NEW YORK -- The criminal trial over phony apple juice is bringing to light the conduct of a large company, two of its executives and the parent conglomerate in a crisis that puts careers, profits, reputations and public trust in the company at risk.

Beech-Nut Nutrition Corp., the nation's second-largest baby food manufacturer, prides itself on having sold "food products of the highest quality for 85 years."

But in a 470-count indictment a year ago, a federal grand jury charged that Beech-Nut, its president, Niels L. Hoyvald, and John F. Lavery, vice president for operations, participated in a conspiracy and a scheme to defraud. The government charged that the juice the company sold for babies -- in millions of jars labeled "100% Apple Juice" -- was nearly always 100 percent apple-free -- a deceptive mix of cheap ingredients, particularly corn, cane or beet sugars, and flavorings, colorings and other chemicals that sometimes was mixed with cherry, pineapple or other true juices.

Three days before Beech-Nut was to go to trial on the charges, it pleaded guilty to 215 felony counts. Each count was for a willful shipment of bogus fruit juice to unwitting buyers in 20 states, Puerto Rico, the Virgin Islands, the Bahamas, the Dominican Republic, Japan, Saudi Arabia and Taiwan.

The company agreed to pay a $2 million fine -- more than six times the largest ever paid under the 1938 food and drug law.

In reaching the agreement, Beech-Nut in effect stranded Hoyvald and Lavery, who now face up to three months in the courtroom while on paid leave. They also will face perhaps 90 prosecution witnesses -- including many who are or were Beech-Nut scientists and employes -- and possible imprisonment. They "are expected to defend themselves," said Beech-Nut President Richard C. Theuer, adding that the company wanted to "put the past behind it."

Until the indictment, Hoyvald, 54, had been on the fast track at Beech-Nut. Nestle S.A., the Swiss food giant that bought Beech-Nut in 1979, installed him as senior vice president for sales in April 1980 and as president and chief executive only a year later. He held the post until Theuer succeeded him after the indictment. Lavery, 56, joined Beech-Nut 34 years ago and rose to vice president for operations.

The opening statements on Nov. 17 and testimony by two prosecution witnesses in the first week of trial in U.S. District Court in Brooklyn focused on four questions:

Was Beech-Nut just one of the companies victimized by what Hoyvald's lawyer called "unscrupulous suppliers" who were able repeatedly to "fake out the industry"?

Why did Beech-Nut decline to join other members of the Processed Apples Institute (PAI), the industry trade association, in a lawsuit against "unscrupulous suppliers"?

Did Hoyvald's and Lavery's subordinates keep them in the dark about the fraud, or did the executives conceal it to improve Nestle's bottom line?

Did tests detect the fakery? If they did, how could the fraud have continued for five years, until March 1983?

Less than a decade ago, no single officially approved test existed for conclusively detecting adulterants in apple juice. One test did reliably detect cane or corn sugar, but not beet sugar.

As a result, Beech-Nut chemists made what Assistant U.S. Attorney Thomas H. Roche -- in his opening statement -- said was a "a massive, innovative" and successful effort to detect beet sugar in apple juice. The key to success was a simple fact: beet sugar and apple juice each contain two natural sugars (fructose and glucose), but they do so in sharply different ratios.

Starting in the winter of 1978-79, the chemists applied the new test method to the apple concentrate that accounted for at least 90 percent of Beech-Nut's supply at the time. Prosecutor Roche said in his opening argument that the chemists "strongly suspected" adulteration in juice supplied by Universal Juice Inc., which operated out of a residential apartment in Riverdale, N.Y. As a result, Beech-Nut persuaded Universal to agree to make Beech-Nut immune from liability if any of its customers should sue.

The agreement was drafted by Paul E. Hillabush, Beech-Nut's corporate director of quality assurance since 1973. Lavery, to whom he reported at the main plant in Canajoharie, N.Y., signed it in April 1979. "Armed with this paper assurance," Roche charged, Lavery was unwilling thereafter "to act on the scientific evidence that the product was phony."

In a September 1981 memo, Hillabush warned of "a tremendous amount of circumstantial evidence" suggesting that Beech-Nut had been buying adulterated concentrate. Hillabush, testifying under a grant of immunity, said that Lavery, who never had Universal's concentrate tested, called him "Chicken Little."

In March 1982, Hillabush testified, Hoyvald beseeched him to avoid situations that could bring adverse publicity, citing a Food and Drug Administration seizure of a load of Beech-Nut orange juice. Hillabush said he told Hoyvald that the apple concentrate situation had a high potential for bad publicity, but the president "broke off the dialogue and left my office."

Hillabush was asked on cross-examination by Brendan V. Sullivan Jr., the president's lawyer, if he was ever requested by Hoyvald "to do anything wrong." "Not that I can recall," he replied. Nor, he said, had he ever told "any of the Swiss Nestle people" of his concerns about adulteration.

