Worcester County prosecutor John L. Sanford Jr. still has the plaque commemorating the testimonial dinner that Ocean City Mayor Harry J. Kelley threw for him a few years back. At the time, those two titans of the Eastern shore has been friends for 40 years.

No more. Now, the gravel-voiced Kelley and the crewcut Sanford no longer talk to each other. Instead, from a distance, the pair aim a steady stream of invective at each other, alleging both incompetence and corruption.

According to one version, it all began when Sanford's wife made an unsuccessful bid for a City Council seat a few years back. Friends, and Kelley, say that the Sanfords - who live six blocks away from Kelley - held the mayor responsible for her defeat.

Kelley said that he and his family in fact voted for Mrs. Sanford, although he did not speak in her behalf. "I'm sorry I voted for her," he says now.

The feud between these fiery fixtures has drawn any number of prominent people in this resort community into an expanding circle of controversy. The city's police chief, members of the City Council and the county's liquor board control chairman are all involved.

The feud also has generated three libel and slander lawsuits and Kelley says he may initiate a fourth.In between the lawsuits comes more invective: allegations of police misconduct, suggestions of prosecutorial abuses and charges of conflict-of-interest involving the leasing of the city-owned pier.

All of these charges are coming in the midst of the already-prickly atmosphere of an election year.Sanford 67, is facing his first election challenge since 1966 - and Kelley is backing his opponent "100 percent."

The 60-year-old Kelley himself is also seeking to be reelected by the 3,500 yard-round residents of this strip city - the citizens of the small town that is almost hidden among the high-rise condominiums and hotels of a resort whose summertime population swells to 200,000.

"It's strictly a small-town fight that has mushroomed out of all proportions," said John Robins, a Salisbury lawyer representing Sanford's wife in the slander suits.

Despite the current high-pitched level of argument, the origins of the feud are murky.

Furthermore, both Kelley, who seems to enjoy his nickname of "Iron Jaws" and Sanford - who says of himself, "I'm a tough sonavabitch" - have been questioned in recent weeks by the office of Maryland State Special Prosecutor Gerald Glass, at each other's behest.

The feud intensified last year when Mrs. Sanford's gardener allegedly took a swing at an Ocean City policeman and was arrested and charged with assaulting an officer.

Sanford rushed to the gardener's defense, criticizing the entire Ocean City Police Department in the process.

Kelley defended his policemen and the battle was joined. The two men began to make an increasingly vitriolic series of public pronouncements attacking each other. Neither would lift his phone to call the other and straighten out the mess.

"It was a classic case of two stubborn men," one observer said recently.

Sanford's office, which has the responsibility of deciding whether to prosecute such cases, dropped this one - although Sanford disclaims any personal responsibility for that action. A Baltimore lawyer was called in especially to prosecute the gardener, who was convicted.

After Sanford came under criticism for the handling of that case, he then refused to drop any cases brought to him by the Ocean City police until Circuit Court Judge Daniel Prettyman "gave me hell. He told me to exercise my discretion."

He now is being investigated by Glass, he says, for allegedly dropping other cases, for allegedly acting as a personal representative in two estate cases, although the law says the prosecutor shall not otherwise be employed "in private (law) practice," and for supposedly receiving more expense money "than I should have." He denies or refutes all charges.

Last December, Sanford said, he asked for a state investigation of the Ocean City police whom, he said, "tried to make life unbearable for me. There was surveillance of my house. He (Kelley's police chief) had a girl checking on every case I'd dropped. There were letters regarding the conduct of my assistants."

Kelley initially defended his police force but in March he himself called for a similar probe after two of his intelligence officers were refused admittance to a regional law enforcement conference on organized crime.

The other week, Kelley demanded the resignation of his police chief, Leroy Duggan, claiming his "relationship with certain people" had tainted him and his department. Duggan has since announced his candidacy for City Council "to clear my name." He could not be located for comment.

"There will be many discrepancies, eye openers and indictments in my police department," Kelley predicted last week. "Several people will be affected."

While one half of the controversy was expanding to include not only prosecutor Sanford but Police Chief Duggan, the other half was reaching out to include not only Kelley but his long-time friend Charles R. (Buddy) Jenkins, the Worcester County Liquor Board Chairman.

According to Kelley, the Maryland state prosecutor's office is focusing its investigation of him on his personal finances and on his actions in allegedly helping Jenkins obtain the renewal of what appears to be a lucrative franchise arrangement involving the Ocean City pier.

The town's wooden pier into the ocean was built in 1929 attract fishermen. Most townspeople bought stock in the Synepuxent Pier Co., which got the first 50-year lease. The pier did not turn out to be the big bonanza initially expected. So when two local enterpreneurs began buying up shares, townspeople, including Kelley, were willing to sell.

The two men then turned the wooden pier into a moneymaking amusements attraction full of carnival kitsch. A few years ago, the widows of the two men sold out to Jenkins.

Since then, the official blessing given to Jenkins continued leasing of the pier and Jenkins' years-old friendship with Kelley have become first a matter of talk, then a matter of investigation by the special prosecutor.

Kelley said that when Jenkins was a boy he taught him "how to set decoys out, how to duck hunt, how to build blinds." Kelley likens him to billionaire Howard Hughes, who was known for both his wealth and inaccessibility.Jenkins was not available for an interview last week, although he was in his office behind a huge pirate statue at his Jolly Roger Amusement Park.

Early this year, Jenkins sought to renew his pier franchise, due to expire next April. The 1929 state law authorizing the pier gave the city the option to renew or purchase the structure itself.

Kelley and the Council opposed taking out a short-term loan or floating a bond issue to buy the pier for its appraised value of $3.25 million. Instead, they renewed Jenkins' franchise for 50 more years, hiking the fee Jenkins must pay the city from $4,100 to $6,500 a year.

"They could've bought it," said Sanford. "You think a sensible businessmen wouldn't have bought it?" Kelley said the city should not be in the entertainment business.