For more than two years now, International Telephone & Telegraph Corp., perhaps the ultimate multinational conglomerate, and the Securities and Exchange Commission the federal government's corporate watchdog agency, have been locked in a legal combat. Simply stated, ITT is challenging the SEC's authority to make public the details of allegedly improper payments by ITT and its subsidiaries to officials of foreign governments, among others.

The challenge by ITT, whose $13.1 billion sales worldwide in 1977 ranked it No. 11 on the Fortune 500, is more than just another scuffle between big business and big government. What ITT is doing is questioning the right of the public to know the SEC charges contained in a suit that the commission has been ready to file for nearly two months.

Both the SEC and ITT are forbidden by court order to discuss the case, but tempers have been strained by the prolonged litigation, and questions occasionally do elicit heated replies. Said an attorney for ITT about its case against the SEC: "They (The SEC) don't have any right to embarrass a corporation or its executives and to press their notions of morality. Their statutory right is to protect the investors."

Pressed further, the same attorney explains: "We're not particularly interested in testing the scope of the securities laws. The company is resisting because the board of directors has determined that, if details of the transactions are made public, it could screw up commercial relationships and could cause bodily harm to those involved. After all, look what's been happening in Italy."

In truth, ITT mounted its cased long before the recent terrorist activities, which don't really seem to bear on its case, anyway. In March 1976, when the SEC began its investigation of ITT, the company got a court order, signed by U.S. District Court Judge George Hart Jr., placing a seal order on all phases of the then-developing investigation.

On March 22 of this year, after two years of investigating, the SEC notified ITT that it would be filing a civil suit, known as a complaint, the next day. Such advance notice to the targets of a complaint is common SEC practice.

When the SEC files suit against a company, the complaint, which often is detailed, becomes part of the court record. This, in turn, normally is available for public scrutiny, and the allegations often are reported in newspapers, among other places.

On March 24, Judge Hart denied ITT's motion to extend the seal, which had applied to the investigation, to the suit itself. The judge said: "The court has no power to enjoin the filing of a complaint by the SEC and has no power to prohibit the SEC from making allegations in the complaint which are not materially untrue or libelous."

The SEC was then free to file the complaint, thus making its findings public, but the agency agreed to delay taking action after ITT requested time to appeal Judge Hart's decision. On May 3, the U.S. Court of Appeals denied ITT's motion, but the judges effectively kicked the case back to Judge Hart when they stated that "denial of access to court records . . . is a matter within the sound discretion of the trial court."

Perhaps significantly, the three appeals courts judges referred in their brief opinion to a recent Supreme Court decision delaying public access to tape recording of White House conversations when Richard Nixon was president. In denying access, the high court had overturned the very same appeals court that handled the ITT motion.

As a result of the appeals court decision on the SEC-ITT again will appear before Judge Hart on May 26 to present its agruments for sealing the details of the SEC complaint from public view.

ITT has labelled the touchy details of the SEC complaint "trade secrets." This may have been done with an eye toward the Freedom of Information Act. The reason is that trade secrets are exempt under the act.

In one of its motions to the court, the SEC called "strikingly novel and mischievous" ITT's contention that "allegedly improper payments and political contributions made by ITT and its subsidiaries to foreign governments, not reflected on the company's books and records, and concealed from investors, are "trade secrets.'"

The SEC also has asked Judge Hart to find ITT in contempt of an order he issued on May 5, 1976, directing ITT to comply with an SEC subpoena issued in March of that year. In seeking a contempt citation two weeks ago, the SEC said that ITT had not yet turned over "any of the documents or records" subpoenaed. There was no explanation as to why the SEC had waited so long to ask for the contempt order.

Although slim, the public court record on the case does clearly indicate that the ITT management reviewed the SEC complaint before going to court on March 22 to try to head off its publication. This is also a common practice of the SEC, which says it shows the complaints "as a courtesy" to defendants. But ITT apparently wanted to take the opportunity to edit the SEC's findings. The commission complained in one court filing that ITT "claims it has the right to see (the complaint) and to litigate about what should be included."

The ITT court challenge to the SEC raises a number of questions, some of them constitutional in nature.

Should a regulatory agency and a company it oversees be free to settle their differences privately, merely reporting the conclusions to the public?

Would sealing the complaint infringe upon a First Amendment right of access by the press and the public to court records?

If the charges are not made public now, when would they be made public? What if the two sides don't settle and the case goes to trial - would the allegations remain sealed?

Some 400 U.S. corporations have disclosed questionable payments at home or abroad since the SEC's drive on these practices began about three years ago. Many of the foreign payments disclosures have been of the generic variety - that is, merely stating that the company made so-much in questionable payments but not revealing the names of the recipients or even the country involved.

Other disclosures have been more specific - for example, the revelations of questioable commission payments by E-Systems Inc. to develop business in Korea and secretive dealings by Page Airways Inc. in Africa, including payments and lavish gifts to African leaders, such as Ugandan dictator Idi Amin.

Companies either voluntarily make the disclosures in their filings with the commission or they are sued by the SEC. As part of a settlement of an SEC complaint, or suit, companies normally agree to appoint a panel to investigate the alleged payments. When completed, the findings of the panel are made public and become part of the corporation's disclosures to the government and its stockholders.

The legal test of what a company must reveal to its stockholders is by no means clear-cut. Essentially, the law provides only that a company must inform its stockholders - and the SEC - of any development that could have a material effect on the company's operations.

The ITT case pre-dates the so-called Foreign Corrupt Practices Act passed in December, which makes payments to foreign officials by U.S. corporations a crime under certain circumstances. It could be subject to the act's accounting provisions if its management knowingly prevented the allegedly illegal payments from being reflected on the company's books and records.

Although ITT apparently is willing to make a generic disclosure about what it says it has been able to learn about the amounts paid, it refuses to have any specifics revealed. Indeed, ITT claims that some of its own foreign subsidiaries have balked when asked in the course of two separate investigations by the New York headquarters for details of any alleged bribes and kickbacks. The SEC has found these investigations inadequate.

ITT also has argued that details of these questionable payments, made over a five-year period, are really too picayune to disclose considering the company's multi-billion-dollar sales each year. The company's own, admittedly limited, investigation turned up $8.7 million of these payments during the period. The company seems to be saying that this figure might be significant for a $100 million company, but not for a company the size of ITT. The SEC also has rejected this argument.

In an affidavit filed with the court, ITT President Lyman Hamilton Jr. sought to bolster the company's argument by offering proof that the whole foreign payments question if of little concern to stockholders. He noted that a 1976 proxy statement included a proposal, introduced by several religious organizations, among others, that the company disclose any political payments or gifts made outside the United States during the previous 10 years. The proposal was overwhelmingly trounced in a vote by the company's shareholders.

However, stockholders of U.S. companies are notorious for voting blindly with management. In this case, moreover, the ITT management stated in the proxy that it was against the proposal.

ITT appears to be taking a carefully weighed gamble in its SEC challenge. The company - still feeling the legal aftereffects of five-year-old revelations of its alleged political activity in Chile and elsewhere - apparently found the revelations serious enough to risk the uproar the court challenge may cause.

Described in the title of Anthony Sampson's book as "The Soverign State of ITT," the company seems willing to further enhance its well-known reputation for arrogance in order to preserve the sancity of corporate secrets.