Police here said today they are investigating a theory that a former Los Angeles police officer, now in prison, had conspired with jailed record executive Marion "Suge" Knight in the 1997 murder of rap star Christopher Wallace, known as the Notorious B.I.G.

Sgt. John Pasquariello confirmed a report in Thursday's Los Angeles Times that police suspect the former officer, David Mack, may have arranged for a friend to kill the New York-based rap singer, who was 24, as he left a music industry party in Los Angeles. Mack is currently serving a 14-year sentence for a bank robbery.

"This is a theory we're exploring. It's certainly not the only possibility but it's something we're looking into," said Pasquariello. "There are circumstantial links to Mack.

"Nothing so far concretely ties him in to the crime so that we could even say he's a suspect. But there's circumstantial evidence."

A lawyer for Mack and two others for Knight, who owns the hip-hop label Death Row Records, strenuously denied that there was a murder conspiracy, and said the two had never even met.

Instead, the attorneys accused the police of "selectively" releasing information "as an investigative tool."

Donald Re, a lawyer for Mack, noted that the police did not impound the former officer's Chevrolet Impala--the same kind of car that witnesses said the shooter used to gun down Wallace--because "they knew it wasn't worth it."

Re, who said he spoke to Mack today, said the former officer was "shocked" at the report. "He thought it's ridiculous.

"He said he never worked for Suge Knight and didn't know him," said Re.

Similarly, Knight's lawyer, Robin Yanes, said the police investigated the theory a year ago and found no evidence to support it.

Knight is serving a nine-year sentence related to a 1992 assault and is under investigation by the federal government over racketeering and tax fraud issues. He runs the record label from jail.

Police have been pursuing leads based on the belief that Wallace's murder is linked to a much-publicized rivalry between East Coast and West Coast rap labels. Wallace was attached to the New York-based Bad Boy Entertainment.

Knight's star rapper, Tupac Shakur, was gunned down in Las Vegas in 1996 in another unsolved murder.

But police have been hard pressed for solid evidence to prove the theory. In April, they confiscated computers, documents and a Chevrolet Impala from Knight's Death Row offices. A judge ordered them to return the documents and the car several months later after investigators failed to find any evidence.

"It's all hearsay and innuendo, rumor, there's nothing substantive," said Yanes.

"Everything on this involving Suge has been like that."

The L.A. Times report, based on interviews with retired detectives and internal police documents, said that homicide investigators have been trying to build a case against the former officer for nearly two years. According to the Times, a former Compton police officer who worked as security for Death Row said that Mack sometimes socialized at the record label.

LAPD documents cite a witness, Damian Butler, as saying Mack "was standing just outside the door . . . as we were entering the party" on the night of Wallace's murder.

Through Re, Mack denied he was at the party at the Petersen Auto Museum in March 1997.

A jailhouse informant told police that Wallace's killer went by a "Middle East" sounding name, Amir or Ashmir or Abraham, the paper said. In Christmas 1997, Mack was visited in jail by a college friend, Amir Muhammad, whom Mack knew as Harry Billups. Muhammad has since apparently dropped from sight, but his picture appears to resemble a composite drawing of the shooter by police sketch artists.

But there seem to be many flaws in the theory: Mack's gun has been tested by police and did not match the gun used in the slaying; the jailhouse informant said the shooter belonged to a security force connected to the Nation of Islam, and his true name was Kenny or Keeky, none of which appears to match Muhammad's background.

Pasquariello would not speculate on a possible motive that would explain why Mack might hire a friend to kill Wallace.

He also confirmed that police are investigating the possibility of a money dispute "unrelated to the East Coast-West Coast thing."

Yanes suggested yesterday that Wallace was killed by his own security force in a dispute over payment. "It was all over the streets; his own people killed him," he said.

"There was no one near him when he got shot. He was set up. But they can't pin it on anyone. They tried.

"They're desperate; they have nothing."

"Born Again," a posthumous album by Wallace, who was also known as Biggie Smalls, was released this week.

CAPTION: Police may have a new lead in the murder of rapper Notorious B.I.G.