In April 1982, the apple institute's Washington law firm, Covington & Burling, hired private investigator Andrew Rosenzweig, a former New York City detective lieutenant. His assignment was to gather evidence for an eventually successful lawsuit against Universal and Food Complex Co. of Queens, the other principal supplier of apple concentrate to Beech-Nut.

Rosenzweig -- the first prosecution witness -- testified that he put Food Complex under surveillance for three months. He testified that he saw beet sugar and chemicals -- but no apples -- enter the plant, and a product labeled "apple concentrate" and "apple conc." emerge. From Food Complex's dumpster, he regularly fished out records, such as invoices and "batch sheets" for production, listing ingredients, including synthetic "apple essence" and caramel flavoring, he testified. In his opening argument, Roche said Beech-Nut's Research and Development lab reached its own conclusions: Food Complex "apparently could not supply real apple juice concentrate."

Roche told the jurors:

"These conclusions were directed to John Lavery, who, in turn, stated that Niels Hoyvald was then making all the decisions about concentrate purchases and ... had determined that Beech-Nut would continue to buy concentrate from Universal and Food Complex until the end of 1982 because of budgetary promises he had made to Nestle. And indeed ... the evidence will show that Niels Hoyvald promised Nestle that he would turn Beech-Nut around in 1982, to turn red ink into black ink."

Roche stressed the profitability of the fraud in his statement, saying that the purchase of fake apple concentrate saved Beech-Nut $1.75 a gallon on hundreds of thousands of gallons.

Investigator Rosenzweig testified that he tracked a load of fake concentrate from Food Complex to the Beech-Nut plant in Canajoharie. The next day, June 25, 1982, wearing a concealed tape recorder, he met with Lavery, Hillabush, and another executive to urge Beech-Nut to join other PAI members in suing Food Complex and Universal. By then, they were Beech-Nut's sole sources of apple concentrate.

The jury heard the tape, in which Rosenzweig told his hosts of PAI tests showing adulteration of Beech-Nut apple juice, of Beech-Nut's sensitivity as a processor for the infant market and of his investigation of Food Complex.

Lavery responded on the tape that Beech-Nut already had reason to suspect Universal and Food Complex, had been buying their concentrate at far below market prices, and for some time had heard allegations against Universal. He said the suppliers would get no more orders (he cut them off the same day). He expressed concern about possible bad publicity for Beech-Nut juice. But the company neither provided juice samples Rosenzweig requested for the PAI nor joined its suit.

In late July and early August, an FDA investigator began a four-day plant inspection. A few days later, a New York State food official told Beech-Nut that a jar of its apple juice had been found to be adulterated, and that more samples might be sought at the plant. Hillabush testified that he warned Lavery that the result could be seizure of the full inventory, and that Hoyvald raised the possibility of moving it beyond the reach of New York State authorities on short notice.

Roche said evidence would prove that, on that night, nine trucks rolled up to the plant and carted off 26,000 cases of juice made from fake concentrate to a warehouse in Secaucus, N.J. This was done "on instructions of Niels Hoyvald," Roche said.

Telling no one that the juice in Secaucus was fake, Roche charged, Hoyvald "personally offered to sell {it} at an unusually low price {to} move the merchandise fairly rapidly."

Hoyvald refused in August 1982 to make a voluntary recall, but, Roche said he agreed to one two months later -- after nearly all of the fake juice in Secaucus had been sold. Even so, he said, Hoyvald restricted the recall "to wholesale accounts and large chain warehouses."

Beech-Nut continued through March 1983 to sell juices containing bogus apple concentrate even though, Roche argued, Hoyvald and Lavery knew that they "were made from the same phony concentrate as the products they had recalled and were adulterated."

In the first defense opening statement, Hoyvald's counsel, Sullivan, called the fake apple juice "a healthy product" that could have been sold if honestly labeled.

If quality controllers workers and scientists "had suspicions, they didn't tell Mr. Hoyvald," he said, adding that at every critical turn his client had relied on lawyers. Why hadn't Beech-Nut joined the PAI suit? Because Hoyvald was "so angry at the unscrupulous suppliers" that he had the company file its own suit, recovering "a large sum of money." Sullivan also said that none of the documents on which the government is relying "got to Nestle."

Sullivan praised Hoyvald for his "concern for quality" and for "stunning accomplishments" -- including adding vitamins to products as part of a basic Nestle project to develop a line of nutritious, competitively priced infant foods. Nestle was "a stickler for fine quality," Sullivan said.

Lavery's lawyer, Steven Kimelman, said Lavery may have exercised "bad judgment," but "did not commit any crimes." He won promotions with "hard work and dedication," Kimelman added.

The other two defendants in the case are Nina B. Williamson, a former officer of Food Complex, and Danny A. Shaeffer, 38, the sole employe of Nameco Trading Co., which sold fake concentrate to Beech-Nut.

Guilty pleas in the case have been entered by Zeev Kaplansky, owner of Universal Juice, Raymond H. Wells, owner of Food Complex, and South Orange Express, Inc., of Clifton, N.J., which labeled, warehoused, and shipped bogus concentrate.