A group of D.C. General Hospital pathologists who in the late 1960s were personally paid more than $29,000 for supplying a commercial firm with tissues and organs removed from miscarried and stillborn human infants, "were not entitled to" the money, according to a report prepared by the District of Columbia's Office of Municipal Audit and Inspection.

The watchdog agency referred its report to the D.C. Corporation Counsel's Office, where Gilbert Gimble, an assistant corporation counsel, said "we're going to be making a decision shortly on whether or not we can recoup any of these monies that . . . may have been paid to these individuals."

The Office of Municipal Audit and Inspection launched its investigation after the organ selling was revealed by The Washington Post in February of last year.

The Post reported that the hospital's pathology department received more than $68,000 during the late 1960s in exchange for tissue supplied to a commercial firm that reprocessed the material and sold it for research purposes.

Those at the hospital involved in the sales told The Post that they had not "sold" tissue, but rather, were engaged in research arrangements with the commercial firm, FLOW Laboratories, in Rockville.

However, the audit report submitted to the Corporation Counsel states "Although the arrangement with FLOW was set up as a research project, the records obtained indicate it was more commercial in nature. For example, we noted:

"FLOW was to notify the Department of Pathology of all positive viral cultures in the kidneys provided. Only one report of FLOW's findings (all negative results) was noted. This report was submitted almost two years after the program had begun and no additional reports were noted even though kidneys were furnished to FLOW for another three years . . .

"In May, 1970, FLOW notified the then director of laboratories that it was terminating the arrangement it had with the Department of Pathology for the "procurement" of specimens."

The report continued: "As reported in The Washington Post, pathologists at (D.C. General) did received compensation, in addition to their regular salaries for obtaining and preparing specimens for shipment to the various research laboratories.

"From June, 1965, through March, 1975, in excess of $78,000 was received for the organs and tissues provided by the Department of Pathology," the report states. "Of that amount, at least $29,000 was paid to pathologists for 'professional services rendered' . . . Total amounts paid from the fund to individual pathologists ranged from $90 to in excess of $13,000."

A U.S. grand jury investigated the organ sales, but according to a source familiar with the investigation the statute of limitations had expired on any possible violation of the law.

At the time of The Post articles two of the pathologists involved, Dr. Sophie Perry, director of the pathology department, and Dr. Abolghassem Hatef, said they had done at least some of the work during hours when they were being paid by the District government to perform their usual duties.

According to the auditors report Perry received $4,917 and Hatef was paid $15,239, for supplying organs to commercial firms. Neither Perry nor Hatef could be reached yesterday for comment.

"We found that the statements contained in the newspaper articles regarding the sale of human tissue and organs basically correct," the report states. "The programs were not officially authorized nor were funds received administered in accordance with District requirements.

"In addition, it is our opinion that the payments made to pathologists for services they performed constitute a supplementation of income in violation of Title 18, Section 209(a) of the U.S. Code and should be referred to the Corporation Counsel's Office for disposition . . ."

Title 18 Section 209(a) of the U.S. Code forbids government employees from receiving any outside compensation for work they do in their capacity as government employees.

Not only, as the report states, was the organ selling program never approved by the Department of Human Resources, it also was never explained to, or approved by, the parents of the dead infants involved.

The report also includes information on a fund established in the hospital's obsterics and gynecology department with monies received from the sale of human placentae and mothers' milk.

Money from that fund, which at one point totaled more than $26,000, was used to send department members to out of town meetings, to purchase a color television for the department's residents, to pay for "refreshments, parties and picnics, and to pay for staff education," according to the report.

The U.S. Attorney's Office looked at the fund, a source said, but found that it involved bad financial management rather than criminal activity. Unlike the pathology department fund, no individual doctors received payments from the OBGYN fund.