That sounds quite odd to me. I would contact his attorney in Montana and ask again about this issue. And then double check with another attorney to make sure.  Unless it is a law specific to Montana, I do not see how a federal incarceration would wipe out state fines, especially if the federal incarceration has nothing at all to so with the state crimes that he committed.  I think that he would be liable for all of the fines in each of the states and that his incarceration merely prolongs his ability to pay them.   When you speak with his attorney in Montana ask for the specific statute that he has referred to.  Good luck.