The Justice Department's special watchdog on professional ethics has faulted Assistant Attorney General William F. Baxter for failing to disclose his ties with International Business Machines Corp. before he dismissed the government's 13-year-old antitrust case against the computer giant last January.

However, in a 45-page report released yesterday, the department's Office of Professional Responsibility found that Baxter's relationships with IBM before he joined the government were so inconsequential that there were no conflicts of interest when Baxter dismissed the longest antitrust case in U.S. history.

Nonetheless, the office found that Baxter's failure to disclose "otherwise palpably innocuous information" before he dismissed the case resulted in a "regrettable but significant, and in our opinion accurate public perception of an appearance of a conflict of interest."

Shortly after the case was dismissed, it became known that Baxter briefly served as a consultant to a West Coast law firm representing IBM in a private antitrust suit during the late 1970s. A former Stanford University law professor, Baxter also had an IBM fellowship in 1969, which allowed him to take a year off from teaching while he studied mathematics and economics.

Given the suit's "long and controversial history," Baxter should have voluntarily disclosed these relationships before he assumed office, the report concluded.

Yet, "based on what Mr. Baxter actually did in each of these instances, we find no substantial relationship between him and IBM which would give rise to an actual conflict-of-interest on his part in dismissing the government's case against IBM."

It is unusual for the department's ethical watchdog to release its findings on any conflict-of-interest charges. However, Solicitor General Rex E. Lee said he concluded its release was necessary to clear the air and close the books on conflict-of-interest charges against Baxter that had clouded the fate of the IBM case. Some of IBM's competitors and a few public-interest lawyers have argued that the IBM case should not have been dismissed because of Baxter's ties with IBM.

In a statement, Baxter said: "I believed then as I do now that IBM had not violated any antitrust law."

However, he acknowleged: "with the benefit of 20-20 hindsight, it now appears clear that it would have been better for all concerned if I had found some mechanism of 'volunteering' for the public record" his indirect contacts with IBM. "But I was fully occupied by new job," he said.