreed Tuesday to drop demands for an armored car, weapons and ammunition, instead accepting transfers of 20 inmates to less crowded facilities.

Twice on Tuesday, about 100 riot police moved toward the prison compound apparently trying to intimidate the prisoners _ and panicking those waiting outside.

During the first attempt, many of those outside the prison laid down on the ground to block the force from entering. Later in the evening, the lights went out and the force entered the compound, provoking screams from the crowd who feared a repeat of a massacre at Caandiru prison that left 111 inmates dead.

The lights soon came back on and the force backed away without incident.