Battling to overturn the conviction of suspended Gov. Marvin Mandel and his five codefendents, their lawyer yesterday argued before a federal appeals court prosecution contained a "fatal flaw" - the "unwarranted and unprecedented" intrusion by the federal government into the affairs of a state.

This "improper extension" of the federal mail fraud statute allowed the government to secure the conviction of a sitting governor "without any need to find he's been bribed, derived any improper benefits or transgressed any state law," the lawyer argued for the U.S. 4th Circuit Court of Appeals.

Federal prosecutors countered that the defense allegation not only ignored "abundant evidence of fraud" produced at the Mandel trial, but failed to take note of numerous judicial findings that neither bribery nor a violation of state law must be proved in a mail fraud case.

Both sides arguments yesterday in this small, far west Virginia town where the appears were heard were heavy with theory, discussions of pervious cases and carefully phrased answers to intircate questions posed by two members of three-judge appeals panel.

The panel, which normally convenes in Richmond, is conducting a one-week summer session in this community.

The suspended governor did not come to Abingdnn for the arguments, and in fact, only one defendent, former attorney Ernest N. Cory Jr., was in the court room yesterday.

The three-judge panel will decide the appeal later this summer of Mandel, businessmen W. Dale Hess, Harry W. Rodgers III, William A. Rodgers, Irvin Kovens and Cory, who were convicted last year of conspiring to corrupt the governor's office and defraud the citizens of Maryland of their governor's "faithful (and) loyal" services.

The scheme, the U.S. prosecutor said, earned Mandel $35,000 in gifts and business interests in return for his influence on legislation to enrich a racetrack secretly owned by the other defendants.

Because a number of documents were mailed as part of the scheme, the governor and his powerful friends were accused of breaking federal mail fraud laws.

The charge that this mail fraud statute was overextended by federal prosecutors was the main issue raised in yesterday's arguments by attorney Arnold Weiner, one of nine defense lawyers who traveled here for the appeal.

In a 100-page written appeal filed for the defendants, the lawyers argued that the government must prove bribery of a public official or violation of a particular state law to obtain a mail fraud conviction.

The defense asserted that the prosecution failed to prove either bribery or violation of a state law in the Mandel case, and instead proved only that the defendants had failed to disclose their business relationship - a failure that was not a violation of state law.

"The line between guilt an innocence was never sharply drawn (at the trial)." Weiner told the judges yesterday. "The jury was allowed to decide by its own untutored political judgment what he (Mandel) should and should not disclose. No federal statute was ever construed in such a manner as to allow such intrusion in the political processes of a state."

However, the prosecution team, composed of Assistant U.S. Attorneys Barnet Skolnik, Daniel Hurson and Elizabeth Trimble, argued in its written appeal that the case rested not on a simple charge of bribery, but on evidence of a "massive fraud upon the citizens and government" of Maryland that involved a "complex interwoven fabric of deception, duplicty, falsehood and decet."

The appeal argument, removed more than 300 miles from Mandel's native Baltimore to this small town with its brick sidewalks and one-courtroom defedal courthouse, also seemed far removed in spirit from the jury trial with its revelations of a spectacular divorce settlement and gifts of diamond bracelets, suits and vations.

Here, much of the argument time was spent with two of the judges, questioning prosecutor Hurson on whether certain pieces of evidence were properly admitted at the original trial.